With Thursday’s deadline looming, U.S. lawmakers are still in talks over an agreement to prevent a lapse in government funding. If Congress doesn’t pass the necessary bill by midnight on Oct. 30, it will force a federal government shutdown, leading to worker furloughs and reduced operations at certain government agencies.
To understand its impact, one only needs to look back a few years.
For the U.S. footwear industry, like much of the country, the 2018-2019 shutdown — the longest in history, lasting 35 days — remains a painful memory. That partial shutdown took a $3 billion bite out of economic growth during the final three months of 2018, according to an estimate by the Congressional Budget Office.
Now, in 2021, political stalemates in the House and Senate are once again obstructing the government’s ongoing operations in ways that threaten to impact the economy and reverse some of the progress made in the wake of the pandemic. Here are four ways this potential full government shutdown could affect shoe companies and retailers:
1. Delayed data
During even the partial shutdown in 2019, crucial retail sales data were delayed due to the Commerce Department’s closure. Other regularly scheduled releases such as the international trade report were also stalled during this time, depriving businesses and analysts of important information on which to make strategic decisions.
2. Stock market volatility
While the U.S. stock market has soared since its pandemic lows, the threat of a government shutdown — and worse, a refusal on the part of Republicans to vote to suspend the debt limit — could destabilize this progress. In December 2018, the Dow dropped 9.7% — the largest single-month decline since February 2009 and its worst December since the Great Depression in 1931. This had ramifications for consumer sentiment, which in January 2019 fell to its lowest level in more than two years amid mounting worries about the U.S. and global economy.
3. Slowing sales for D.C. retailers
While Americans who receive benefits such as Social Security will still see their payments arrive during a shutdown, federal workers in Washington, D.C., and beyond could experience gaps in their pay. In the first weeks of 2019, store owners in the nation’s capital reported plummeting sales and higher-than-usual return rates as many locals went more than a month without a paycheck. “People aren’t coming in; people are returning things because they want to make sure they have money for their bills. So it’s been very, very quiet,” JoAnn Epps, owner of Gaithersburg, Md.-based Jo’s Comfort Zone, told FN. “Even those clients [wanting orthotics and brace adjustments] aren’t coming because they don’t know if they’re going to be able to pay out-of-pocket to then submit to insurance.”
4. Closed or neglected National Parks
While outdoor recreation has boomed during the pandemic, a government shutdown could lead to the closure of National Parks — or at least significantly reduced services within them. During the 2019 shutdown, Yellowstone Park was among the federally run destinations that went unmanned by regular park employees, leading to reports of trash and human waste accumulating within its bounds. Local retailers and outdoor brands told FN at the time they were concerned about the potential ramifications for their business. “People are going to do other things if they don’t feel certain they’re going to get [into Yellowstone],” said Wes Allen, co-owner of Wyoming’s Sunlight Sports. “A National Parks shutdown for my business would be extremely painful.”