Government shutdown could hurt LI, but not right away
The federal government shutdown that paralyzed much of Washington Tuesday could be yet another headache for Long Island's economy, which is already bruised by anemic job growth, depressed housing prices and the aftermath of an epic storm.
The pain in Nassau and Suffolk counties, however, will depend on how long the impasse on Capitol Hill lasts, economists said.
If lawmakers resolve their differences within weeks, the impact is apt to be confined to the furloughed federal employees who live here. Anything longer, economists said, and the trouble could bleed into the stock market, hobble consumer spending and undercut Long Island's fastest-growing industries.
"When consumption goes down, the first thing to go is luxury items and discretionary spending like leisure, vacations and restaurants," said John A. Rizzo, an economist for the Long Island Association, the region's largest business group. "Those are an important part of Long Island's economy."
Yet the real concern is not the partial government shutdown, economists said. Rather, it's the Oct. 17 deadline for Congress to raise the government's borrowing limit. Without a deal, the U.S. Treasury could default on its bills, roiling global markets, economists said.
"Federal Treasury debt is the cornerstone of the entire world financial system," said Brian Kessler, an economist with Moody's Analytics. "Shaking that would have unforeseen consequences."
Still, the shutdown matters to Long Island -- particularly if it drags on.
The local economy is already fragile from its post-recession struggles. While the job market is improving, most new positions are low paying. The foreclosure rate is double the national average. And Long Island still struggles with the aftermath of superstorm Sandy.
"The shutdown of the federal government is another unnecessary obstacle that may hold back our economic recovery," said Kevin Law, president of the Long Island Association.
The first ones feeling the shutdown are federal workers like Bob Ocon, 58. He spent Tuesday working in the yard of his Wading River home, furloughed from the Federal Aviation Administration's Ronkonkoma office. "It's going to cut into my discretionary spending," he said.
There are 16,600 federal employees on Long Island, accounting for 1.3 percent of the workforce here. It's unclear how many are furloughed and how many are still being paid. But federal workers tend to earn more than most, economists said, making their economic impact outsized.
A prolonged shutdown could also exacerbate Long Island's housing woes, experts said. Mortgages could be delayed because lenders verify Social Security numbers, tax returns and other information with federal agencies.
"If the government is shut down for a week, it's going to slow that down," said Bob Moulton of the Americana Mortgage Group in Manhasset.
If the shutdown drags on for a month, Washington could fall behind on payments to government contractors. That would hurt Long Island's defense contractors, who are already struggling with "sequestration" cuts.
Federal jobs on Long Island
16,600: Number of federal employees on LI (not all are furloughed)
1.3%: Share of LI jobs that are federal
Source: New York State Labor Department
800,000: Workers furloughed nationally
$200M: Daily lost wages nationally during the shutdown
Source: Moody's economist Brian Kessler