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The closure of the US government UU Could depress employment growth in January

WASHINGTON (Reuters) – A partial closure of the US government. UU It could reduce job growth by 500,000 in January and raise the unemployment rate above 4.0 percent unless the stagnation in Washington is resolved before next Friday, economists warned.

FILE PHOTO: A protester holds a sign indicating hundreds of thousands of federal employees who will not receive their paychecks as a result of the partial closure of the government, during a "Meeting to End the Closure" in Washington, USA. UU., On January 10. , 2019. REUTERS / Carlos Barria

About 800,000 government workers missed their first paycheck on Friday after the partial closure that began on December 22 when President Donald Trump demanded that the United States Congress give him $ 5.7 billion this year to help build a wall on the border of the country with Mexico.

The Labor Department, which has not been affected by the closure, surveys employers and households looking for a highly observed employment report, which includes non-farm payrolls and the unemployment rate, during the week that includes the 12 of the month.

For this month, the pay period for most federal employees, which includes the week of the 12th, runs from January 6 to 19. Around 380,000 workers have been suspended, while the rest are working without pay.

Unless the government reopens next week, workers without permits are likely to be considered unemployed, since they would not have received a salary during the survey of the pay period.

"So, if the government remains closed on January 19, unpaid federal workers will not receive payment during the week of the survey, which means that it is very likely that we will get a big drop in the payroll report, something in the order of perhaps 500,000 to 600,000, "said Omair Sharif, senior economist at Societe Generale in New York.

That could lead to the first monthly decline in employment since September 2010 and break a series of 99 consecutive months of job growth.

But if Congress decides to pay these workers retroactively, as was the case after the October 2013 government shutdown, they would be considered employees.

"You can see the payroll figure from the private sector to avoid this distortion, but it will create some uncertainty and prevent us from getting a clear reading of the labor market," Sharif said.

The economy created 312,000 jobs in December, the largest amount in 10 months. Trump likes to brag about the strong labor market as one of the achievements of his crown. The shutdown, which on Friday tied the record for the longest time in the nation's history, could also raise the unemployment rate in January.


The household survey from which the unemployment rate is derived would likely consider unemployed workers as unemployed.

"These workers represent approximately 0.2 percent of the current workforce, so, in general, the increase in unemployment associated with the closure of the government could lead to an increase of 0.2 percentage points in the rate of unemployment in January, "said Daniel Silver, an economist. at JPMorgan in New York.

The unemployment rate rose two tenths of a percentage point to 3.9 percent in December, when some unemployed Americans piled into the labor market confident in their employment prospects.

While these impacts on the labor market are likely to be temporary, they could make it difficult for legislators to obtain a clear reading of the health of the economy for monetary policy.

Economists are also concerned that a prolonged shutdown of the government may hurt the confidence of businesses and consumers, and undermine the expenses of businesses and households.

Richmond Federal Reserve Chairman Thomas Barkin said on Thursday that the closure, which has delayed the release of Commerce Department data, including November's trade figures, could affect the amount of economic data available for the Reserve. Federal, the central bank of the United States.

JPMorgan estimates that the close is cutting 0.1-0.2 percentage points each week from quarterly economic growth. He said the impact could be even greater if the closure caused a significant change in sentiment.

"The end of 2013 had notable negative effects on some measures of consumer and business confidence, but these effects were short-lived in a context of strong economic data and rising stock markets," Silver said.

"It is possible that a prolonged shutdown at this time may interact with market declines and weaken economic data to produce greater pressure on confidence and the economy in general."

Lucia Mutikani report in Washington; Edited by James Dalgleish

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