Source: DB |
The most direct impact is visible in the number of government jobs - the impact on the private sector that services the government is of course quite large as well. The chart below shows the decline in government payrolls over time (not seasonally adjusted).
Source: US Department of Labor |
While government payrolls continue to fall, the decline has been slowing - mostly due to the stabilization in state and local employment. Federal jobs however are another story.
Given the fiscal drag resulting from an already weak (relatively) federal spending, the US economy is highly vulnerable to a negative outcome of the upcoming debt ceiling/budget fight. And while tightening federal spending is absolutely vital, a disruption at this juncture could prove to be costly.
BNY Mellon: - The upcoming showdown between Republicans and Democrats of Capitol Hill over both the 2014 federal budget and the national debt ceiling is shaping up to be a battle royal in Washington...”
In fact the "showdown" has already started. Some Republicans
have threatened to shut down the federal government (by
withholding funding) if the administration does not
compromise on the Affordable Care Act. Yesterday the Obama
administration fired back (see video below). While nobody
thinks the situation will turn as ugly as it did in 2011, a
major budget disruption (beyond the sequester) could create
a serious setback for the US economy. And in this tepid
recovery there is little else that could cushion this
potential increase in "fiscal drag".
What's particularly concerning however is that after having developed a "tolerance" to repeated budget fights, the public seems to have completely lost interest in the topic.
What's particularly concerning however is that after having developed a "tolerance" to repeated budget fights, the public seems to have completely lost interest in the topic.
Google Trends for phrase "federal budget" (US-based searches only) |
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