The U.S. economy remains largely unscathed by the government shutdown, but the nation could be at risk of economic peril if the stalemate deepens into a long-term standoff, some economists told ABC News.
About 750,000 laid-off government workers are already feeling the pinch from the shutdown, suffering from late payments and tight budgets. Those direct effects will increase dramatically on November 1, when millions of low-income Americans will lose access to critical food assistance.
A prolonged shutdown lasting several months or longer could force laid-off employees to deplete their savings, while undermining consumer strength as a swath of people are left without key government support, economists said. The absence of standard economic data normally issued by the federal government could also foster uncertainty, diminishing trust among businesses and policymakers, they added.
The threat of rising risk comes as a slowdown in hiring stokes recession fears and inflation proves difficult to fully contain.
“We are gradually reaching a point where the shutdown becomes more significant,” Gregory Daco, chief economist at accounting firm EY, told ABC News, warning of a “vicious cycle” in which a prolonged shutdown clouds the economic outlook and cools economic activity.
“A government shutdown would be an additional hurdle that could further weaken the underlying foundations of the U.S. economy,” Daco added.
But at least one economist downplayed the scope of the economic threat posed by a government shutdown, even if it drags on for months.
“Shutdowns involve very little money because most federal spending is on autopilot,” Jeffrey Campbell, an economics professor at the University of Notre Dame and former senior economist at the Federal Reserve Bank of Chicago, told ABC News.
A prolonged shutdown could add another entry to the country’s list of economic woes, but would likely have few “spillover effects” since the consequences would be limited to a relatively narrow slice of the economy, Campbell added.
Guests shop during Nordstrom’s flagship event on October 21, 2025 in New York City.
Craig Barritt/Getty Images
Each week of a potential government shutdown would reduce annualized real gross domestic product (GDP) growth in the quarter by about 0.1%, equivalent to about $30 billion, Mark Zandi, chief economist at Moody’s Analytics, told ABC News in a statement.
For reference, the economy grew at an average annualized rate of 1.6% during the first half of 2025, meaning a prolonged shutdown would be necessary for substantial damage to occur.
If the shutdown were to continue for the rest of 2025, it could reduce annualized GDP by up to 2% in the current quarter, which could result in an economic contraction over the three-month period, Daco said.
Sentiment among investors and consumers could deteriorate as uncertainty looms over the economy, some economists warned, pointing to a feedback loop as participants brace for more suffering and the resulting pullback triggers sluggish economic performance.
“If it extends into the holiday shopping season between Thanksgiving and Christmas, a recession will become a real threat, affecting the already fragile confidence of consumers, businesses and investors,” Zandi said.
Still, some economists expressed skepticism that a government shutdown could derail the U.S. economy, which has proven resilient in the face of high inflation, far-reaching tariffs and onerous interest rates.
Although hiring has slowed, the country’s unemployment rate still remains at a historically low level. Inflation has risen in recent months, but remains well below the pandemic-era peak.
“When you’re in a pretty good place, getting pushed a little bit away from it isn’t so bad,” Campbell said. “If we were in a bad situation and I made it worse, then this would be a lot more expensive.”
However, a pause in economic data released by the government during the shutdown has made it more difficult to assess the health of the U.S. economy, economists said.
The US Bureau of Labor Statistics will release inflation data on Friday, but the measure will come more than a week late. Earlier this month, the agency postponed the release of a closely watched jobs report without scheduling an alternative release date.
Policymakers and business leaders can still tap private sector data sources, but a loss of some federal data will make it harder for them to act with the kind of confidence that would boost the economy, Daco said.
“The lack of data adds uncertainty to an already uncertain underlying economy,” Daco said.
