Jan 29, 2019

Economists cut expectations after Trump shutdown

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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

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Kayleigh McEnany replaces Stephanie Grisham as White House press secretary

Photo: Scott W. Grau/Icon Sportswire via Getty Images

Trump campaign spokeswoman Kayleigh McEnany is replacing White House press secretary Stephanie Grisham, who will return to the East Wing as First Lady Melania Trump's chief of staff, according to two sources familiar with the situation. The news was first reported by CNN and the New York Times.

Why it matters: Grisham will leave after nine months without ever having held a formal press briefing.

Go deeperArrowUpdated 19 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10:30 a.m. ET: 1,363,365— Total deaths: 76,420 — Total recoveries: 292,425Map.
  2. U.S.: Total confirmed cases as of 10:30 a.m. ET: 368,533 — Total deaths: 11,008 — Total recoveries: 19,972Map.
  3. Trump administration latest: Peter Navarro warned White House colleagues in late January about the massive potential risks from the coronavirus.
  4. Public health update: Funeral homes are struggling to handle the pandemic.
  5. 2020 update: Wisconsin Supreme Court blocks the governor's attempt to delay in-person primary voting until June.
  6. Tech update: YouTube has removed thousands of COVID-19 videos for violating policies related to spreading medical misinformation.
  7. What should I do? Pets, moving and personal health. Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

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WeWork board sues SoftBank

Illustration: Sarah Grillo/Axios

SoftBank was sued Tuesday morning by a special committee of WeWork's board of directors for alleged breaches of contract and fiduciary duty related to SoftBank's decision to cancel a $3 billion tender offer for WeWork shares.

Why it matters: SoftBank is viewed by many in the private markets as an unfaithful partner. If this reaches trial, that reputation could either become widely cemented or reversed.