E52: Government Shutdown vs. the U.S. Economy
KEY TAKEAWAYS
- The Economy is Flying Blind: Unlike the partial shutdown in 2018-2019, this full shutdown has halted the release of critical government economic data, including jobs and inflation reports. This lack of information makes it difficult for the market and the Federal Reserve to accurately assess the economy's health.
- Economic Impact Grows Over Time: While a short shutdown has minimal effect, a prolonged one creates significant economic drag. As federal workers and contractors miss paychecks, consumer spending is expected to fall. The longer it lasts, the greater the risk of a broader economic slowdown.
- The Fed Faces a Difficult Decision: The Fed is expected to continue cutting interest rates, but the absence of official data complicates its decision-making. The shutdown itself acts as a drag on economic growth, which may push the Fed to cut rates even without clear data, forcing it to rely on less comprehensive private-sector surveys.
U.S. Regional Director of Research Rob Rowe and Veronica Clark, Senior U.S. Economist, discuss the U.S. government shutdown, how it may affect the U.S. economy, and the Fed's possible reaction.
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Robert Rowe, U.S. Regional Director of Research and Head of Global Strategy and Macro Group, Citi
Rob Rowe is the Head of Citi Research’s Global Strategy & Macro Group (GSMG) as well as Head of Research for the Americas. GSMG unites all of Citi’s Economists with Fixed Income, FX, Equity and Commodities strategists to create a common team providing research on the world’s major economies and asset classes. Rob has been with Citi for 35 years in various capacities. He originally joined Smith Barney, Harris Upham & Company in 1989 working in investment banking, fixed income sales, and research. In addition to his overall responsibilities, he continues to provide portfolio strategy for select clients as part of his previous role overseeing the Global Bond Portfolio Analysis team. Rob is a graduate of Hartwick College with a BA in European History and the Theatre. He is also a graduate of the American Academy of Dramatic Arts.
Veronica Clark, Senior U.S. Economist, Citi
Veronica Clark first joined Citi Research in 2015 and is now an Economist on the US Economics team, primarily covering US economic data and forecasting. She also is the primary Economist for Canada. Prior to joining the team, she worked in Emerging Markets Strategy and G10 Short Term Interest Rate Trading. Veronica holds a Master’s degree in Economics from New York University and Bachelors in Mathematics and Economics from the University of North Carolina at Chapel Hill.
