Shutdown fix makes companies defensive

Written By Unknown on Jumat, 18 Oktober 2013 | 18.38

The short-term fix that ended the government shutdown will have significant effects on the state and national economy as companies may put off hiring and spending for new projects while uncertainty over a permanent budget solution lingers, experts said.

One of the most direct impacts will be on the defense industry, including Waltham-based Raytheon.

Just awarded a $385 million Navy contract to develop an air and missile defense radar system, Raytheon could push back the additional hiring necessary to fill the contract because of uncertainty in the government and the potential for another shutdown in a few months, said defense analyst Loren Thompson, COO of the Lexington Institute in Virginia.

"It's quite possible that a hundred or more engineers who might have been hired on this program will be hired later or not hired at all," Thompson said. "They have to behave more cautiously."

Raytheon did not respond to requests for comment.

Virginia-based General Dynamics, which has an engineering and manufacturing facility in Taunton that employs about 100 people, also could be cautious with its investments and hiring over the next few months, Thompson said. A General Dynamics spokesman declined to comment on the company's plans.

Elliot Winer, chief economist for the Northeast Economic Analysis Group and former chief economist for the state, said businesses in general will likely be hesitant to make investments or new hires.

President Obama yesterday addressed the economic impacts of the shutdown.

"These last few weeks have inflicted completely unnecessary damage on our economy. We don't know yet the full scope of the damage, but every analyst out there believes it slowed our growth," Obama said.

Standard & Poor's Ratings Services said the shutdown cost the economy $24 billion, and research firm IHS Global Insight reduced its fourth-quarter forecast for U.S. economic growth to 1.6 percent from 2.2 percent. Spending at chain retail stores fell 0.7 percent last week, mortgage applications dropped 5 percent, and auto sales slumped about 2 percent.

Chris Geehern, executive vice-president of Associated Industries of Massachusetts, said the potential for another budget fight "will dampen the creation of new jobs and opportunities."

"Employers remain concerned that a lack of a solution to the underlying issues may well bring us back to the brink again," Geehern said.


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