US could see ‘zero’ growth in first quarter if shutdown continues, says White House chief economist

Washington | The US could post zero economic growth in the first quarter if the federal government does not reopen, the chairman of President Donald Trump’s Council of Economic Advisers said on Wednesday.

“If [the shutdown] extended for the whole quarter, and given the fact that the first quarter tends to be low because of residual seasonality, then you could end up with a number very close to zero in the first quarter, Kevin Hassett, Chairman of the White House Council of Economic Advisers (CEA), said in an interview to CNN.

Asked whether GDP growth could hit zero in the quarter, he said, “Yes, we could.”

At the same time, he asserted that the second quarter would be humongous if the government reopened. “It would be like four or five per cent,” Hassett said.

He also said the chances of a recession in 2020 is close to zero. “They’re very, very close to zero,” he said.

“We have so much momentum. There was just a great industrial production number. We just had a great jobs number. There’s a lot of momentum carrying into this year. The government shutdown adds a lot of uncertainty. You’re starting to see that uncertainty in some pieces of data,” Hassett said.

The federal government shutdown over Trump’s demand for USD 5.7 billion for a wall along the Mexican border entered 33rd day on Wednesday, with little sign of relief for the roughly 800,000 federal workers going without pay.

Hassett said talks with China are moving forward and exuded confidence that the US can reach a trade deal with China before the March 1 deadline.

Trade negotiations between Washington and Beijing have stretched for months amid their tit-for-tat trade war. The countries reached a 90-day truce following Trump’s meeting with Chinese President Xi Jinping in Argentina on December 1 last year.