Don't believe guesstimates of shutdown-related losses*

shutdown4.jpgJust way too early to know how bad - or not so bad - the 16 lost days will turn out to be. Some fallout nationally is inevitable: Economists are reducing their fourth-quarter annual growth estimates by anywhere from 0.5 percent to a 1 percent, hardly what the sluggish recovery needs. Regions that are especially tied to the government will have a tougher time, at least for a while. But Southern California's economy is in pretty good shape, with most of the effects from the shutdown likely to be short term and marginal. You never want to be too declarative when it comes to the economy, but some of the gloomier forecasters seem off the mark. Wouldn't it be nice if these folks just said, "We simply don't know"? Of course if they did that, they wouldn't be quoted!

--Federal workers: L.A. County has only 46,000 of them, which in a workforce of 5 million represents a tiny portion of the economy - and they will be receiving back pay for their 16 days off.

--Contractors: Perhaps a bit more worrisome sector because they won't necessarily be reimbursed for the downtime. But not all work comes to a halt; during the 1995-'96 shutdown, only one out of five contracts were put on hold. Also, contract work tends to be long term and involve convoluted payment schedules. What seems like losses at first are sometimes less than meets the eye.

--Consumer spending: Perhaps federal workers took it easy at the malls during the shutdown, although with taxable retail sales in L.A. County running about $100 billion, it's hard to imagine too many store owners noticed, save for the lunch joints near federal buildings.

--Tourism: Lots have been made of the folks who weren't able to visit the National Parks, and the effect on nearby businesses - motels, souvenir stores, and so on. Certainly, those operators took a hit, but not all business will be lost forever if travelers are able to reschedule their trips (as often happens when inclement weather forces people to cancel their plans). Again, be careful about jumping to conclusions.

Home sales: Sometimes logic trumps talking heads - does anyone really believe that in a dynamic market like this one potential buyers stopped in their tracks after watching the Congressional antics on CNN? If there was any sluggishness in Southern California, it's more likely the result of a market that has slowed down after an overly-exuberant 12 or so months.

Investments: So far, so good - stocks had been in a slump since mid September, but the Dow is bouncing back to within 300-400 points of its all-time high, and the blue chip index is up almost 17 percent year to date. Sure doesn't sound shabby.

Consumer confidence: Indexes took a hit over fears of a default, but those numbers tend to bounce around a lot. The important point is that people seem to view the Washington insanity as a manufactured crisis rather than something that reflects the overall economy.

*When tallying up the folks who really got stiffed from the shutdown, let's not forget John Anderson. From the Washington Post:

He is a line cook at the American Indian Smithsonian Museum on the National Mall. Anderson is not a government employee. He's a contract worker - the government hires his company to make the food for visitors to the museum. When the shutdown closed the museum, Anderson lost his job. He'll now presumably be able to go back to work, but unlike federal workers, he won't get back pay. And he could use that back pay: Anderson is a divorced father of two who usually brings home about $350 a week after taxes and child support. His 16-year-old son lives with him in Washington but commutes by bus and train to high school in Maryland every day. Anderson has no savings - his wages don't leave much cushion for savings - and struggled through the shutdown to pay his rent, put food on the table and pay for his son to travel back and forth to school.

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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.
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