The impact of the government shutdown on the US economy isn’t all bad

The real impact of the partial government shutdown on the US economy isn’t all bad 

Bottom Line: Despite its many inefficiencies, there’s no question that the US economy, which just had its best year in a generation or more, is taking a hit as this partial government shutdown continues. While I do believe that we should have a much smaller federal government and we’d all be better off for it in the long run – this isn’t the way to get there. Our economy and families are built into the current bureaucratic structure and the impact economically extends well beyond the 800,000 or so federal employees currently impacted. That’s the bad news.  

There are several estimates for the negative effect on the US economy. On the conservative end Moody’s suggests that economic growth will be reduced by .5% if the shutdown continues for the first quarter. On the more aggressive end some firms are suggesting negative economic growth for the first quarter if we ride through it without resolution. The Trump administration itself yesterday put out new and telling guidance. The government is estimating that .1% of economic growth will be lost per week. That’s 1.3% lost growth for the quarter if it holds. But where there’s a ying, there’s a yang. Here’s the good news for some.  

The partial government shutdown is doing the Federal Reserve’s job for them. Rather than the fed needing to continue to raise rates to keep up with the rapid pace of economic growth to thwart inflation – just the opposite is happening. In fact, many interest rates, especially mortgages rates have been sliding for the past month. Mortgage rates just hit their lowest levels since April of last year. That despite the Federal Reserve having raised rates four times over the past year. So, if you’re looking buy a home or borrow money the partial government shutdown is providing you with the best chance in nearly a year to do it. And even once the shutdown ends, when that might be, the odds are pretty solid that rate increases will be less likely throughout the year.

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