Impact of the Longest Government Shutdown on the U.S. Economy

Tue Nov 11 2025 09:46:59 GMT+0200 (Eastern European Standard Time)

The historic federal government shutdown is coming to a close but has significantly affected the U.S. economy, impacting federal workers, travel, and consumer sentiment.

The ongoing federal government shutdown, which has lasted longer than any previous closure, has not only left 1.25 million federal workers without pay but has disrupted air travel and slowed economic activity. Experts predict some of the losses will be permanent, with the economy potentially losing about $11 billion overall. Flight cancellations have risen sharply, causing havoc in the travel industry during a critical holiday season.

WASHINGTON (AP) — The longest federal government shutdown in U.S. history seems to be winding down, yet it has already imposed extensive repercussions on an economy that was already under stress.

Approximately 1.25 million federal workers have gone unpaid since October 1. Thousands of flights have been canceled, a trend likely to persist even as Congress aims to reopen the government. Reduced government contract awards and interruptions to food aid programs have further exacerbated the situation.

While much of the lost economic activity is expected to bounce back as the government resumes operations — with federal employees receiving back pay — there are unique impacts that may not be reversible. Canceled flights, missed dining outings, and postponed consumer purchases may remain as lost opportunities permanently.

“This prolonged shutdown is likely to leave a notable imprint on the economy,” remarked Gregory Daco, chief economist at EY. “The record duration of this shutdown combined with widespread disruptions to welfare programs and air travel is significant.”

The Congressional Budget Office (CBO) has indicated that a six-week shutdown could trim economic growth by around 1.5 percentage points for the fourth quarter. The CBO forecasts a potential boost of 2.2 percentage points to first-quarter growth next year post-reopening, yet estimates suggest about $11 billion in economic activity might be lost for good.

The previous shutdown that lasted 35 days in 2018-2019 had only a minor impact on the economy, reducing GDP by a mere 0.02% according to CBO data. This time, however, the effects are projected to be more profound, exacerbating challenges in hiring, inflation rates, and overwhelming uncertainty caused by administrative tariffs.

With 650,000 federal employees temporarily out of work, the unemployment rate is anticipated to increase to 4.7% from 4.3%. Yet these employees will be counted as employed once the government reopens. In total, approximately $16 billion in wages are expected to remain unpaid by mid-November, impacting consumer spending during the holiday shopping season.

Travel and Flight Disruptions

Flight cancellations have surged with over 5,500 cancellations reported since Friday due to directives from the Federal Aviation Administration to alleviate pressure on air traffic controllers who have also missed two paychecks.

Tourism Economics has predicted that the government shutdown will lead to a reduction of $63 million daily in travel-related spending, resulting in a potential loss of $2.6 billion over the duration of the shutdown.

Consumer Sentiment

Americans' outlook on the economy has worsened amidst the shutdown, with consumer sentiment dropping to a three-year low, affected by concerns about personal finances and business conditions. Such pessimism can potentially suppress long-term spending and growth, exacerbating the economic challenge.

Potential Consequences for Federal Spending

While some federal expenditures may continue, new equipment purchases and contract issuances have been severely curtailed. An estimated $800 million in new contracts are at risk daily due to the shutdown, putting various departments under financial strain.

Future Outlook

Once the government reopens, Congress's deliberations will likely restore full funding for SNAP benefits, which were delayed during the shutdown, impacting 42 million households. However, the broader economic consequences derived from this shutdown will take time to mend, exposing deeper vulnerabilities within the economy.