The Government Shutdown May Not Show Up in the Data for Months, if ever.
The week starts where we left off last week with a partial Government Shutdown. While 880,000 federal government workers have been furloughed, a contingency of thirty Democrats did some "research" in Puerto Rico, Meanwhile, government workers that need to do research for the New Construction, New Home Sales, MARTS Retail Report, and Gross Domestic Product reports are furloughed. It's okay. The impacts of the furlough on GDP is being overstated.
The Government Shutdown is a Government Data Shutdown. We did not receive the November New Home Sales data last month. It appears that we will not receive the December MARTS retail report, the December New Home Construction report, the December new home Sales Report, or the Advance Fourth Quarter GDP report. The websites for the Bureau of Economic Analysis and the Census Department are not being updated during the furlough. We missed the November New Home sales data was not released and "nobody" made a mention of it.
If the people who produce the reports are non-essential employees are the report non-essential reports? If the reports are essential reports are the employees essential workers? They are 880,000 non-essential employees. If they earn $50,000 a year, chump change for Washington DC, the non-essential employees are costing up 44 billion dollars a year. Some may be essential workers. Some may not be essential. These reports are important. Are they essential? To me, Yes. To you.....
The shutdown does not impact the other 99.4% of the Non-farm Payroll who still have their jobs. The media is having conniption fits over the possibility that the "Obama-Trump" jobs creation streak might come to an end. Here's the thing: The "Jobs Streak" is really a seasonally adjusted private sector Current Employment Statistics (CES) worker streak. Government workers are not a part of the private sector. They will not impact the "jobs" streak.
The shutdown might not spike the Unemployment rate. The question is are these people really unemployed, by definition. These furloughed workers may fall into the category of employed workers " if they were temporarily absent from their jobs because of illness, bad weather, vacation, labor-management disputes, or personal reasons." This is from the Bureau of Labor report under Employment Situation Technical Note.
The Shutdown might be drowned out by the Annual Noise of December to January Layoffs. We normally lose 2.8M to 3.6M non-seasonally adjusted non-farm payroll workers every January. Government workers are included in the non-farm payroll data. Last January the non-farm payroll dropped from from 146.168 million to 143.220 million. The Government sector dropped from 2.830 million to 2.797M (Table B-1, pages 31 and 34.)
The Shutdown might not impact GDP. If the GDP is growing by 0.1% or more than the prior quarter's value, quarter to quarter or same quarter, and the impact of the shutdown is 0.1% per month then if the Q2Q value should have been 2.8% then it might only be 2.7% Q2Q, or if we were supposed to hit 3.2% same quarter growth then it may "just" be 3.1%. If you examine the two tables, same quarter GDP appears to be expanding. The quarter to quarter data is often strongest during the Second quarter, slightly weaker during the third quarter, weaker during the fourth quarter, and weakest during the first quarter. GDPI may drop quarter to quarter, and that is because there was such a huge spike between second and third quarter. We may see growth in exports and a decrease in imports as tariffs take hold.
The Shutdown should not hit fourth quarter. The Shutdown happened with two weeks left in the year. This means that we had 2 months and 2 plus weeks of data going into a 3 month period of time.It might not impact first quarter if the shutdown is resolved in short order. Even if it impacted January, that is only one month out of three.
How could it impact GDP? Personal Consumption Expenditures (PCE) may dip a little from same quarter to same quarter. This was Christmas. Spending surges during December and we saw record retail data from MasterCard and Visa. Government Consumption Expenditures could dip - and once again two months and two weeks of expenditures were completed.
The shutdown may not show up in the "Jobs Streak" because the job streak is a private sector job streak and the government workers are "public" workers, not private workers. The data shutdown may not show up in the unemployment data because the workers are furloughed, in a management dispute, and are not unemployed. The shutdown may not show up in the GDP because 84% of the GDP data was already in, and 100% was already estimated. It may not impact GDP because GDP was growing and if this slows GDP the two forces could offset each other.
The biggest impact that the shutdown may have on the GDP is that the GDP report may not be released on-time. It must not be "essential." After all, 99.4% of the workers are working and 96.1% of government workers are working.
It's the economy.
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