Moody’s chief economist: Prolonged government shutdown is “fodder for recession”

Mortgage & Real Estate

Moody’s Chief Economist Mark Zandi is warning that growth rates are going to fall and unemployment will rise if the government shutdown goes into February. 

In an interview with CNBC, Zandi posited that the economy was looking “wobbly” before the partial government shutdown began on Dec. 22. Now, 28 days later, he warns that if federal workers don’t return to work soon, American consumers could lose faith in the economy. 

“If this drags on into February, March, then growth rates are going to fall to a place where unemployment will start to rise. That’s fodder for recession,” Zandi said in the interview (video below).

“If you go back a year ago, GDP growth was closer to 4%. That was all juiced up by the deficit-financed tax cuts,” he told CNBC’s Squawk Box. “Now we’re down to about 2. And if the shutdown drags on we’ll probably go below 2, and that’s a key threshold.”

If the shutdown, now the longest in U.S. history, does continue, Zandi estimated that there could be .5% shaved off GDP growth in the first quarter of 2019. Watch the video below for more. 

Leave a Reply