Government Shutdowns Usually Have Little Economic Impact — But This Time Could Be Different
Published September 29, 2025
By Jeff Cox, CNBC
In the United States, government shutdowns spark deep political fights. They hurt the economy and markets very little. Experts now see the 2025 shutdown in a new light because its facts point to long-term effects.
Why This Shutdown Could Be Different
A major sign is President Donald Trump’s plan to let some furloughed workers stay out of work for good. In past shutdowns, workers returned when the deadlock ended.
Michael McLean, a senior public policy analyst at Barclays, spoke in a client call. He said that if Trump acts on this plan, the economy could fall into new risks. "This plan breaks past practice, and it may bring new risks to a shutdown’s mild effect," McLean said.
Historical Context of Shutdowns’ Impact
Shutdowns in the past have harmed the economy little. This is mainly because federal workers get paid once the government restarts. Market drops have not lasted long and mostly recover fast. Some experts put the GDP loss at about 0.1 percentage point each week of a shutdown. The longest recent shutdown lasted 35 days between late 2018 and early 2019. That period was too short to affect the U.S. economy, which is worth $30 trillion.
Labor Market Vulnerabilities
The job market seems weak, especially in the Washington, D.C. area, which has many federal workers. Early in 2025, layoffs tied to changes in government jobs—supported by Elon Musk’s Department of Government Efficiency advisory board—hurt work stability in the area.
Now shutting down non-essential jobs and possibly making some furloughs final could add more strain. This chance makes experts like Nomura’s David Seif worried. He said that the impact on the October nonfarm payroll report, to be released in November, may hit harder than in past shutdowns.
Disruptions to Key Economic Data
A long shutdown may slow or lower the quality of important economic reports. The Department of Labor said it will stop most work, which stops the Bureau of Labor Statistics from sending out its reports. The monthly jobs report is one of them.
The consumer price index report may be late. That delay can change Social Security payments for many retirees. The Federal Reserve uses BLS reports to set interest rates and money plans. Without quick government data, the Fed will have to depend on private data. This mix of sources makes its job much tougher.
Market and Economic Outlook
Some experts still see a chance for a good outcome. Mark Cabana, head of rates strategy at Bank of America, said, "Even if the shutdown happens, we see little harm in the economy." He noted that a shutdown stops the flow of government reports and that the Fed would then use private data for its plans.
Elizabeth Renter, a senior economist at NerdWallet, said that the overall hurt to the economy may be “relatively mild.” She pointed out that the immediate loss of pay hits furloughed workers and contractors very hard.
Summary of Potential Impacts
- Permanent Furloughs: President Trump’s idea to stop recalling some workers breaks old habits. This step risks long-term job problems.
- Labor Market Risk: The weak job market, especially in areas with many federal employees, could get even harder.
- Economic Data Delays: A shutdown may push back key reports (jobs, CPI). This change could affect Social Security and the Fed’s plans.
- Market Response: Markets might drop at first but have shown quick recoveries in the past.
- Household Strain: Furloughed workers and contractors face immediate money worries.
As the shutdown goes on, officials, experts, and investors will watch the changes with care. Many hope that a quick end comes with little hurt. But this shutdown may mark a stronger economic burden than those before it.
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Image credit: Anna Moneymaker | Getty Images
Location: U.S. Capitol, Washington, D.C., September 29, 2025
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