Kevin Hassett, chairman of the White House Council of Economic Advisers, noted in a CNN interview that first-quarter growth tends to be relatively weak because of measurement issues and said it could be “very close to zero” if the shutdown persists through March.
“It is true that if we get a typically weak first quarter and then have an extended shutdown, that we could end up with a number that’s very, very low,” Mr. Hassett said. He added that when the government reopens, the economy should recover any lost ground.
.. Mr. Hassett also said he sees the odds of a recession in 2020 at “very, very close to zero.”
On Tuesday, Mr. Trump’s economic adviser Lawrence Kudlow told reporters at the White House he’s “not at all concerned” about the shutdown having a negative impact on the economy.
“No one likes the hardship that people are having to shoulder, including myself,” he said. “But I will also say, we are predominantly not a government-run economy. We’re a free-market economy. So when the government reopens…you will see an immediate snapback.”
.. But in an economy powered by spending and investment, which boil down to little more than consumers’ and businesses’ confidence in their future job and growth prospects, an extended shutdown could threaten broader collateral damage. A troubling sign that this risk may be materializing: The University of Michigan’s consumer-sentiment index plunged 7.7% this month from December to the lowest level since Mr. Trump was elected.
“Federal employees will receive their back pay, but that doesn’t mean that the businesses they patronize will be made whole by extra spending after the shutdown,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients Tuesday.