Trump administration admits shutdown is more costly than expected

The government shutdown is hurting the U.S. economy more than the Trump administration originally thought.

“The Trump administration had initially estimated the shutdown would cost the economy 0.1 percentage point in growth every two weeks that employees were without pay,” Reuters reported. “But on Tuesday, there was an updated figure: 0.13 percentage points every week because of the impact of work left undone by 380,000 furloughed employees as well as work left aside by federal contractors,” a White House official said.

In a statement to reporters, the official broke it down: “That includes the effect of work not done by 380,000 furloughed Federal workers (0.08 p.p. per week) plus the work not done by Federal contractors (0.05 p.p. per week),” the official said.

Related: Furloughed workers protest amid government shutdown

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Furloughed workers protest amid government shutdown
Union workers demonstrate in front of the White House against the government shutdown on January 10, 2019, in Washington, DC. - US President Donald Trump headed Thursday to the US-Mexico border to push his demand for a wall, a day after he walked out of negotiations with Democrats in a political crisis paralyzing the government. (Photo by NICHOLAS KAMM / AFP) (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)
Union members and Internal Revenue Service workers rally outside an IRS Service Center to call for an end to the partial government shutdown, Thursday, Jan. 10, 2019, in Covington, Ky. (AP Photo/John Minchillo)
IRS worker Christine Helquist joins a federal workers protest rally outside the Federal Building, Thursday, Jan., 10, 2019, in Ogden, Utah. Payday will come Friday without any checks for about 800,000 federal employees affected by the government shutdown, forcing workers to scale back spending, cancel trips, apply for unemployment benefits and take out loans to stay afloat. (AP Photo/Rick Bowmer)
IRS worker Angela Gran, center, and others participate in a federal workers protest rally outside the Federal Building, Thursday, Jan., 10, 2019, in Ogden, Utah. Payday will come Friday without any checks for about 800,000 federal employees affected by the government shutdown, forcing workers to scale back spending, cancel trips, apply for unemployment benefits and take out loans to stay afloat. (AP Photo/Rick Bowmer)
Cheryl Monroe, right, a Food and Drug Administration employee, and Bertrice Sanders, a Social Security Administration employee, rally to call for an end to the partial government shutdown in Detroit, Thursday, Jan. 10, 2019. (AP Photo/Paul Sancya)
Government workers rally against the partial government shutdown at Federal Plaza, Thursday, Jan. 10, 2019, in Chicago. The partial government shutdown continues to drag on with hundreds of thousands of federal workers off the job or working without pay as the border wall fight persists. (AP Photo/Kiichiro Sato)
People gather during a federal workers protest rally at the Federal Building Thursday, Jan., 10, 2019, in Ogden, Utah. (AP Photo/Rick Bowmer)
People gather during a federal workers protest rally at the Federal Building Thursday, Jan., 10, 2019, in Ogden, Utah. (AP Photo/Rick Bowmer)
Furloughed TSA worker Marae Persson shows participates in a federal workers protest rally at the Federal Building Thursday, Jan., 10, 2019, in Ogden, Utah. (AP Photo/Rick Bowmer)
Furloughed National Park Service ranger Kathryn Gilson, center, listens as fellow furloughed ranger Sean Ghazala, left, speaks to the media, Thursday, Jan. 10, 2019, during a press conference and rally at Staten Island's La Colmena Center in New York. Ghazala is based at Manhattan's African Burial Ground, and Gilson works at Gateway National Recreation Area, a national park encompassing wetlands surrounding New York city and parts of New Jersey's coastline. Gilson says she is home "bouncing off the walls" and worrying about paying her bills and student loan. Staten Island is a largely Republican borough of New York city, but Democrat Max Rose recently defeated his Republican opponent in the 2018 congressional elections. (AP Photo/Kathy Willens)
People rally to call for an end to the partial government shutdown in Detroit, Thursday, Jan. 10, 2019. (AP Photo/Paul Sancya)
Union members and other federal employees protest the government shutdown on Capitol Hill in Washington, Thursday, Jan. 10, 2019. (AP Photo/Andrew Harnik)
Union members protest the government shutdown on Capitol Hill in Washington, Thursday, Jan. 10, 2019. (AP Photo/Andrew Harnik)
Union members and other federal employees stop in front of the White House in Washington during a rally to call for an end to the partial government shutdown, Thursday, Jan. 10, 2019. . (AP Photo/Pablo Martinez Monsivais)
A demonstrator holds a 'Stop The Shutdown' sign during a rally with union members and federal employees to end the partial government shutdown outside the White House in Washington, D.C., U.S., on Thursday, Jan. 10, 2019. The partial government shutdown entered its 20th day today as its impact is more widely felt with about 800,000 federal workers who will miss their paychecks on Friday. Photographer: Andrew Harrer/Bloomberg via Getty Images
Union workers demonstrate in front of the White House against the government shutdown on January 10, 2019, in Washington, DC. - US President Donald Trump headed Thursday to the US-Mexico border to push his demand for a wall, a day after he walked out of negotiations with Democrats in a political crisis paralyzing the government. (Photo by NICHOLAS KAMM / AFP) (Photo credit should read NICHOLAS KAMM/AFP/Getty Images)
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Given that the 0.1% hit on growth happens every week instead of every two weeks, the cost of the shutdown has essentially doubled.

“The new estimate is a bit higher than we have penciled in but it underlines how uncertain the impact is,” Capital Economics Senior U.S. Economist Michael Pearce told Yahoo Finance.

He added: “Either way, however, Congress has already approved back pay for federal workers, so I suspect the shutdown will only have a significant bearing on first quarter GDP if it drags on beyond the end of this month.”

The ultimate cost of the shutdown could balloon

Pearce noted that “the bigger issue is what this standoff tells us about the disputes still to come this year, including over the debt ceiling… and the FY2020 budget.”

“Failure to reach a deal on either would have much bigger implications for the economy.”

JPMorgan Chase CEO Jamie Dimon — a bull on the U.S. economy — told reporters on a media call that “someone estimated that if it goes on for the whole quarter, it can reduce growth to zero.”

President Donald Trump has thus far not indicated willingness to compromise or be moved by the cost of the shutdown. Speaking with reporters on Monday evening, he said that he would “never back down” from the fight.

But even if “there are various pain points that will be felt shortly in coming days and weeks,” analysts at Bank of America Merrill Lynch (BAML) wrote last week, “all could lead to a compromise.”

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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