Here are some of the implications:
- The roughly 0.13% of GDP that was lost in each week of the shutdown will no longer be lost. A settlement in the first month of Q1 may provide time to erase much of the drag on Q1 GDP.
- Government workers who were not paid during the shutdown will be retroactively paid.
- Some, but not all, of the income lost to government contractors will be retroactively paid.
- Some, but not all, of the second-round spending lost in the private sector because of the interruption to government payments will be recouped.
- Economic data delayed because of the shutdown will be released, though no schedule is available at this writing for belated data releases.
- The Fed would not have hiked rates on January 30, even if a full set of economic data had been available. That being said, the Fed (and the rest of us) will be in better shape to assess economic performance with a full set of U.S. data.
- Washington policy makers, no longer preoccupied with the shutdown, will shift attention to other matters, including trade, the budget process for 2020, infrastructure spending and of course, “the wall”.
- The Separation of Powers matters.
- Organized labor has been reluctant to use their power. The timing of the deal strongly suggests a work outage by air-traffic controllers helped drive a settlement. This may be an eye-opener.
- Markets were largely unmoved by the shutdown. When word arrived that the shutdown would end, stock, bond and foreign exchange prices were not affected much.