The US government is partially shut down. About 800,000 U.S. government workers have been off the job for almost a week now because Congress failed to pass a key funding bill.
This has happened 17 times in the past before, the last time was in 1995 when the government shutdown lasted for 3 weeks. 800K is less than 1% of the total US work force so it won’t affect the overall economy much 😐 If the shutdown only lasts for 2 or 3 weeks, there’s nothing to worry about unless you’re one of those people who are directly impacted. So what does this mean for Canadians? Not a whole lot 🙂 The impact of the shutdown to our economy up here is measured only in the decimal points.
However, here is what we need to know.
- Our Loonie will probably rise in the short term. An exchange strategist with Nomura Securities in New York speculates U.S. capital could flow into Canadian treasury bills as investors look for a safe place to hold their cash. So if you’re thinking about shopping cross border I suggest visiting the US now, instead of waiting because it will probably get more expensive to buy US dollars over the next couple of weeks.
- The US stock markets will be volatile going forward since the federal government isn’t releasing important economic data that investors need in order to make an informed decision. Expect our TSX to hit some choppy waters as well.
- Exporters beware. Canadian businesses with contracts with US companies or the US government might experience complications. So if you run an export business be prepared for the possibility of delayed payments or slower business from US customers.
- US National parks and many other tourist attractions are closed so if you were planning to visit the National Zoo in Washington, now’s not the time.
The bigger issue right now is can Congress agree on a budget before October 17th so they can raise the debt ceiling. If the debt ceiling isn’t raised then the US government will have to default on its debts. This could create a $600 billion hit to the US economy. National GDP could fall 4% which would quite literally put the US back into another recession, which will significantly impede Canada’s growth as well.
Random Useless Fact: Some animals can detect sound at a higher frequency than humans allowing them to hear noises we can’t.