Why L.A. isn't being hit too hard by shutdown - for now

shutdown2.jpgJust figuring out what's open and closed is a challenge, much less assessing the local impact. The prevailing view is that right now the shutdown is more inconvenience than dislocation. both for federal workers based here and the customers they serve. The Small Business Administration has stopped processing loan applications, which is a hassle, and the Federal Housing Administration is backed up in its paperwork, which could cause problems in purchasing a home. But you can still apply for a passport (offices generate enough fee revenue that the offices pay for themselves), and NASA's Jet Propulsion Laboratory in Pasadena remains open (the facility is run by California Institute of Technology employees, not federal civil servants). The federal courts remain open, too. So it's a mishmash. If the impasse were to drag on for many more weeks, however, there's bound to be real fallout - among government workers unable to pay their mortgages, among local contractors having to lay off staff, among would-be homebuyers unable to get financing. All that will fan out into the general economy. And while the news this morning about a short-term deal on the debt ceiling extension is encouraging, there's no mention of a continuing resolution that would fully reopen the government. The concern is that as an economic matter, the shutdown is not being given the same priority as the prospects of default. From this week's Business Update on KPCC:

Mark Lacter: If you look back on the history of these things, Susanne, you see that the disputes are resolved before too much damage gets done. As for Southern California, I notice that KPCC's Alice Walton was asking around over the weekend about the shutdown, and most folks gave it a shrug. The regional economy is just too diversified - and not especially tied to federal employment. You have about 46,000 federal workers employed in L.A. County in one capacity or another - that's out of a workforce of nearly 5 million. And, now it appears as if the federal employees who have been furloughed are going to receive their back wages whenever the shutdown finally ends.

Susanne Whatley: That still might make things dicey when it comes time to pay the monthly mortgage...

Lacter: ...but at least money will be available before most folks run into serious liquidity issues. That's what the shutdown really comes down to - inconvenience rather than dislocation. And, you see this with the various government services affected: the E-Verify website is down - that lets business owners know whether the people they're wanting to hire can work legally in the U.S., which obviously is important. The Small Business Administration has stopped processing loan applications, and the Federal Housing Administration is reporting delays in its loan processing, which could mean a home buyer might not complete his or her paperwork all that quickly.

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Why L.A. isn't being hit too hard by shutdown - for now

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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