Moody’s Investors Service warned Tuesday that the U.S. economy could suffer even worse damage from another government shutdown only three weeks after the record-breaking, month-long shutdown that concluded last week.

The partial federal government shutdown that left 800,000 federal workers furloughed (or working without pay on essential government functions) concluded temporarily after President Donald Trump and congressional leaders agreed to fund the government for three weeks while negotiations between the two parties continue over Donald Trump’s request for a $5.7 billion border fence appropriation in the next spending bill.

Moody’s Investors Service warned:

The partial government shutdown had concentrated effects, with limited ramifications for the broader US economy […] A second shutdown could be more severe.

The First Shutdown Fallout Was Well Contained

The fallout from the first government shutdown was well-contained, but the next one might not be. | Source: Shutterstock

The economic damage of a pretty full-throated “partial” government shutdown for 35 days was remarkably well contained to the federal employees who had a month’s wages delayed and the contractors who lost a month’s worth of Washington’s business.

Throughout the month of January, equities markets hardly seemed to notice that anything was wrong, posting a month of solid growth, pulling back from December’s historic selloff, and rebounding 12 percent from the S&P 500’s December low.

That’s despite worries that a lengthy government shutdown would dampen an already gloomy market’s spirits and drag equities down.

Just before the shutdown commenced, USA Today reported:

On average, the Standard & Poor’s 500 stock index, a broad gauge of the U.S. market, has posted an average decline of 0.4 percent during government shutdowns over the past four decades, data from LPL Research show.

The stock market has tended to take government shutdowns in stride over the decades, but a 12 percent rebound is a marked outlier to a mean 0.4 percent decline.

CBO: Shutdown Cost The Economy $3 Billion

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