About 500,000 federal workers have been furloughed without pay until the government resumes full operations.
But the impact is much broader than that. Employees of government contractors, which do hundreds of billions of dollars worth of business with the federal government, are also at risk. Defense contractor Lockheed Martin (LMT) will furlough about 3,000 workers today. United Technologies cancelled a planned furlough of nearly 2,000 Sikorsky Aircraft workers at the last moment after Defense Secretary Chuck Hagel announced he was bringing back 90% of the 350,000 civilian workers who were sent home because of the shutdown.
In addition, many state governments, including North Carolina, Rhode Island, Arkansas, are also furloughing employees whose pay depends on federal funding. And the housing market is expected to slow down because lenders won't be able to verify borrowers' incomes with the IRS and Social Security Administration. Borrowers will also face delays getting mortgage insurance from the Federal Housing Authority, which guarantees about 15% of new loans.
Research firm IHS estimates the shutdown costs the national economy $300 million a day in lost output.
"At the end of the day, you're going to find somewhere between 0.3% and 0.5% diminishment in GDP" in the fourth quarter as a result of the shutdown, says Dan Alpert, managing director at Westwood Capital.
And he's at the low end of estimates. Mark Zandi, chief economist at Moody's Analytics, and Guy Lebas, chief fixed income strategist at Janney Montgomery Scott say a shutdown lasting 3-4 weeks could cut fourth quarter GDP by as much as 1.4 percentage points. That's a sizable amount since GDP in the second quarter was only 2.5%.
How much the shutdown impacts the economy and the job market will also depend on how long it lasts, says Alpert, who expects the shutdown will end sometime this week.
"When we finally get the jobs numbers we didn't get on Friday--we'll see what the economy looked like before the shutdown and that will be an indicator of where we're headed," says Alpert, author of the new book, The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy.
In the meantime, Alpert says the job market reflects an "enormous departure from full-time employment to low-wage part-time employment." People are working "cheap" and "businesses are running lean," says Alpert.
"Two-thirds of the jobs that have been created year-to-date are in the very low wage categories" paying about $15 an hour, says Alpert. "There are many other things to do to change it" but shutting down the government isn't one of them, says Alpert.
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