The U.S. economic system stays largely unscathed by the government shutdown, however the nation might danger economic peril if the deadlock deepens right into a long-term standoff, some economists informed ABC Information.
Roughly 750,000 furloughed authorities staff already really feel crimped by the shutdown as they endure missed paychecks and strained budgets. These direct results will develop dramatically on Nov. 1, when hundreds of thousands of low-income People are set to lose entry to vital meals help.
A protracted shutdown lasting a number of months or longer might power furloughed staff to exhaust financial savings, whereas sapping wider client energy as a swathe of individuals go with out key authorities help, economists mentioned. The absence of gold-standard financial information usually issued by the federal authorities might additionally foster uncertainty, diminishing confidence amongst companies and policymakers, they added.
The specter of mounting danger comes as a hiring slowdown stokes recession fears and inflation proves troublesome to totally comprise.
“We’re step by step reaching some extent the place the shutdown turns into one thing extra vital,” Gregory Daco, chief economist at accounting agency EY, informed ABC Information, warning of a “vicious cycle” through which a lingering shutdown clouds the financial outlook and chills financial exercise.
“A authorities shutdown can be an extra headwind that would additional weaken the underlying basis of the U.S. economic system,” Daco added.
However no less than one economist downplayed the extent of the financial menace posed by a authorities shutdown, even when it stretches on for months.
“Shutdowns contain extraordinarily little cash as a result of most federal spending is on autopilot,” Jeffrey Campbell, an economics professor at Notre Dame College and a former senior economist on the Federal Reserve Financial institution of Chicago, informed ABC Information.
A protracted shutdown might add one other entry to the nation’s checklist of financial ills, however it might doubtless have few “spillover results,” because the fallout can be restricted to a comparatively slim sliver of the economic system, Campbell added.
Company store throughout at Nordstrom Flagship occasion on October 21, 2025 in New York Metropolis.
Craig Barritt/Getty Photos
Every week of a possible authorities shutdown would cut back annualized actual gross home product (GDP) progress within the quarter by about 0.1%, which quantities to about $30 billion, Mark Zandi, chief economist at Moody’s Analytics, informed ABC Information in an announcement.
For reference, the economic system grew by a median annualized price of 1.6% over the primary half of 2025, that means it might take a protracted shutdown for substantial injury to be incurred.
If the shutdown had been to proceed for the rest of 2025, it might cut back annualized GDP by as a lot as 2% within the present quarter, probably leading to an financial contraction over the three-month interval, Daco mentioned.
Sentiment amongst buyers and shoppers might bitter as uncertainty looms over the economic system, some economists warned, noting a suggestions loop as members brace for additional ache and the following pullback triggers sluggish financial efficiency.
“If it extends into the vacation purchasing season between Thanksgiving and Christmas, a recession will turn into an actual menace as it’s going to weigh on already fragile client, enterprise and investor confidence,” Zandi mentioned.
Nonetheless, some economists voiced skepticism concerning the risk the federal government shutdown might derail the U.S. economic system, which has confirmed resilient within the face of elevated inflation, far-reaching tariffs and burdensome rates of interest.
Although hiring has slowed, the nation’s unemployment price nonetheless hovers at a traditionally low degree. Inflation has ticked up in latest months, however it stays far beneath a pandemic-era peak.
“While you’re in a reasonably good place, getting shoved a little bit bit away from it isn’t so dangerous,” Campbell mentioned. “If we had been in a nasty scenario and making it worse, then this is able to be much more expensive.”
A pause in government-issued financial information in the course of the shutdown has made it harder to evaluate the well being of the U.S. economic system, nevertheless, economists famous.
The U.S. Bureau of Labor Statistics is ready to launch inflation information on Friday, however the measure will arrive greater than every week not on time. Earlier this month, the company postponed publication of a intently watched jobs report with out scheduling another launch date.
Policymakers and enterprise leaders can nonetheless avail themselves of personal sector information sources, however a lack of some federal information will make it harder for them to behave with the kind of confidence that may bolster the economic system, Daco mentioned.
“The dearth of information provides uncertainty to an already unsure underlying economic system,” Daco mentioned.
