As the ongoing U.S. federal government shutdown stretches on, economic ripple effects are becoming more pronounced. Michael Galletly, an IT management specialist with the Department of Agriculture in Utah, recently spent over two hours reviewing household expenses with his wife, preparing for financial strain. Currently on unpaid leave and serving as president of American Federation of Government Employees Local 4016, he estimates he can manage for two to three months under tight budgeting, but uncertainty looms. “I don’t know how long this thing is going to go,” he said.
The impasse has already disrupted travel, delayed permits and loan approvals, and closed select public facilities. With millions of federal employees now facing missed paychecks, spending cuts are expected to amplify broader economic consequences. Stash Graham, managing director at Graham Capital Management, noted the nation may be approaching a critical turning point in terms of macroeconomic impact.
Signs of weakening confidence among consumers and businesses have emerged, potentially foreshadowing deeper economic softness. The suspension of key data releases, such as the monthly jobs report, is increasing uncertainty, leading companies to delay investment decisions and raising the risk of policy missteps due to incomplete information.
Galletly has already scaled back spending—scrapping plans for a camper trailer, opting for a used laptop for his daughter, and postponing window replacements. With his first paycheck at risk, he has applied for unemployment benefits and contacted lenders about mortgage and auto loan accommodations. “Having been through this before—this is my third shutdown—I just can’t afford to hope for the best,” he said.
Historically, shutdowns have caused temporary disruptions akin to natural disasters, with analysts estimating a weekly drag of about 0.2 percentage points on quarterly GDP—roughly $15 billion. Much of this loss is typically recovered once operations resume and back pay is issued.
However, the current situation carries heightened risks. The Trump administration has threatened to withhold back pay and initiate permanent layoffs, actions begun last week. These measures, combined with an already slowing economy affected by trade tariffs, immigration changes, and prior spending reductions, increase vulnerability.
Michael Zdinak, economics director at S&P Global Market Intelligence, warned that while brief shutdowns may have minimal effects, a prolonged one could derail recent trends of stable growth. Recent moves by the administration to maintain military pay and fund essential food programs have eased some immediate pain but reduced pressure for a swift resolution.
Wells Fargo analysts cautioned that if the shutdown extends into next week, the country would enter uncharted territory, as past closures were generally narrower in scope. S&P Global projects the unemployment rate could climb to 4.8% by October 18—up from 4.3%—if the shutdown persists.
The White House Council of Economic Advisers estimates a month-long shutdown could reduce consumer spending by $30 billion, partly due to the exclusion of millions of government contractors from back pay eligibility.
Allison, a state employee in Ohio whose husband works for the Defense Department without pay, said her family of five canceled their usual fall trip to Michigan, opting for a local day trip instead. With her husband as the primary earner and limited financial flexibility after rising living costs, they have requested a mortgage deferral for November. She fears extended disruption could force her children to drop extracurricular activities. “If this continues through December, I don’t know what we’re going to do,” she said.
— news from BBC
— News Original —
As US shutdown starts to bite, how much could it hit economy?
3 hours ago n nNatalie ShermanBusiness reporter n nMichael Galletly, who works for the Department of Agriculture in Utah, sat down with his wife last week, combing through bills and spending more than two hours strategising how to make it through the government shutdown. n nThe outlook – uncertain. n n”I could make it two months, maybe three lean, very lean months,” said Mr Galletly, an IT management specialist put on unpaid leave this month, who is also president of American Federation of Government Employees Local 4016. “But I don ‘t know how long this thing is going to go.” n nThe impasse has already snarled travel, delayed government approvals for permits and loans and shuttered some museums. n nNow as millions of federal workers across the government start to miss paycheques this week and respond by curtailing spending, analysts say the impact will start to reverberate more widely. n n”We ‘re reaching this critical inflection point in terms of the government shutdown and its ramifications for the broader economy,” said Stash Graham, managing director of Graham Capital Management. n nThere are already signs that business and consumer confidence have dropped, in a possible indicator of economic weakness ahead. n nAnalysts said the delay or suspension of key releases of economic data, like the monthly jobs report, is adding to uncertainty, prompting firms to put spending decisions on hold and raising the risk of error as policymakers proceed without the best information. n nIn Utah, Mr Galletly said he had started to pull back his purchases in the lead-up to the shutdown, scrapping plans to buy a camper trailer, opting for a second-hand laptop for his daughter, and postponing plans to replace windows, including one that is leaking. n nNow, with the prospect of missing his first paycheque next week, he has applied for unemployment insurance, and reached out to the banks holding his mortgage and car loan, hoping for accommodation. n n”A lot of people tend to look at these things and just hope for the best,” he said. “Having been through this before – this is my third government shutdown as a federal employee – I just can ‘t afford to do that.” n nThe impact of government shutdowns on the economy is typically temporary and limited – kind of like the disruption from a hurricane or major storm. n nAnalysts this year project a hit to quarterly growth of roughly 0.2 percentage points per week – roughly $15bn (£11.2bn) – much of which would be made up after the shutdown ends, when federal workers typically receive back pay. n nThis year ‘s clash, however, carries unusual risks. n nThe Trump administration is threatening unprecedented action – including denying backpay to workers and permanent firings, which it started to initiate last week. n nAnd the fight is colliding with a slowing economy, in which businesses and households were already worried over tariffs, changes to immigration rules and earlier cuts to government spending. n n”We ‘ve already rolled the dice a lot this year,” said Michael Zdinak, economics director at S&P Global Market Intelligence. n n”So while the impact of a short shutdown should be minimal, a protracted government shutdown is just another chance we ‘re taking that could derail the trend of steady growth we ‘ve been on the last couple of years.” n nIn recent days, the Trump administration has moved to blunt some of the economic pain, reshuffling government payments to ensure military members continue to receive pay and certain key food programmes maintain funding. n nBut those measures have also dimmed hopes of a resolution, removing some of the pressure points that had been expected to get the two sides talking about how to resolve their differences over spending. n n”If the shutdown drags deep into next week, we will be venturing into uncharted territory,” Wells Fargo analysts wrote recently, noting that most prior shutdowns, especially lengthy ones, have been far more limited in scope. n nS&P Global Market Intelligence estimates that the unemployment rate could rise to as much as 4.8% if the shutdown continues until 18 October – a significant leap up from 4.3%. n nThe White House Council of Economic Advisers recently estimated that a month-long shutdown could lead to the loss of $30bn in consumer spending, in part due to the impact on government contractors, which number in the millions and are not eligible for back pay if their work is affected. n nAllison, whose husband is employed by the Defense Department in Ohio and is now working without pay, said her family of five had already cancelled its typical fall weekend getaway to Michigan, opting for a day trip instead to save money. n nThough Allison works for the state, her husband is the primary breadwinner. n nThe 43-year-old, who asked the BBC not to publish her full name due to concern it would expose her to political attacks, said her family has little wiggle room in its budget after the jump in living costs in recent years. n nWhen the shutdown started, they immediately reached out to the bank to ask if they could defer November ‘s mortgage payment. She is worried an extended shutdown will force her children to drop out of extracurricular activities. n n”If this continues through December, I don ‘t know what we ‘re going to do,” she said.