In a year where the federal government shut down for 16 days and a major U.S. city Detroit filed for bankruptcy, the nation's economic growth was slow, but stable. However, as 2013 drew to a close, the shutdown and looming default threatened to derail an economy that was still in recovery.
When 2013 began, the unemployment rate was 7.9 percent. By September 2013, unemployment had fallen to 7.2 percent, which was still historically high, but the lowest it had been in five-years. However, as the unemployment rate decreased, so did the number of jobs being added, suggesting that more people were dropping out of the labor force. In fact, the number of Americans working or actively seeking a job was at a 35-year low in September 2013.
By the fall of 2013, job growth had fallen sharply after a promising start at the beginning of the year. From January through March, an average of 207,000 jobs were added per month. From April through June, the monthly average dipped to 182,000 jobs added per month.
Those numbers continued to decrease in July through September when an average 143,000 jobs were added per month. Deutsche Asset and Wealth Management chief economist Josh Feinman said to the press, "The labor market is continuing to create jobs. It's just frustratingly slow."
One major reason for a lull in job growth during the fall of 2013 was the standoff in Congress that led to a government shutdown. On October 1, 2013, Congress failed to agree on a budget and pass a spending bill, causing the government to shut down. The failure to pass a bill was largely due to a standoff over the Affordable Care Act, also known as Obamacare.
The impact of the U.S. government shutdown was already being felt by the world's financial markets as stocks fell around the globe on September 30, 2013. The partial shutdown forced about 800,000 federal workers off the job. Already feeling pressure from the shutdown, Congress began tense negotiations in an effort to pass a budget by the debt ceiling deadline on October 17, 2013.
On October 16, the night before the debt ceiling deadline, both the House and Senate approved a bill to fund the government until January 15, 2014, and raise the debt limit through February 7, 2014. The last minute bill avoided a default and ended a 16-day government shutdown. It also ended the Republican standoff with President Obama over the Affordable Care Act.
Economists estimated that the government shutdown took $24 billion from the economy and would slow down economic growth to around 2 percent for the October-December quarter. Before the shutdown, economists forecasted that the economy would expand at a rate of 2.5 in the last three months of the year.
Sung Won Sohn, an economist at California State University, said media, "The shenanigans in Congress have hurt confidence and increased uncertainties, most likely hurting both consumer and business spending as well as hiring." Still there was reason to be optimistic going into 2014.
Economists predicted that growth would likely be higher over the first three months of 2014 when investments and purchases would be made that couldn't be made in late 2013 because of the shutdown.
