With the federal government shutdown continuing, some households are making tougher choices about how they spend."People have to make tougher decisions, I think, even more than ever on how they're going to spend their money," said Thomas Lambert, an applied economist at the University of Louisville.Lambert says benefit lapses, missed paychecks, and broad uncertainty mean less money for everyday essentials for some families, and that the effects won't stop there. "That's less spending at groceries and restaurants, less spending for clothes, less money to give to the landlord for rent," he said. "And then that in turn has further ripple effects, because as these grocery stores and retailers see less business, they're going to have to cut back as well."Against a weakening labor market backdrop, the Federal Reserve on Wednesday lowered its benchmark interest rate by a quarter of a percentage point, its second cut this year, bringing the rate to its lowest level in three years. "Job gains have slowed significantly since early in the year. A good part of the slowing likely reflects a decline in the growth of the labor force due to lower immigration and labor force participation, though labor demand has clearly softened as well. Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low," said Federal Reserve Chair Jerome Powell. Lambert described the move as a "preemptive strike." "In my opinion, this could be a little bit premature," said Lambert, "But on the other hand, I understand the concern about the jobs trying to head off any type of increase in unemployment." He added that the central bank is likely worried because the fallout from the shutdown reaches far beyond government workers. "They know that this shutdown not only affects government employees, but every person down the supply chain," said Lambert.Even if the shutdown ends soon, Lambert cautioned that recovery won't be immediate. "It's going to take a while to make up for what's been done to the economy, the lost revenues, the lost output," he said. "And like I said, not only the direct spending to the federal government, but how it ripples across the economy."
With the federal government shutdown continuing, some households are making tougher choices about how they spend.
"People have to make tougher decisions, I think, even more than ever on how they're going to spend their money," said Thomas Lambert, an applied economist at the University of Louisville.
Lambert says benefit lapses, missed paychecks, and broad uncertainty mean less money for everyday essentials for some families, and that the effects won't stop there.
"That's less spending at groceries and restaurants, less spending for clothes, less money to give to the landlord for rent," he said. "And then that in turn has further ripple effects, because as these grocery stores and retailers see less business, they're going to have to cut back as well."
Against a weakening labor market backdrop, the Federal Reserve on Wednesday lowered its benchmark interest rate by a quarter of a percentage point, its second cut this year, bringing the rate to its lowest level in three years.
"Job gains have slowed significantly since early in the year. A good part of the slowing likely reflects a decline in the growth of the labor force due to lower immigration and labor force participation, though labor demand has clearly softened as well. Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low," said Federal Reserve Chair Jerome Powell.
Lambert described the move as a "preemptive strike."
"In my opinion, this could be a little bit premature," said Lambert, "But on the other hand, I understand the concern about the jobs trying to head off any type of increase in unemployment."
He added that the central bank is likely worried because the fallout from the shutdown reaches far beyond government workers. "They know that this shutdown not only affects government employees, but every person down the supply chain," said Lambert.
Even if the shutdown ends soon, Lambert cautioned that recovery won't be immediate.
"It's going to take a while to make up for what's been done to the economy, the lost revenues, the lost output," he said. "And like I said, not only the direct spending to the federal government, but how it ripples across the economy."