(Yahoo! Finance) - The government shutdown is now the third-longest federal work stoppage in US history and has no end in sight as party leaders on both sides continue to wait for the other side to blink.
Meanwhile, the days ahead are expected to see increasing economic costs.
At the end of the week, a key set of federal workers are scheduled to miss their first full paycheck of the cycle. The government’s payroll calendar notes that Friday is an electronic deposit deadline for the pay period from Oct. 4-18.
For markets, the greatest challenge so far has arguably been the vacuum of government data, such as the delayed monthly jobs report. That has deprived investors and Federal Reserve policymakers of updates on the economy.
One piece of data will become public this week when September inflation data is belatedly released on Friday.
The shutdown has already affected other sectors, from farming to housing. Though the administration has made moves to pay some government workers — from TSA agents to active-duty members of the military — temporarily lessening those economic pain points.
On Capitol Hill, both sides have remained dug into their positions. A Thursday vote in the Senate provided the chamber's 10th failure to advance the GOP plan. More Senate votes are expected this week.
At the heart of the impasse is a fight over healthcare. Democrats want to continue enhanced Affordable Care Act subsidies, which lower healthcare costs for Americans covered under those plans.
President Trump on Sunday reiterated that his party's position was not to negotiate, at least before the shutdown ends, saying it's Republicans that "want to have great healthcare."
The Democrats' hope is that yet another looming deadline — the beginning of the open enrollment period for health insurance on Nov. 1 — will eventually force Trump and other Republicans to the table.
Meanwhile, the Trump administration remains focused on maximizing political pressure. Budget director Russell Vought said federal employee layoffs could end up north of 10,000 workers amid legal challenges.
Vought also recently announced he would be “immediately pausing over $11 billion” in projects from the US Army Corps of Engineers.
Here are the latest updates as the impacts of the government shutdown unfold.
Hashtag shutdown: Government workers take to social media to show the effects of the impasse
Even with the government shutdown entering its third week and no end to the impasse in sight, many government workers are still required to report to work despite a pause in their paychecks.
Some have taken to TikTok to share their stories using the hashtag #federalemployees, CNN reports, providing some behind-the-scenes details about what it's been like during the shutdown, and some information about the differences between essential and non-essential government workers.
How the government shutdown affects mortgage rates
As the government shutdown surpasses the two-week mark, Treasury yields and mortgage rates have declined. But how are the government shutdown, Treasurys, and mortgage rates all related?
Yahoo Finance's Hal Bundrick spoke to several experts about how the government shutdown could affect mortgage rates:
The 10-year Treasury note, a debt instrument issued by the U.S. government, moves in tandem with mortgage rates, with a roughly two-percentage-point spread between them. For example, if the 10-year yield is near 4%, mortgage rates will likely be near or slightly above 6%.
Chris Whalen is the chairman of Whalen Global Advisors LLC and an investment banker focusing on mortgage finance and financial services.
"The 10-year gets pulled down for a lot of reasons, some because of the friction like government shutdowns," Whalen told Yahoo Finance in an email. Mortgage rates have been falling since July, he said, but have recently eased higher. "But that was all done by aggressive lenders, not markets."
Whalen isn't expecting anything drastic to happen in the mortgage markets during the shutdown. He believes the Federal Housing Administration (FHA) will stop processing certain new loans, which will create delays in financing — but that's about it.
Economists are warning that the shutdown’s economic effects could be 'nonlinear'
Markets have brushed off the economic effects of the government shutdown so far but at least two economists this past week argued for diligence in the coming days as economic effects begin to pile up.
Both even used the same word to describe potential economic costs on the horizon: "nonlinear"
RSM chief economist Joe Brusuelas offered in his analysis to investors this past week that as the shutdown enters its third week "both the public and policymakers should expect the impact on households and businesses to increase in a nonlinear fashion."
Oxford Economics lead US economist Bernard Yaros also said in his own report that the effects could multiply. He first acknowledged a rule of thumb that a government shutdown tends to reduce annualized GDP growth by 0.1-0.2 percentage points each week it lasts but "there are nonlinear risks associated with these economic costs as time goes by."
Brusuelas projects that the shutdown's effects on economic growth could increase from 0.1% a week so far to a 0.25% per week drag on US gross domestic product.
Oxford adds in their analysis that the shutdown currently is disrupt about $800 million in federal awards each business day but that the economic costs could multiply when federal employees miss an entire pay cycle — as is expected soon.
Federal courts in the U.S. are expected to begin scaling back non-essential functions on Monday and furloughing some employees, Reuters reported, as it runs out of money it had left to keep operating during the government shutdown.
It means the federal judiciary will be sending its 33,000 employees home and require others to work without pay for the first time in almost three decades.
The shutdown has already caused widespread delays in civil lawsuits involving federal agencies, as many of their employees have been furloughed. However, judges overseeing numerous legal challenges to Republican President Donald Trump's policies have frequently denied government requests to pause those cases.
Unlike executive branch agencies operating under Trump's purview, the judiciary had after the government shutdown that began on October 1 been able to sustain its paid operations for a few weeks by using fees and other funds not dependent on Congress authorizing new spending.
Trump administration announces that TSA agents will be paid during the shutdown
Homeland Security Secretary Kristi Noem announced late Thursday that a variety of federal agents — including those at the Transportation Security Administration (TSA) — will be paid during the shutdown at least for the next few weeks.
It's a move that could lessen a key economic pain point with airports in focus during past funding shortfalls.
Noem posted late Thursday that "more than 70,000 sworn law enforcement officers across DHS including those serving in CBP, ICE, Secret Service, TSA and other critical mission areas will be paid for all hours worked during the shutdown period."
Noem said these officers would receive a "super check" by next Wednesday that would cover already lost days, overtime, and their next pay period.
The move does not address air traffic controllers — who appear set to continue being asked to work with their pay deferred — but the move could nonetheless lessen the chances for airport disruptions in the immediate term. During a previous shutdown in 2018, hundreds of TSA agents called in sick after being asked to work without pay.
Union leader warns the US aviation system faces 'added risk' as the shutdown drags on
Aviation workers are warning that safety risks for air travelers are increasing as the government shutdown drags on.
Sara Nelson, president of the Association of Flight Attendants-CWA, AFL-CIO, told Yahoo Finance on Wednesday (see the video below) that “there is added risk in the system” as air traffic controllers and TSA agents work without pay and additional government support.
Nelson said the aviation system has become stretched since the 34-day shutdown in 2018, and the cuts to the federal government workforce this year have exacerbated issues.
As a result, “we expect that the breaking point is going to come much sooner [than in 2018],” she said.
Nelson added that, beyond travel delays and disruptions, many people are questioning whether it's still safe to fly.
"I have to tell you that it is less safe than it was before this government shutdown started, and every single day that goes on, it becomes less and less safe," she said. "We think it will break very, very soon.”
Senate Republicans — for the 10th time — fail to advance their shutdown plan
Washington's groundhog day sort of approach to the government shutdown continued Thursday when the Senate failed for the 10th time in a row to advance a GOP plan to end the shutdown for seven weeks with concessions to Democrats.
The tally was 51-45, well short of the 60-vote threshold, with lawmakers locked in now-familiar positions.
Three members of the Democratic caucus — Sens. Catherine Cortez Masto, John Fetterman, and Angus King — voted in favor of the measure as in previous votes, while Republican Sen. Rand Paul again voted no. Everyone else voted on party lines.
The Senate has at least one more area of business before it is expected to head home for the weekend, with an afternoon vote set on a Department of Defense Appropriations Act. That measure could at least reopen one wing of the government, but the widespread expectation is that it too will be blocked.
New projections see increasing odds that the shutdown could stretch into November
A telling indicator of where the current government shutdown stands can be found in a word that is increasingly being uttered across various forums in Washington: November.
Odds are increasing that the current 15-day funding shortfall may continue into next month — which of course won't begin for more than two more weeks — as both gridlocked lawmakers and analysts try to figure out how the standoff ends.
Some lawmakers are even beginning to express worries that the Thanksgiving travel season in late November could be at risk.
