For starters, the Council of Economic Advisers estimates that every week that the government remains partially closed, quarterly economic growth decreases by 0.13 percentage points. That means that by Friday, when federal workers will have missed their second paycheck, the shutdown will have already cost the U.S. economy nearly two-thirds of a percentage point of growth.
But, according to Brian Rose, Senior Economist Americas at UBS, the longer the shutdown lasts, the deeper the pain, as government agencies with spare funds to continue operations for a short period of time see their money run out and federal workers decide to quit rather than working indefinitely without pay. Replacements can be difficult and expensive to find and train, extending the negative effects of the shutdown even once the government reopens.
Put together the trade war, the government shutdown, and other seemingly self-inflicted economic woes and the Rose best summed up his view with a metaphor:
I once saw a short film about an F-1 racing team testing new engine designs. They would set the engine running at full throttle and wait until, glowing red from the heat, the most fragile part would break and the engine would stop. We are now running a similar experiment on the economy. It is difficult to predict what part will break first, but you can already smell the smoke. For example, the University of Michigan survey of consumer sentiment fell sharply in early January. The sub-index on recent changes in business conditions, which was at a record high last February, plunged to its lowest level since late 2011. The Fed's Beige Book also noted deteriorating business sentiment.