Bank of America CEO Brian Moynihan has raised concerns about the continuing government shutdown and its negative impact on the U.S. economy. He stated that this standoff is causing delays in important business deals, freezing initial public offerings (IPOs), and putting jobs at risk as necessary approvals stall.
This ongoing shutdown has also pushed back the release of the Commerce Department’s early estimate for the third-quarter gross domestic product (GDP). While many analysts believe that economic growth is strong for this quarter, the furlough of workers considered nonessential has hindered the agency’s ability to compile and publish the report.
Additionally, the Bureau of Labor Statistics was unable to produce the September jobs report because of the shutdown. However, the urgency of generating the September consumer price index, important for determining the annual Social Security cost-of-living adjustment, prompted the agency to bring back some workers to release that data.
Despite the lack of official GDP figures from the Commerce Department, other projections have emerged from regional Federal Reserve banks. The Atlanta Fed’s GDPNow model estimates third-quarter growth at 3.9%. Although this is not an official forecast, it serves as a moving estimate based on available economic data.
On the other hand, the New York Fed’s nowcast, which applies probability bands around growth estimates, indicated a GDP growth of 2.35% for the same quarter, suggesting a chances of growth varying between 1.32% and 3.41%. Both forecasts indicate a need for a clearer understanding of the economy, which has been complicated by the government shutdown.
Experts note this period of uncertainty is akin to “driving in the fog” for economic policymakers, making it challenging to make informed decisions.
Earlier this year, the Commerce Department reported a 0.5% contraction in the economy during the first quarter, followed by a growth of 3.8% in the second quarter. If the Atlanta Fed’s estimate holds true, the overall GDP growth could average around 2.4% for the first three quarters of the year. If the New York Fed’s numbers are accurate, it would suggest about 1.88% growth during the same period.
As the impasse continues in Congress, the implications of this shutdown remain serious, and the direction of the U.S. economy hangs in the balance.
