>> ERIC: As we just discussed, the federal government is about to shut down this weekend.
Add to this the expansion of strikes by the United Automobile Workers across the country, including at a plant in Minnesota, and concerns about the economy are growing.
LOUIS JOHNSTON TEACHES BUSINESS AT THE COLLEGE OF ST TO TELL US WHAT THIS COULD MEAN FOR MINNESOTANS. BENEDICT AND ST. JOHN’S UNIVERSITY.
Well, professor, about 17,000 federal employees in Minnesota, what does that mean for the state if it happens?
>> Well, it probably won’t have a huge economic impact right away, but it will have a big economic impact for individual families.
Madam, you have to go to work, but you don’t get paid.
Don’t worry, we’ll pay you out in a few weeks. That’s kind of the scenario that a lot of these federal employees are going to find themselves in, so that’s tough.
>> Cathy: I would bet that the duration of the shutdown will be significant here in terms of the economic impact.
>> YES, AND THAT’S THE BIG QUESTION.
The longer it lasts, the greater the impact will be. I think the last time it was 35 days.
You know, that’s not so bad, you can kind of think about your credit cards, you can float something for a month or something like that, but when you start coming out 60 days, 90 days, that’s when it really starts to bring you the supply chains are in disarray.
For example, think of some jobs in food inspection and the like.
IF YOU DON’T HAVE THE INSPECTORS ON THE LINE TO BE ABLE TO DO THESE THINGS, THEY’RE GOING TO WITHDRAW YOUR INVENTORY AND A SECOND, WAIT A SECOND, HOW DO I GET THE EGGS OUT THE DOOR AND THESE CUTS? MADE OF MEAT.
>> Eric: Does it mean anything in terms of tracking the markets and reducing confidence in the leadership of the United States?
>> I don’t think that’s the case now, but one of the problems we’re facing is people who do economic statistics, who collect data and things like that are going on vacation.
For example, we may not get unemployment numbers next Friday because the people compiling and reporting them won’t be there.
>> Cathy: AND PLUS THE UAW strike, what impact does that have on wrinkles?
>> Well, that’s very interesting because the way strikes like this are usually done is they call the strike and then they go.
THIS TIME THEY’RE DOING SOMETHING VERY DIFFERENT: They’re taking care of a few plants, then some of these parts, and today they added other plants.
You want to increase the heat of this frog a little bit, so to speak, and it gets a little warm.
I don’t think it has much of an impact yet.
One of the things that is so different about this strike than, say, 15 years ago is that the unionized sector only includes 150,000 workers.
It’s just not that big, so it’s important, they’re in important places, but there’s just not as many unionized auto workers compared to, say, 50 or even 70 years ago.
>> Eric: Is the labor movement seeing a resurgence?
>> I think that’s true, and that’s especially important because for the first time in, I would say, 40 years, they’re having influence. In fact, we have a situation where now, since President Reagan fired the air traffic controllers, the unions are actually able to PUT SOME PRESSURE ON MANAGEMENT.
>> Cathy: Say, another part of the economy: What does it mean that new home construction is down 11%?
>> That means the field’s rate hikes are really biting and are really hurting people’s ability to go out there and buy houses.
Mortgage rates are now at, I believe, their highest point in 20 years and are over 7%.
THIS IS EXPENSISM.
When you start thinking about putting up a down payment and then also having to pay so much interest every month, you start to think: I think the house I have now is fine, or maybe I will for a while continue renting and wait for the interest rates to perhaps go down, or perhaps to get a slightly larger cushion for a down payment.
>> Eric: Given the Federal Reserve’s work on inflation, is it fair to say that bad news is often good news?
>> Well, here’s the irony: The Federal Reserve raising interest rates is designed to slow the economy.
It’s slowing down the housing sector, cars were already slowing down, so it’s doing what it’s supposed to do, but it’s a bit like losing weight.
I don’t really want to do the things I need to do to lose weight, but I want the results.
>> Eric: DID YOU SAY THE UAWBSTRIKE WILL TAKE A LOT OF TIME?
>> NO, NOT ACTUALLY.
I think this will be sorted out pretty soon, but the auto workers are right about the profits that upper management and shareholders have dumped on bankruptcies since 2007, and they really need to sit down and sort this thing out.
BUT THERE’S A LOT TO LOSE SO I DON’T THINK YOU
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