Government Shutdown May Mean Bernanke's "Little Helper" To Continue, Benefits Wall Street

News today that the U.S. House of Representatives has agreed to defund the National Affordable Healthcare Act and the potential shut down of the parts of the federal government in October, do little to provide consistent policy direction and will only heighten uncertainty.

And uncertainty is no friend of the economy, said University of Central Florida economist Sean Snaith.

Despite positive signs that the economy is healing – today’s dip in Florida’s unemployment numbers for example – the Federal Reserve earlier this week decided to continue its Quantative Easing (QE) program aimed at helping the economy. The program, introduced by Federal Reserve chairman Ben Bernanke, funnels billions of dollars into the market on a daily basis as a way to help stimulate the economy.

Some economists had expected a tapering of those billions of dollars as the economy improved. But with uncertainty already high and now Congress heading into a showdown over the budget, the debt ceiling and national health plan, there is only more uncertainty, Snaith said.

“Main street will suffer, but the stock market will still be running to the shelter of Bernanke’s little helper into 2014,” Snaith said referring to QE. “The showdown will almost certainly delay the start of tapering into 2014.”

The bright spot, today’s unemployment figures signal that the Sunshine State’s labor market is improving and outpacing the nation during the economic recovery.

“Persistent policy uncertainty nationally and the overall environment suggest Florida’s businesses will need to heed to the old British wartime adage and recent t-shirt trend to ‘Keep Calm and Carry On,’” Snaith said.

Snaith is the director of UCF’s Institute for Economic Competitiveness. He is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.

Snaith also is a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of leading economists, the Associated Press Economy Survey, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, the Livingston Survey, Bloomberg U.S. Economic Indicator Survey, Reuters U.S. Economy Survey and USA Today Economic Survey Panel.

The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses. Through these analyses, the institute provides valuable resources to the public and private sectors for informed decision-making.