Wire Service
1 minute read
4 Feb 2019
4:44 pm

White House economist says economy strong despite shutdown


The US economy will post strong growth in the first quarter, despite negative effects from the extended government shutdown, top White House economist Kevin Hassett said Monday.

Hassett said he got a 'fist bump' from President Donald Trump on Friday after the January employment numbers. AFP/NICHOLAS KAMM

He said the year started off strong, with the blockbuster January jobs gain of over 300,000 pointing to expansion of more than three percent in the first quarter.

While he recently acknowledged that his office had underestimated the impact on the economy of idling 800,000 federal workers, Hassett was upbeat about the outlook.

“My thought is the negative effects we talked about from the shutdown will be very, very hard to see in the data,” he said on CNBC.

“I think Q1 has got to be well north of two and maybe even north of three” percent growth, given the momentum from employment.

And due to the stimulus provided by 2017’s massive corporate tax cuts, the economy is seeing “a tax-induced supply shock” that will boost growth without increasing prices, he said.

“So I think we could go forward with a great deal of confidence that the high growth isn’t pushing an enormous amount on inflation.”

Hassett said he got a “fist bump” from President Donald Trump on Friday after the January employment report provided “good news the White House needed.”

However, financial markets have become increasingly concerned that despite strong jobs growth the economy will slow this year.

And those fears prompted the Federal Reserve to signal clearly that it intends to pause its interest rate increases.

The US trade war with China also has created uncertainty and threatened to slow both economies.

Hassett said he remained “hopeful” Washington and Beijing could reach an agreement but cautioned that “there’s still a lot of work to do.”

The US will more than double the punitive tariffs on $200 billion in Chinese goods if no deal is agreed by March 1.

The sides held a second round of talks in Washington last week and are expected to meet again in Beijing later this month.