White House chief economist: We could see 'zero' growth in first quarter because of shutdown

Kevin Hassett, chairman of President Donald Trump's Council of Economic Advisers, said Wednesday that the United States could post no economic growth in the first quarter if the federal government does not reopen.

"If [the shutdown] extended for the whole quarter, and given the fact that the first quarter tends to be low because of residual seasonality, then you could end up with a number very close to zero in the first quarter," Hassett told CNN.

Asked whether American GDP growth could hit zero in the quarter, Hassett said "Yes, we could."

Residual seasonality is a term economists use to refer to the predictable variation in economic growth during each quarter. For example, nonseasonally adjusted fourth-quarter GDP in the U.S. tends to be higher than third-quarter GDP while consumers save money for the holidays.

In recent decades, GDP growth in the first quarter has been notably weaker than growth in other quarters — and combined with a contraction in government output — could stifle U.S. GDP growth, Hassett argued.

The federal government shutdown entered its 33rd day Wednesday, with little sign of relief for the roughly 800,000 federal workers going without pay. Republican Senate Majority Leader Mitch McConnell is expected hold a vote on Thursday on a Democratic proposal that would fund the government for three weeks.

The likelihood that proposal survives is slim since the legislation does not include funding for a U.S.-Mexico border wall demanded by Trump. The House of Representatives has passed similar legislation criticized by the president. Hassett added later in the CNN interview that he believes the United States and China could reach a trade deal by the March 2 deadline.

Trade negotiations between Washington and Beijing have stretched for months amid their tit-for-tat trade war. The countries reached a temporary truce following President Donald Trump's meeting with Chinese President Xi Jinping in Argentina on Dec. 1, when the two sides agreed to halt additional tariffs as they try to reach a permanent solution by early March.

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