Small businesses feel the shutdown pain

Illustration: Sarah Grillo/Axios

The check isn't in the mail: 800,000 federal workers are set to miss their second payday this month, with no reprieve in sight as the shutdown approaches Day 35.

Why it matters: The drought of federal worker paychecks — not to mention the contractors who will never be repaid for their furloughs — is starting to sting surrounding businesses, with escalating dangers for the broader economy.

Details: A Philadelphia store owner who serves federal workers told KYW Newsradio that the workers will eventually get paid, but his shop won't recoup the lost business.

  • "We’re actually going to have small business, very soon, impacted negatively because we can’t get an SBA loan," Huntington Bancshares Inc. CEO Steve Steinour told WashPost today.
  • AP reports: "It’s hard to know just how much the shutdown is depressing consumer spending because the Commerce Department, which compiles and reports such data, was itself closed by the shutdown."

The bottom line: "[A] sustained decline in sentiment raises the probability that consumer demand further slows in the near term," Bank of America economists said today, per Bloomberg.

The big picture: 40% of American adults couldn't afford a $400 emergency, according to Fed data released in 2018.

  • Now imagine that your emergency is two missed paychecks in a row, when you've done nothing wrong on the job.
  • Then imagine how — when you eventually get back to work and get your backpay — how your spending habits could change if you were in that position.
  • As those Bank of America economists note: "[L]ost consumption may not be fully made up once the shutdown ends as we find the consumer more cautious in their spending habits."

What's next: The two Senate bills to re-open the government both failed today.

P.S. Secretary of Commerce Wilbur Ross, with a net worth in the hundreds of millions, said on CNBC today he doesn't "quite understand why" federal workers are going to food banks instead of getting loans to survive the "liquidity crisis."

  • "These are basically government-guaranteed loans because the government has committed, these folks will get back pay once this whole thing gets settled down."

Go deeper: All the ways Americans are feeling the effects of the shutdown

What's next

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The second day of the Senate impeachment trial of President Trump will see a full day of opening arguments from Democratic House impeachment managers.

What to watch for: Democrats now have 24 hours — spread out over three days — to take their time to lay out their case against the president's alleged abuse of power and obstruction of Congress. It'll also allow them to highlight gaps that could be filled out by additional witnesses and documents from the administration.

This post will be updated with new developments as the trial continues.

Go deeperArrowJan 21, 2020 - Politics

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Illustration: Aïda Amer/Axios

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