The ongoing US government shutdown, now the second-longest in history, has
furloughed nearly 700,000 federal workers and forced another 700,000 to work
without pay, leading to a temporary reduction in economic growth and consumer
spending. While the shutdown's full resolution remains uncertain amid political
deadlock, economists warn that prolonged disruption could cause more lasting
economic damage and hardship for affected workers and low-income Americans.
Ongoing Shutdown and Its Economic Impact
WASHINGTON — The US federal government has been shut down
since October 1, 2025, due to an unresolved funding deadlock between
Republicans and Democrats in Congress. As reported by John Whiteside of
Reuters, the prolonged shutdown entered its third week by October 24 and is
expected to diminish economic growth in the fourth quarter, with much of the
lost output likely to be recovered once normal operations resume. Economists
estimate that the shutdown reduces annualised inflation-adjusted gross domestic
product (GDP) growth by about 0.1 to 0.2 percentage points each week. This
impact primarily arises from a drop in consumer spending and lower productivity
among federal employees now furloughed or working without pay.
Roughly 700,000 federal workers have been furloughed, while
nearly as many others continue working unpaid. Many of these workers faced
their first missed paycheck on Friday, October 24, 2025. The White House has
indicated that federal employees might not receive retroactive pay once the
government reopens, and some furloughed employees have already been permanently
let go by the Trump administration. Additionally, government contractors,
typically not eligible for back pay, have been sent home.
Gregory Daco, chief economist at EY Parthenon, told ABC News that
“a government shutdown would be an additional headwind that could further weaken the underlying foundation of the U.S. economy,”
explaining that the
current shutdown is gradually becoming significant with cumulative impacts on
consumer finances and broader economic confidence.
Political Deadlock Prolongs Shutdown
The shutdown results from partisan disagreements over
federal spending levels and policy priorities, with Republicans and Democrats
unable to reach consensus on appropriations legislation for the 2026 fiscal
year. As reported by the BBC’s Natalie Sherman, this latest shutdown is marked
by deep political divisions, with both parties perceiving strategic advantages
in holding their ground amid rising public frustration.
Senate Democrats rejected a Republican spending proposal
designed to keep the government running until November. While the bill failed
largely on party lines, a few Democrats, including Senators John Fetterman
(Pennsylvania), Catherine Cortez Masto (Nevada), and Independent Angus King
(Maine), broke ranks to vote in favour. Masto cited concerns about economic
repercussions in her state, which has been leaning Republican, especially as
she faces re-election in 2026.
Speaker of the House Mike Johnson has placed blame on the
Democrats for the prolonged shutdown, calling it "shameful" and
stating on October 21 that the crisis marks the second-longest government
shutdown in US history. Johnson emphasised that the House had already approved
a continuing resolution that the Senate repeatedly failed to pass.
President Donald Trump and Senate Republicans met on October
21, with Trump signalling a refusal to be "extorted on this crazy
plot" and stating he would only meet with Senate Democratic Leader Chuck
Schumer and House Democratic leader Hakeem Jeffries after the shutdown ends.
Congressional votes on spending bills to end the shutdown have repeatedly
failed, with more than a dozen unsuccessful Senate votes since the shutdown
began.
Human Impact and Service Disruptions
The shutdown’s human toll is significant. Approximately
750,000 government employees are on unpaid leave, impacting many households
nationwide. Those working without pay face financial strain and growing
uncertainty over when normal compensation will resume. The shutdown also
affects low-income Americans reliant on government assistance programs, with
millions expected to lose access to critical food aid such as food stamps
starting November 1, putting additional pressure on vulnerable populations.
Beyond employee pay, essential government services have been
partially or fully suspended. Key agencies including the National Institutes of
Health (NIH), the Centers for Disease Control and Prevention (CDC), and the
Women, Infants, and Children (WIC) nutrition program face operational
disruptions. However, essential services like Medicare, Medicaid, and the
Transportation Security Administration (TSA) continue functioning.
The suspension of government economic data releases adds to
market uncertainty and complicates business and policymaker decision-making.
Economists have expressed concerns that without timely, reliable data, economic
confidence could further erode as the shutdown lingers.
Economic Outlook and Risks
Economists agree the shutdown is not likely to cause a US
recession directly if it ends relatively soon. However, if the impasse
continues for months, the damage could compound. EY’s Gregory Daco warned of a
"vicious cycle" where the shutdown clouds the economic outlook,
chills consumer and business activity, and further weakens economic growth
prospects.
As reported by The New York Times, weekly economic losses
are estimated in the range of $7.6 billion to $15.2 billion. The impact exceeds
that of the 2018-2019 shutdown, reflecting growing federal workforce size and
economic interconnections.
The Federal Reserve and other economic watchers closely
monitor the situation for signs that the shutdown could force more aggressive
monetary policy adjustments or affect labour markets and financial stability.
For now, the US economy remains largely resilient but vulnerable to the
increasing pressures of prolonged political gridlock.
Negotiations and Prospects for Resolution
Efforts to resolve the shutdown continue amid unclear
prospects. Senate votes on spending bills have consistently failed, primarily
along party lines. On October 23, the Senate rejected the 'Shutdown Fairness
Act,' proposed by Senator Ron Johnson to provide pay for military personnel and
"excepted employees." A competing bill from Senator Chris Van Hollen,
which sought broader pay coverage for all federal employees, also did not pass.
Democratic leaders, including Senate Majority Leader Chuck
Schumer, remain firm in opposing Republican spending demands. As reported by
NPR, while some temporary relief measures have delayed the most severe shutdown
impacts, the underlying political impasse persists with no imminent solution.
The shutdown joins two previous shutdowns under PresidentDonald Trump, marking the third in his administration and the longest full
government shutdown in US history.
As the US government shutdown drags past three weeks, its
economic and social repercussions are increasingly tangible. Nearly 1.4 million
federal workers face furlough or unpaid labour, consumer spending and economic
growth have slowed, and essential government services are interrupted. With
partisan stalemate showing little sign of abating, the pressure mounts on
political leaders to reach a compromise to restart government operations and
stem further economic harm.
This shutdown highlights long-standing challenges in American governance and the high costs of political division for public administration and economic stability. The nation watches closely as the impasse extends, awaiting signs of resolution and relief for federal workers and citizens dependent on government programmes.