By Max Zahn: The federal government is hurtling toward a possible shutdown at a delicate moment for the nation’s economy, as a hiring slowdown stokes recession fears and inflation proves difficult to fully contain.
Federal Reserve Chair Jerome Powell last week said policymakers face a “challenging situation” while they attempt to navigate the economy through a “turbulent period.”
A government shutdown typically risks only modest damage for the U.S. economy, stemming mainly from furloughed public workers, who temporarily lose out on pay and put a dent in U.S. consumer spending, analysts told ABC News.
The impact of a shutdown could be more significant this time around, however, since the wobbly economy may strain under the weight of a potentially prolonged interruption, while a halt in the release of key economic data could make it more difficult for policymakers to steer the economy, they added.
“In stable times, this is not a particularly big deal,” Marc Goldwin, senior vice president and senior policy director at the Committee for a Responsible Federal Budget, told ABC News. “It’s probably a little bit of a bigger deal now.”
Top congressional leaders met with President Donald Trump at the White House on Monday afternoon in a last-ditch effort to avert a government shutdown — but as a stalemate persists just one day from the deadline, a shutdown seems nearly inevitable barring an unexpected breakthrough.
Lawmakers from both sides of the aisle are digging in ahead of the Tuesday night deadline.
Each week of a potential government shutdown would reduce annualized real gross domestic product growth in the quarter by about 0.1%, Mark Zandi, chief economist at Moody’s Analytics, told ABC News in a statement.
For reference, the economy grew by an average annualized rate of 1.8% over the first half of 2025, meaning it would take several weeks of a government shutdown for notable damage to be incurred.
Typically, lawmakers resolve government shutdowns quickly. Since 1977, the U.S. government has failed to meet a funding deadline on 20 separate occasions, posting an average shutdown length of 8 days, the Bank of America Institute, or BAI, said in a memo on Monday. However, the most recent shutdown which took hold in 2018, during Trump’s first term lasted far longer than average, clocking in at 35 days.
Many federal employees deemed non-essential would be furloughed without pay during a shutdown, and some government contractors could temporarily lose business. In recent shutdowns, the total number of furloughed workers amounted to about 800,000 people, though it would likely be smaller this time around due to government cuts, the BAI said.
The Trump administration has threatened to fire some federal workers in the event of a shutdown, which could heighten the economic impact, some experts said. The economy usually recovers a large share of lost output after a government shutdown, once furloughed workers receive back pay, but such a resurgence would not occur if those workers were to be fired.
Essential services like defense and law enforcement would continue throughout a shutdown, as would mandatory spending programs like Social Security and Medicare, BAI added.
