A protracted federal government shutdown compounds slower economic growth and increases the possibility of a downturn by early 2020, says a leading regional economist. 

Creighton University Economics Professor Ernie Goss said surveys conducted at the Nebraska university have already indicated slower growth for 2019; the shutdown will certainly have an impact on gross domestic product.  

“There is never a good time for an economic hiccup or slowdown, but this is an exceptionally bad time,” said Goss, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business.

“Housing is very soft right now, and we also have the trade tensions/trade wars with China. In addition, Brexit out of Great Britain is creating uncertainty. When we tack on this government shutdown, it’s going to have an impact on GDP, gross domestic product,” said Goss. GDP is a monetary measure of the market value of all the final goods and services produced quarterly. 

The last significant government shutdown for 16 days in October 2013 showed negative GDP growth in the first quarter of 2014. 

Goss also points to indirect impacts in the private sector as a ripple effect. “As we move along, we will see impacts grow,” he said. “For every one job pullback in the federal government, there will likely be a job lost in the private sector.” 

A major impact of the government shutdown, combined with trade issues, can be seen in the Midwest with farmers front and center, Goss said. The effects include payment delays in the $12 billion in government farm support earmarked to offset the ongoing trade dispute with China, as well as government loans. More important for farmers, significant statistical information is not available to help strategize spring crops. 

“A lot of people are operating in the blind,” Goss said. “A real big part of what the government does is provide statistics. The Bureau of Economic Analysis is not going to be providing GDP estimates, some of the import/export numbers.”  

Goss recommends that consumers and businesses not affected by the trade dispute or shutdown go about business as usual. Keeping consumer confidence high could be key as long-term impacts of the government shutdown and trade disputes remain unknown.

“We tend to judge this shutdown by past shutdowns. Most of the past shutdowns have all been shorter, and they have not had a long-term impact,” he said. “This one could be different to the extent that it has been going on longer and is happening at a very inopportune time.”

The current government shutdown is in its 34th day.