My Mortgage Blog

The good news last week was that Congress was able to pass a budget, end the shutdown of the federal government and dodge the debt ceiling bullet at the last moment. The downside was that the shutdown cost the economy approximately $24 billion and created a backlog of economic reports that were delayed from being released last week.

The 16-day shutdown removed $1.5 billion from the economy each day of its duration, according to a report released by the ratings agency Standard & Poor’s. Moody’s Analytics released similar findings, stating that the shutdown cost U.S. production $1.43 billion a day, for a total of $23 billion during the shutdown.

Moreover, it’s expected that the shutdown will reverberate in months to come. The 16-day standoff shook consumer confidence enough that holiday retail sales expectations have been tempered, according to a report released last week by the National Retail Foundation.

While the NRF said it was still forecasting a 3.9 percent increase in holiday sales to $602.1 billion, it also projected that spending by individual consumers would decrease. The group said that the average holiday shopper will spend $737.92 on holiday gifts, décor, greeting cards and other holiday expenses, in comparison with $752.24 last year.

The foundation specifically asked consumers in its survey if the budget impasse would impact their holiday spending, and 29 percent of respondents said the situation would somewhat or very likely affect their spending plans. When asked how they felt about the economy, 51 of the respondents said the economy would impact how they spend this holiday season, and 79.5 percent said they plan to spend less overall.

While concerns about the economy were up, one point of encouragement was that the S&P 500 closed out last week at a record high of 1,744.50 points. Another good bit of news was that first-time claims for unemployment benefits filed during the week ending Oct. 12 dropped to 358,000, a decrease of 15,000 from the previous week's revised figure of 373,000, the Employment and Training Administration reported last week. The four-week moving average was 336,500, an increase of 11,750 from the prior week's revised average of 324,750.

The total number of unemployed Americans during the week ending Oct. 5 shrank to 2,859,000, a drop of 43,000 from the previous week's revised level of 2,902,000, the Administration also reported. The four-week moving average was 2,875,750, an increase of 17,750 from the preceding week's revised average of 2,858,000.