Government shutdown hurts secondary businesses

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The U.S. government shutdown isn't just hurting federal employees, it's also starting to affect the people whom Congress depends on: bartenders on Capitol Hill.

Rebecca Ray, a manager and bartender at the Union Pub near the Capitol, said one of the bar's best days lately was Oct. 1, the day that federal workers went into work and were sent home early. It was a good day, she said, because so many of them stopped off for a drink or more before going home.

Since then there has been a slight decline in business with the loss of the interns and younger staffers, said Ms. Ray, 23, who grew up in Sarver, Butler County, and moved to Washington, D.C., last year to earn a master's degree in international politics at American University.

Ms. Ray's concern is less over the immediate impact of the shutdown and more about the long-term implications -- that sales could fall more dramatically as the stalemate wears on.

It's the same worry economists have, even outside the D.C. beltway.

According to Charles Dougherty, an economist at IHS Global Insight in Philadelphia, the government shutdown means $150 million a day in lost wages to the D.C. metropolitan area.

For Pennsylvania, the direct hit from the shutdown will be much less severe.

In a report on which states would be the hardest hit by the federal shutdown, the online financial site Wallet Hub, said Pennsylvania ranked 18th. Virginia was at the top of the list for states expected to be the hardest hit.

"Everyone agrees this is a really messed up thing," said Mark Price, an economist for the Keystone Research Center, a policy research organization in Harrisburg. During the first week of the shutdown, the ripples were about the same as if the workers were on a short-term furlough. "Once you start to creep up over a month, the effects are magnified," he said.

As of August, Pennsylvania had 96,900 federal employees who were not active duty military and did not work for the U.S. Post Office, according to the state Department of Labor and Industry. Postal workers are not part of the government shutdown.

In addition to federal offices and programs, the shutdown also affects secondary businesses that serve those who work for the government, including restaurants, dry cleaners, parking lots and even day care and after-school centers because parents who aren't working can provide their own child care.

Federal government (nonpostal) workers account for 1.2 percent of the Pennsylvania workforce. If the federal government completely shut down, the state unemployment rate would rise from 7.8 percent to 8.9 percent. But not all federal workers have been sent home.

Tom Jackson, a regional economist with IHS Global Insight in Philadelphia, said with a third of government workers let go for the shutdown, as happened in the mid-1990s, that comes to $43 million a week in federal wages pulled directly from the state economy.

The effects of such shutdowns are more weighted toward the eastern part of the state.

The Philadelphia area claims 40 percent of the state's federal government workers. Pittsburgh has 18 percent, and Harrisburg has 7.5 percent.

At Mr. Jackson's office in Philadelphia, the impact of the shutdown is apparent in the unusually empty lobby of his office building, which also houses more than a dozen floors of workers for the Environmental Protection Agency.

Instead of the nearly 1,000 workers who are normally working for the agency in the building, just about 50 are there.

businessnews

Ann Belser: abelser@post-gazette.com or 412-263-1699. First Published October 9, 2013 9:38 PM


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