The Pouting Pundits of Pessimism are at it again. After the fiscal cliff and the debt downgrade didnt produce calamity for the economy, now its the government shutdown. Some say that the furloughing of 800,000 federal employees will have a significant negative impact on economic growth in the months ahead. In fact, one firm is saying that as long as the partial shutdown continues, GDP growth will fall by 0.1 points per week and this is an additive factor meaning that the shutdown will subtract at least 5% from GDP if it lasts a year.
We think this is an overstatement in the extreme. In fact, we doubt the economy will show any negative growth as the result of the shutdown. The economy has lost jobs before and continued to grow. As the table above shows, Nonfarm payrolls fell by 1.5 million over the 3 month period of April-June 2009, and yet the economy continued to move right along, with 4.3% growth in retail sales over the following six months (see other data in table). And in 2010, a total of 735,000 government workers were laid off after the Census during a 4-month period from June to September 2010. The economy continued to grow.
http://www.ftportfolios.com/blogs/EconBlog/2013/10/4/dont-fret-the-shutdown
We think this is an overstatement in the extreme. In fact, we doubt the economy will show any negative growth as the result of the shutdown. The economy has lost jobs before and continued to grow. As the table above shows, Nonfarm payrolls fell by 1.5 million over the 3 month period of April-June 2009, and yet the economy continued to move right along, with 4.3% growth in retail sales over the following six months (see other data in table). And in 2010, a total of 735,000 government workers were laid off after the Census during a 4-month period from June to September 2010. The economy continued to grow.
http://www.ftportfolios.com/blogs/EconBlog/2013/10/4/dont-fret-the-shutdown
