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Looking at no pay for four days, consumers may cut back

Mitchell Hartman Oct 4, 2013
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Looking at no pay for four days, consumers may cut back

Mitchell Hartman Oct 4, 2013
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We’re in Partial Government Shutdown: Day 4. West Point cadets are now being taught by fill-in officers because civilian faculty members are on furlough. Some FEMA and National Hurricane Center workers, meanwhile, have been ‘un-furloughed’ to deal with Tropical Storm Karen in the Gulf of Mexico.

The furlough of roughly 800,000 federal workers — those deemed non-essential — is beginning to affect the real economy of consumer spending and income. Sam’s Club says its sales are off in some markets. And manufacturers like United Technologies and Boeing, which depend on government workers to do inspection and certification work as well as depending directly on government contracts, are warning of layoffs if the shutdown continues. 

The shutdown is costing approximately $155 million per day in lost wages, or 0.3 percent of GDP on an annualized basis, according to Capital Economics. But the shutdown won’t really start to bite until half-empty paychecks hit workers’ bank accounts around October 15th. The payday scheduled for the end of October will be barren for federal workers.

EPA inspector Natasha Greaves in Seattle has already delayed a home remodel, and she’s holding off on travel reservations for the Christmas holidays. Greaves is 42, married, and helps to support an elderly parent.

“Over time, it will become much worse,” says Greaves, “just not knowing.  Are you going to be able to do the things that you’ve done, to support folks, to pay all your bills?”

Rutgers University public policy professor Carl Van Horn at the John J. Heldrich Center for Workforce Development says a mass federal furlough is better than a mass layoff, where workers aren’t sure they’ll ever be called back.

“The past history has been that workers that were furloughed eventually get paid anyway,” says Van Horn. “But the more cautious ones will not be sure that that will happen again.”

After government shutdowns in the 1990s, federal workers got back pay. But that may not be in the playbook this time around.

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