First, shutdowns are expensive, and many government employees continue to work (like the military), but don’t get paid. This time President Biden and Speaker McCarthy agreed on a plan, but the Speaker has been unable to deliver. So, the path forward isn’t clear.
Second, there will be an impact on GDP from Goldman Sachs: A government shutdown this year has looked likely for several months, and we now think the odds have risen to 90%. … We continue to think a shutdown would last 2-3 weeks.
We have estimated a shutdown would subtract 0.2pp from Q4 GDP growth for each week it lasts … We expect all data releases from federal agencies to be postponed until after the government reopens, except for releases from the Federal Reserve, which does not rely on congressional funding.And from Nick Timiraos at the WSJ: Shutdown Would Blindfold Fed in Piloting Course on Rates. We will all be flying mostly blind without reports on employment, inflation, housing starts and more. However, there will be some private data to fill the gap.
For housing, depending on the length of the shutdown, the impact would be on existing home closings in October. If the shutdown lasts for the entire month, I’d expect about a 10% decline in seasonally adjusted sales in October. If the shutdown only lasts a couple of weeks, there would probably be little impact. Some issues could be Tax transcripts, Flood Certs, and SS# Authorization.