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Expand chart
Data: Staff research; Chart: Axios Visuals

Economists are cutting expectations for first quarter GDP to reflect the government shutdown's hit to the economy, but not all of the growth lost during the shutdown is forever gone.

What they're saying: Barclays economist Michael Gapen cited the shutdown's "effects on consumer spending and other expenditure categories over and above the direct effect in terms of the drop in production by furloughed government workers."

The big picture: The CBO estimates the shutdown cost the economy $11 billion, including $3 billion of activity that won't be recovered.

  • "Some businesses could not obtain federal permits and certifications, and others faced reduced access to loans provided by the federal government. Such factors were probably beginning to lead firms to postpone investment and hiring decisions," CBO officials wrote in their report.
  • Unsurprisingly, the White House disagrees that the shutdown's economic impact was this severe.

What's going on: Three of the big banks raised estimates for second quarter growth, alongside their first quarter downgrades, saying that the lost economic activity will resurface in the second quarter.

  • There will be a rebound in economic activity in the second quarter once federal employees — many of whom couldn’t work for 35 days, and missed two weeks of pay — work for an uninterrupted quarter, Morgan Stanley economist Ellen Zentner wrote in a note.

Yes, but: Ethan Harris, an economist at Bank of America, who also upped his second quarter growth forecast says "only some of the lost private sector spending will come back."

  • The White House says backpay for federal workers is expected by the end of the week, but not all contractors can recoup wages.

Watch this space: S&P points out that lost productivity from furloughed employees won’t be recovered and business confidence will slump, especially if it appears that we’re headed for another government shutdown in three weeks.

Our thought bubble, from Axios' Dion Rabouin: It's important to note that the length of this shutdown is unprecedented. The 35-day shutdown was two weeks longer than the previous record in 1995-96 and more than twice as long as the 16-day shutdown in 2013.

Go deeper: Treasury will again borrow $1 trillion to pay for tax cuts, spending

Go deeper

6 mins ago - World

Barbados becomes a republic, replacing U.K. queen with president

Combination images of Dame Sandra Mason, president of Barbados, and Britain's Prince Charles at her swearing-in ceremony in Bridgetown, Barbados, late Monday.

Barbados officially became a republic at midnight local time after Dame Sandra Mason was sworn in as the Caribbean nation's first president in a ceremony attended by the United Kingdom's Prince Charles.

Why it matters: Mason replaced Britain's Queen Elizabeth as head of state Tuesday — removing the country's final remaining colonial tie to the U.K. almost 400 years after the first British ships arrived in Barbados.

Right-wingers making McCarthy sweat for future Speaker post

House Minority Leader Kevin McCarthy stands with his Republican colleagues outside the House on Nov. 17. Photo: Stefani Reynolds/Bloomberg via Getty Images

Right-wing elements in the Republican Party are complicating House Minority Leader Kevin McCarthy's attempts to become the next speaker of the House should the GOP take back the majority in 2022.

Why it matters: While McCarthy has worked carefully to build trust among the conservatives who tanked his chances at clinching the speakership in 2015, they're still circling ahead of the next Speaker vote in January 2023.

4 hours ago - Politics & Policy

Congress sprints to meet crush of deadlines

Illustration: Aïda Amer/Axios

Congressional leaders have been pushing off vital action for months — and a lot of it will catch up with them in December, which begins Wednesday.

Driving the news: Funding for the federal government is set to expire at midnight on Friday. There are also consequential deadlines related to the debt limit, President Biden's agenda and annual actions like voting on the National Defense Authorization Act.