The partial shutdown of the U.S. government is beginning to generate economic fallout beyond the federal workforce. Defense companies are warning that they will have to begin furloughing thousands of employees next week because without government auditors and inspectors in their plants, they can’t continue production. Any slowing of production will inevitably ripple through the defense supply chain as subcontractors and other lower-tier players are forced to respond to reduced demand from prime contractors. About 10% of the U.S. manufacturing workforce is engaged in defense production. I have written a commentary for Forbes here.
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