The largest banking trade group in the United States says shutting down the government could hurt investor and consumer confidence, but would hit the overall economy indirectly.
Speaking as the American Bankers Association unveiled its annual economic forecast in Washington, Ellen Zentner, chair of the ABA’s advisory committee, said “no one likes the uncertainty of a government shutdown.”
Citing the most recent shutdown in October 2013, which lasted 16 days, Zentner said that while the economic impact might have been minimal, the effect on the American psyche went deeper.
“If we look back at October 2013, it’s very difficult to see that there was an impact,” she said. “Workers that were nonessential government workers that were furloughed were eventually sent back to work, and they were provided back pay. Where we did see a lasting effect, though, was on business sentiment and consumer sentiment.”
The 2013 shutdown is believed to have cost the United States about $2 billion in lost productivity, and hurt American voters’ trust in lawmakers.
A similar shutdown Friday would force the closure of nonessential government offices and furlough thousands of government workers. Consumer and business confidence has been rising, but the banking group says a prolonged shutdown could dampen that optimism.
From a local business perspective, Zentner says, the impact of a government shutdown is very real.
“It matters for businesses who serve those federal workers that report to work every day and buy lunch while they’re at work,” she said. “If those workers are furloughed, they’re not buying lunch each day, and so as a restaurant, that’s business lost.”
Barring a lengthy and disruptive government shutdown, the ABA is forecasting economic growth to expand 2.4 percent this year and for already-low unemployment to drop further to 3.8 percent by the end of the year.
Workers who have seen little or no wage growth since the recovery could see their paychecks rise by about 3 percent in 2018 and 3.5 percent in 2019, as employers compete for workers in a shrinking labor pool.