U.S. Shutdown Hits Economy Hard, Recovery Expected Post-Closure

WASHINGTON, Nov. 7 (Reuters) – The ongoing U.S. government shutdown is severely impacting the economy, according to White House economic adviser Kevin Hassett. During an interview with Fox Business Network on Friday, Hassett indicated the economic fallout is worse than anticipated, particularly for the travel and construction sectors.

“Travel and leisure is a place that’s really being heavily hit right now,” Hassett said, warning that continued disruptions in air travel could lead to a “near-term downturn” for the industry if the shutdown persists for another week or two.

The National Economic Council director noted that this is the longest shutdown in U.S. history, lasting 38 days so far, and mentioned it’s affecting various areas of the economy. The Federal Aviation Administration implemented a 10% reduction in flights at 40 major airports, impacting business and holiday travel.

Hassett expressed disappointment over Federal Reserve Chairman Jerome Powell‘s recent comments that the Fed may pause interest rates in December. He argued that the uncertainty created by the shutdown is softening the labor market and could hinder economic growth. The fourth quarter GDP growth is now predicted to be about half of the initially estimated 3%.

Hassett said he’s worried about the future of the government workforce and suggested that recurring shutdowns might discourage people from pursuing federal jobs. “I wonder who’s going to want these jobs if we don’t get this solved quickly,” he remarked.

He also pointed out that the effects of the shutdown extend to construction projects, supply chain delays, and disruptions in local economies. “If we go another month or so, who knows how bad the economy could be this quarter,” he cautioned.

Despite these concerns, Hassett remains optimistic that the U.S. economy will rebound rapidly once the government reopens. He highlighted that advancements in technology, particularly artificial intelligence, could play a significant role in boosting productivity and economic growth in the future.