Thousands of federal employees received reduced paychecks on Friday as the government shutdown continues, with many facing the possibility of no further income until Congress acts to restore operations. n nSara Nelson, head of the International Association of Flight Attendants, highlighted the immediate consequences: workers are struggling to cover rent and essential expenses, and this financial strain will ripple through local economies. n nHowever, according to economics professor Abby Hall, the broader economic impact may remain minimal if the shutdown is brief. Historical data supports this view — the 2019 shutdown reduced U.S. GDP by just 0.02%, a small fraction of overall economic activity. n nThis limited effect stems from the fact that once the government reopens, federal workers typically receive back pay, allowing spending to resume. Financial analyst Andrew Davis compared the situation to a natural disaster: “The initial storm comes through and disrupts economic activity, and then once the storm passes, you see a snapback.” n nDespite the disruption, key economic indicators will still be released. The Bureau of Labor Statistics is assigning limited staff to publish the monthly consumer price index (CPI) report, which directly influences cost-of-living adjustments for Social Security benefits. n nDavis, a former economist at the bureau, stressed the importance of timely data dissemination. The CPI report plays a critical role in shaping policy and public understanding of inflation trends, even during periods of administrative disruption. n
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How much effect will the shutdown have on the consumer economy?
Thousands of federal workers are receiving smaller paychecks on Friday due to the government shutdown. And for many, it could be their last check until Congress agrees to reopen the government. n n”Federal workers serve in every single one of our communities around this country and the people that are not getting paychecks are not paying their payroll bill, said Sara Nelson, president of the International Association of Flight Attendants. “They ‘re not going to be able to pay their rent. They are not going to be able to pay for the other services and that is going to have a ripple effect on all of us.” n nBut outside of federal workers, the economic ripple effects of a shutdown may be less noticeable, according to economics professor Abby Hall. n n”If this shutdown is relatively short, I don ‘t imagine that for many people, they will notice a particularly large difference,” Hall said. n nDuring the last shutdown which ended in 2019, the Congressional Budget Office found just two hundredths of a percent was shaved off the U.S. GDP, a measure of economic activity. n nThat limited impact is because when the government reopens from a shutdown, federal workers should collect back pay and spending continues. n nRELATED STORY | Trump administration begins ‘reduction in force ‘ as government shutdown continues n n”A government shutdown, think of it like a hurricane,” financial analyst Andrew Davis said. “The initial storm comes through and disrupts economic activity, and then once the storm passes, you see a snapback.” n nDespite the shutdown, consumers could still get new data on inflation later this month. According to multiple reports, the Bureau of Labor Statistics is tasking some employees with putting out the monthly consumer inflation report. n nDavis formerly worked as an economist at the bureau. n n”That CPI report goes directly into a cost of living adjustment, which is the emphasis of getting that out,” he said. n nThose figures ultimately impact Social Security benefit payouts.