The U.S. government is now on shutdown because the Democrats and Republicans could not agree on a budget. According to the article "Federal Shutdowns Usually Don't Do Much Economic Damage. There Are Reasons to Worry About This One," this shutdown looks riskier than all the other one's and President Donald Trump is threatening to permanently eliminate thousands of government jobs. The U.S. government has been shut down 21 times in the past half century, and the last shutdown stretched about five weeks. During a shut down, Federal workers do not get paid and the federal government delays some spending. When the shut downs are over, federal workers go back to their jobs and collect back pay. Government benefit payments and healthcare programs (Social Security and Medicare) won’t be disrupted by the shutdown, which is a crucial income support for some families. However, there is little evidence that they have a significant impact on the economy since it is not for a long period of time.
There is an estimate that the shutdown and loss of income for federal workers could decrease the nation's annual growth rate 0.1 to 0.2% in the fourth quarter for each week the government is closed. The economy created 911,000 fewer jobs than originally reported in the year, which meant that employers added an average of fewer than 71,000 new jobs a month over that period. Since March, job creation has been slowing down even more, which shows an average of 53,000 jobs a month. The GDP growth is at a 3.8% annual pace from April through June, but drops to 0.6% in the first three months of the year.
Press, Associated. “Federal Shutdowns Usually Don’t Do Much Economic Damage. There Are Reasons to Worry about This One.” US News & World Report, U.S. News & World Report, 2025, www.usnews.com/news/business/articles/2025-10-02/federal-shutdowns-usually-dont-do-much-economic-damage-there-are-reasons-to-worry-about-this-one.
This is super relevant right now! Had no idea shutdowns happened 21 times before. Great summary!
ReplyDeleteIt will be interesting to see how long this Government shutdown lasts and the impacts it will have on the economy. With the government being shut down, that means important data will not be available for this month. I am curious to see how the Fed will navigate this and to see where they turn to get reliable data from. Also, you mention how GDP will decrease because of the shutdown. Do you think the jobs report will also show a decline because of the shutdown? The Fed will have its hands full trying to balance policy with limited amounts of reliable data available to them.
ReplyDeleteHad no idea that a government shutdown usually is not that damaging, as the word shutdown definitely hints at that. It is interesting that this is 1/22 that actually may be riskier than the rest that have happened in the U.S.
ReplyDeleteThis shutdown seems more serious than past ones because it comes at a time of already slowing job growth and economic uncertainty. It raises questions about how long the economy can withstand political deadlock before it starts to affect consumer confidence and long-term growth.
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