\n Government shutdowns can be political earthquakes that paralyze Washington, DC. But for the economy, shutdowns are often barely a blip.\n <\/p>\n \n Whatever economic damage occurs during that time <\/strong>tends to be limited and quickly fixed. Even the last government shutdown \u2013 the record-long 35-day shutdown in 2018-2019<\/a> \u2013 had few long-lasting impacts on the US economy and financial markets.\n <\/p>\n \n That could very well be the case again this time around, especially if the looming shutdown<\/a> <\/strong>proves to be brief. Yet there are reasons this episode could be different \u2013 and not in a good way.\n <\/p>\n \n The US economy in 2025 looks more vulnerable than during past budget fights. The job market is stumbling<\/a>, and the Trump administration is threatening even more federal layoffs. A government shutdown would just add more chaos and uncertainty, at a time when there is already plenty of both.\n <\/p>\n \n Not only are the stakes higher, but a shutdown could also delay the collection and release of some key economic data \u2013 including the jobs report and monthly readings on inflation. That could force CEOs, investors and even Federal Reserve officials to fly blind when making key decisions.\n <\/p>\n \n \u201cThe timing is bad. It\u2019s a little bit more dangerous this time,\u201d said David Kelly, chief global strategist at JPMorgan Asset Management.\n <\/p>\n \n The Trump administration amped up that sense of <\/strong>danger by threatening to carry out mass layoffs of federal workers<\/a> during a shutdown.\n <\/p>\n \n Investors and economists normally shrug off the furloughs of nonessential federal employees because they are repaid and return to work when the shutdown inevitably ends.\n <\/p>\n \n But the Trump administration is signaling that may not be the case this time. Some say the threat of mass layoffs could be a tactic to pressure Democrats already dismayed by the shrinking federal workforce.\n <\/p>\n \n \u201cIt seems like posturing. I don\u2019t think they will do that. But President Trump has been willing to take big risks,\u201d said Stephanie Roth, chief economist at Wolfe Research.\n <\/p>\n \n Roth notes that few people thought President Donald Trump would really slap 145% tariffs on imports from China<\/a> \u2013 until he did.\n <\/p>\n \n Before the shutdown risk this year, Trump officials were eager to hand out pink slips in a quest to dramatically reduce<\/a> the size of the federal workforce.\n <\/p>\n \n Roth said laying off hundreds of thousands of federal workers during a shutdown \u201cwould be a really big economic problem\u201d and unsustainable over the medium-term.\n <\/p>\n \n Jared Bernstein, a top economic adviser in the Biden White House, was shocked by the mass layoff threat.\n <\/p>\n \n \u201cThis is just running over innocent bystanders,\u201d Bernstein told CNN in a phone interview. \u201cIt\u2019s not only bad economics because you\u2019d be contributing to an already rising unemployment rate, but it\u2019s profoundly unfair. It\u2019s not their fault you can\u2019t keep the lights on.\u201d\n <\/p>\n \n Normally, the rule of thumb is that each week of a government shutdown trims about 0.2 percentage points from gross domestic product (GDP) \u2013 or economic growth. But those losses are quickly reversed as the government reopens.\n <\/p>\n \n However, permanent layoffs in the federal government would raise the risk of more long-lived effects, forcing investors and economists to rethink the damage to the US economy.\n <\/p>\n \n Many, especially analysts and investors, will be left in the dark about the health of the US economy if a shutdown impacts the release of major economic reports.\n <\/p>\n \n The Bureau of Labor Statistics, already under fire from the Trump administration<\/a> over the quality of its data, could be forced to delay Friday\u2019s September jobs report if there is a shutdown. The monthly jobs report is always critical, but it has been especially important lately because of cracks in the labor market and sizable revisions to prior months.\n <\/p>\n \n The BLS has already faced struggles caused in part by massive swings in the economy, steep budget cuts and low survey response rates.\n <\/p>\n \n If a shutdown lasts at least a dozen days, it would likely interrupt the surveys the BLS must conduct to prepare the October jobs report \u2013 the one scheduled for release in early November.\n <\/p>\n \n \u201cIt\u2019s already complicated enough to interpret the labor market data. If we have a period of time where the data isn\u2019t available, those challenges would significantly increase,\u201d Nathan Sheets, global chief economist at Citigroup, told CNN in a phone interview.\n <\/p>\n \n The collection of inflation data by the BLS could also get derailed by a government shutdown. This is important as investors and Fed officials are on high alert for evidence that the Trump administration\u2019s tariffs are driving up prices.\n <\/p>\n \n Wall Street seems unfazed about the risk of a government shutdown.\n <\/p>\n \n US stocks surged on Friday even as the odds of a 2025 government shutdown spiked to over 80% on prediction platform Polymarket<\/a>.\n <\/p>\n \n Market veterans know that shutdowns tend to be minor events for the stock market.\n <\/p>\n \n Since 1976, the S&P 500 has averaged no change during government shutdowns, according to Truist Wealth. US stocks even managed to spike by 10% during the government shutdown that began in late 2018.\n <\/p>\n \n \u201cPrior government shutdowns have had minimal lasting economic impact. They tend to mimic a hurricane or a snowstorm, delaying most activity and quickly making up for it upon reopening,\u201d Keith Lerner, Truist Wealth\u2019s chief investment officer, wrote in a report.\n <\/p>\n \n Bob Elliott, chief investment officer at Unlimited Funds, said in a Substack post on Friday that markets are going by the \u201csame old playbook\u201d where a government shutdown won\u2019t matter to the economy.\n <\/p>\n \n \u201cUs macro folks are worriers by constitution, so take this with a grain of salt,\u201d Elliott said, \u201cbut there seems to be a risk that this shutdown may be different than what we\u2019ve come to expect.\u201d\n <\/p>\n<\/p><\/div>\n New York \u00a0\u2014\u00a0 Government shutdowns can be political earthquakes that paralyze Washington, DC. But for the economy, shutdowns are often barely a blip. Whatever economic damage occurs during that time tends to be limited and quickly fixed. Even the last government shutdown \u2013 the record-long 35-day shutdown in 2018-2019 \u2013 had few long-lasting impacts on … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":4434,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-4433","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/www.jubi24.com\/wp-content\/uploads\/2025\/09\/Government-shutdowns-usually-dont-hurt-the-economy-This-time-could.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts\/4433","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4433"}],"version-history":[{"count":1,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts\/4433\/revisions"}],"predecessor-version":[{"id":4435,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts\/4433\/revisions\/4435"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/media\/4434"}],"wp:attachment":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4433"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4433"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4433"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n New York<\/span>
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\n <\/cite><\/p>\n![\"Market](\"https:\/\/www.jubi24.com\/wp-content\/uploads\/2025\/09\/gettyimages-2236259807.jpg\")
\n <\/div>\n<\/div>\n
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Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"