White House Tells Agencies To Prepare For Job Cuts In Shutdown

Monica Guerra, Executive Director and Head of US Policy at Morgan Stanley Wealth Management discusses the impact of a government shutdown on the labor market and specifically the next jobs data release.

President Donald Trump threatened mass firings of federal workers as the US hurtles toward a shutdown with Democrats and Republicans at an impasse over funding the government.

“We may do a lot and that’s only because of the Democrats,” Trump said in response to a question about the number of government employees who could be dismissed during a shutdown. The White House last week directed agencies to draw up plans for widespread firings if the government closed down. So far, no agencies have explicitly called for terminations in their shutdown plans.

With just hours to go until a midnight deadline, the deadlock over spending threatens to paralyze many US government operations for the first time in nearly seven years, causing the suspension of services for Americans and paychecks for federal workers. As many as 750,000 federal workers could be temporarily furloughed, even if Trump doesn’t proceed with permanent dismissals, the nonpartisan Congressional Budget Office estimated.

Political fallout could be widespread for both Trump and Democrats ahead of next year’s critical midterm elections, and leaders of both parties focused their public comments on blaming the other.

“They want to try to bully us — they are not going to succeed — into taking their partisan bill,” Senate Democratic Leader Chuck Schumer said Tuesday. “That’s why we are heading into a shutdown.”

Democrats “are taking a risk by having a shutdown,” Trump said at a mid-day Oval Office event. “We’re not shutting it down. We don’t want to shut it down because we have the greatest period of time.”

Asked about chances of a shutdown, he responded, “Nothing is inevitable, but I would say it’s probably likely.”

House Speaker Mike Johnson, a Louisiana Republican, similarly predicted that a shutdown is imminent.

“I’m an optimist, but I’m a little skeptical this morning,” he told CNBC Tuesday.

Although last-minute spending deals have averted several other threatened shutdowns in recent years, the stakes are especially high now, with the White House threatening to fire employees rather than furlough them, and Democratic leaders under intense pressure from progressives in the party to stand up to Trump.

Stocks fluctuated Tuesday morning with the prospect of a shutdown stoking concerns about how long it’ll go on and what impact the possibly delayed release of key economic data will have on the Federal Reserve’s upcoming interest-rate decisions.

Johnson accused Democrats of playing politics with their effort to renew health-care tax credits, saying it doesn’t have to be resolved until the end of the year when the tax credits expire.

“Open the government and then we’ll have all the discussions,” he said. “But right now that is a red herring.”

House Democratic Leader Hakeem Jeffries accused Republicans of being unwilling to participate in bipartisan negotiations, telling CNBC Tuesday that his party refuses to be a part of “a my-way-or-the-highway” approach.

Republicans in recent days have repeated the phrase “Schumer shutdown” in an attempt to pin the blame on their Democratic opponent.

“Chuck Schumer needs a Schumer shutdown and I think that’s what we’re probably careening toward,” Senate Republican Leader John Thune told CNBC on Tuesday.

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