The federal government has shut down many times before, but economists say this one could hit harder than previous standoffs. Normally, shutdowns are more nuisance than catastrophe — a political impasse that halts some operations, delays paychecks and drags on the economy for a few weeks before the missed activity is recovered. But with a slowing job market and stubbornly high inflation, this latest shutdown may prove more disruptive than most.
Shutdowns usually follow a familiar script: Congress fails to agree on authorizations for government operations, funding runs out and parts of the federal government close until lawmakers strike a deal. The question is how much damage occurs to the broader economy. Past data suggest the overall economic effect has typically been minimal, though not trivial.
The Office of Management and Budget estimated that a 16-day shutdown in 2013 cost the government $2 billion in lost productivity. A Senate Permanent Subcommittee on Investigations later found that three previous shutdowns had cost taxpayers nearly $4 billion — including at least $3.7 billion in back pay for furloughed workers and $338 million in other expenses, such as administrative delays, lost revenue and late fees on interest payments. Those numbers may sound large, but they are tiny relative to total federal spending. In 2013, $2 billion represented just 0.05% of the government’s more than $4 trillion budget.
Shutdowns can also trim the nation’s output. The Council of Economic Advisers noted in September 2025 that both Goldman Sachs and the Federal Reserve estimated a government closure could shave roughly 0.2 percentage points off U.S. GDP for each week it lasts.
“Government shutdowns are inconvenient and messy,” Scott Helfstein, head of investment strategy at Global X, told The Associated Press. “But there is little evidence that they have a significant impact on the economy. Typically, the lost economic activity, if meaningful in the first place, is recovered in the following quarter.”
Even so, this time could play out differently. The Congressional Budget Office has estimated that around 750,000 federal employees could be laid off. President Trump has also suggested mass firings rather than temporary furloughs, potentially eliminating positions and creating longer-lasting ripple effects.
“If followed through, it could have longer-term consequences, prolonging government downsizing and keeping the sector as a drag on payrolls into next year,” Thomas Ryan of Capital Economics wrote in a recent commentary.
The timing also compounds the risk. The labor market has softened, with hiring cooling and wage growth slowing. Inflation remains elevated, continuing to weigh on consumers who account for nearly 70% of U.S. GDP. Those overlapping pressures could make this shutdown feel markedly different — and its recovery less assured — than those that came before.
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