Even before the government shutdown ended, Standard and Poor’s estimated the fiasco cost the economy $24 billion.
A week since the government reopened, the picture doesn’t look much better.
Moody’s Analytics estimates that the shutdown will reduce economic growth in the fourth quarter from 2.5 to 2.0 percent and cost $20 billion.
Now the White House estimates the ordeal cost 120,000 jobs in the first half of October.
Though much of the damage is expected to be reversed in the coming weeks, the underlying message is clear: a standoff that started over Obamacare ended as a self-inflicted wound on the economy, just as the recovery continues to struggle.
“This all just really underscores how unnecessary and harmful the shutdown and the brinksmanship was for the economy, why it’s important to avoid repeating it,” Jason Furman, head of Obama’s Council of Economic Advisers, said at a briefing on Tuesday.
The White House has come up with its price tag for the shutdown, estimating that the government shutdown cost us 120,000 jobs and lower economic growth by 0.25 percentage points in the first half of October, according to the administration’s Bureau of Economic Analysis.
The good news: further damage is avoidable if Congress does its job.
“The economy will bounce back from the shutdown, assuming lawmakers do not do it again in just a few months, but growth will remain lackluster for longer than it would have otherwise,” writes Moody’s Analytics chief economist Mark Zandi, noting that a recent survey by the National Retail Federation shows that consumers expect to spend less this holiday season than last.
Economists note that most of the damage to job growth will be reversed in the upcoming months. The White House’s estimate “seems plausible if they are counting furloughed employees as not on payrolls,” says Ethan Harris, head of North American Research for Bank of America Merrill Lynch.
In other words, much of this loss represent a temporary reduction in payroll employment, not a permanent destruction of jobs.
That means that the hit to job growth won’t be lasting, even if some of it shows up in the October jobs numbers. “Any slowing in job growth from the shutdown will be temporary,” concludes Gus Faucher, senior economist for PNC Bank. (The White House did not immediately respond to a request for clarification about its job numbers.)
Furloughed government workers will also be receiving backpay, which means they are likely to make some purchases they deferred during the shutdown and take some of the sting away.
But some of the economic losses will linger: Government contractors, for instance, won’t be paid for the time they’ve been furloughed, and the shutdown had a ripple effect across the private sector as well. Taxpayers also took a hit when Treasury bill rates spiked as we approached the debt ceiling, raising borrowing costs.
These are all losses that Congress inflicted on a country still struggling to recover from the worst recession in recent history.
And we could go through another cycle of self-inflicted economic pain in just three months’ time, when Congress faces yet another next budget and debt ceiling deadline.