Many federal agencies and offices will temporarily reduce their operations, which could cause the unemployment rate to rise temporarily. Bloomberg estimates that it could rise from 4.3 percent in August to as high as 4.7 percent if the shutdown lasts three weeks. This is precisely because of the suspension of work by employees of federal offices and agencies, for whose salaries there is currently no money available.
President Donald Trump is also threatening to use the shutdown to lay off federal employees beyond the temporary suspension of work, which affects around 750,000 employees.
The deterioration of the situation on the American labor market could prompt the US Federal Reserve to pursue a more aggressive monetary policy easing, i.e., a faster or more significant reduction in the key interest rate in the US, which would also push down the US dollar.
A weaker dollar could benefit our motorists, for example, as it would make fuel cheaper. And that's not all. The prices of electronic products, for example, are also linked to the euro-dollar exchange rate. And, of course, goods from online stores that sell in dollars would also become cheaper for us.
Since 2020, the Swiss franc has gained the most against the US dollar, rising by almost 22 percent. In second place is the Czech koruna with ten percent. The euro has gained almost five percent against the dollar.
However, most of the world's major currencies have lost value against the dollar since the beginning of 2020, including the Swedish and Norwegian krona, the Hungarian forint, the Japanese yen, and the Chinese yuan.
The current US government shutdown is primarily due to the Republicans' inability to agree with the Democrats on the form of public financial aid for the healthcare system. The last shutdown – which lasted five weeks at the turn of 2018/2019 and was the longest in US history – cost the US economy around USD 11 billion. However, some of the damage caused was remedied after government funding resumed.
The current “government shutdown” is also delaying the processing and publication of data from the American labor market. The US Bureau of Labor Statistics was supposed to publish it this Friday. However, it is crucial for the US Federal Reserve and its decision on the further setting of the key interest rate. This, in turn, is important for the financial markets, including the stock, bond, and foreign exchange markets.
The resulting uncertainty is therefore also paralyzing these markets and pulling down not only the dollar but also, for example, American stocks. And not just American stocks. The shutdown that has begun may also have a negative impact on the performance of European stocks.
The text, which has been shortened, was originally published on the website lukaskovanda.cz.