The US government plans to close unless Congress passes a budget bill to fund its operations.
Without this law, federal agencies will be forced to suspend non-essential activities at 12:01am on Wednesday at Washington, D.C. (04:01 GMT).
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Republicans control the House, Senate and the White House, but they cannot pass the bill on their own. Republicans have 53 of the 100 Senate seats, but 60 votes are needed to advance the bill to vote.
Republicans are proposing short-term spending plans, while Democrats are trying to use the approaching shutdown as leverage. They are pushing back against Medicaid cuts included in the tax law passed in July and extending tax credits for healthcare purchased through government exchanges.
With either side willing to compromise, the closure could have ripple effects across the US economy.
Layoffs and impact on consumer sentiment
The federal government is the largest employer in the country. In a memo last week, federal agencies were told to prepare layoff notifications for programs that are underfunded by the deadline and programs that are not considered a priority by the administration. The notes themselves did not explicitly clarify what their priorities were.
The White House did not respond to Al Jazeera’s request for clarification.
Cuts are what is called forced reduction, or through RIF. But it is unclear whether the cuts will continue because Trump doesn’t have the power to carry them out, said Daniel Hornn, a policy fellow at the Stanford Institute of Economic Policy.
“We don’t have the legal authority you (the White House) gained from closing the RIF,” Hornung told Al Jazeera.
The RIF expected that the cuts made now would be challenged in court as agents would require 30-60 days of notice if they were considering cutting.
However, even if job reductions are blocked, it is not clear when it will happen. As a result, people at work may postpone buying particularly expensive items, according to Michael Klein, a professor of international economic affairs at Tufts University in Massachusetts.
“Consumers are beginning to cut their spending as they worry about what the future will look like,” Klein told Al Jazeera.
“It’s not legal (by the court), but it may be decided that it may be a long time. Even if it all goes away, those who are out of work probably won’t spend.”
The note did not provide a specific number of jobs that could be cut. This is because more than 150,000 workers are also expected to leave federal workers after accepting this year’s acquisition. These cuts are the largest federal worker employment cuts in nearly 80 years as part of a postponed exit program that kept workers on pay until the end of September.
In addition to permanent layoffs, government workers will face Farrow as long as the government is closed. Workers who are considered not essential to government activities will stop working until Congress passes a budget bill or suspension measure.
Delayed Job Report
On Tuesday, the Employment Opening and Labor Turnover Survey (Jolts) released by the Department of Labor showed that employment openings of 114,000 people fell to 5.1 million in August, and employment openings increased from 19,000 to 7.2 million. If the government is shut down, the Labor Bureau will delay the release of key economic reports measuring the health of the US economy.
On Thursday, the weekly unemployment claims will be made public, with a monthly employment report being prepared on Friday detailing which jobs were born, which sectors and unemployment rates. Typically, the department will publish its report on the first Friday of each month, unless holidays are intervened.
The broader labor market has already shown signs of cooling in recent months. In August, the world’s largest US economy added only 22,000 jobs.
Softening of working conditions was one of the reasons the Federal Reserve reduced interest rates by 25 basis points in September. Lack of new data means that central banks have less information to consider to consider whether to cut fees again. Still, the Fed’s next two-day policy meeting will not be between October 28th and 29th, so it is unlikely that a short delay will have a significant effect.
Hornung believes this closure comes during a rather unique economic situation where central banks need to watch.
“The main risk is being in a place of unstable economic situation anyway. Unlike previous closures like the long-term closures in 2018, the economy was working well.
“The labour market is currently very weak. In recent months, it appears that there is still a risk of inflation left due to tariffs, so it’s a kind of question of how well the economy can withstand.”
Market impact
Historically, investors have generally recognized that shutdowns are short-lived, so closures have limited impact on financial markets.
“Normally, in a shutdown scenario, there is no significant impact on either the stock or bond market, as investors tend to look at the closure and rate the temporary slowdown related to the shutdown as reversed when the government opens,” Hornung added.
This time, the dynamics are different as the government plans to cut down on jobs and jobs that only hire employees. This is set against Trump’s broader economic agenda, focusing on tariffs that have already put pressure on businesses.
The market was relatively flat before the looming shutdown. As of 3:30pm in New York (19:30 GMT), the Dow Jones industrial average rose 0.08%, the Nasdaq increased 0.06%, and the S&P 500 increased 0.2%.
