The six-week government shutdown that came to an end late Wednesday will be another drag on an economy already facing many challenges, though the full impact will take months to measure.
The six-week government shutdown that came to an end late Wednesday will be another drag on an economy already facing many challenges, though the full impact will take months to measure.
About 1.25 million federal workers haven’t been paid since Oct. 1. Roughly 10,000 flights have been cancelled since last week and disruptions will continue, the officials say, even as air traffic controllers return to work. Government contract awards have slowed and many food aid recipients have seen their benefits interrupted.
Most of the lost economic activity will be recovered when the government reopens, as federal workers will receive back pay. But some canceled flights won’t be rebooked, many canceled restaurant reservations won’t be made again, and some postponed purchases will never happen.
The shutdown also cut off the flow of economic data on jobs, inflation, and consumer spending, which could lead the Federal Reserve to skip what had been an expected interest rate cut at its next meeting in December.
“The shutdown has been harmful to the U.S. economy and to critical data collection about employment, prices and more,” said Heather Long, chief economist at the Navy Federal Credit Union.
The Congressional Budget Office estimated that a six-week shutdown will reduce growth in this year’s fourth quarter by about 1.5 percentage points. That would cut growth by about half from the third quarter. The reopening should boost first-quarter growth next year by 2.2 percentage points, the CBO projected, but about $11 billion in economic activity will be permanently lost.
The previous longest government shutdown, in 2018-2019, lasted 35 days but only partially shut the government because many agencies had been fully funded. It only nicked the economy by about 0.02% of GDP, the CBO said then.
This year’s shutdown adds to the economy’s existing challenges, which include sluggish hiring, stubbornly elevated inflation, and President Donald Trump’s tariffs, which have caused uncertainty for many businesses. Still, few economists foresee a recession.
