The government shutdown is now the longest – and likely the most damaging in US history

By Matt Egan, CNN

New York (CNN) — The ongoing government shutdown isn’t just the longest in American history. It’s likely the most damaging, too.

Historically, the economic damage from shutdowns is fleeting, quickly reversing when the government reopens. However, the 36-day lapse in funding that began on October 1 is already dealing a significant – albeit temporary – blow to the world’s largest economy.

Millions of Americans are not getting food stamp benefits needed to feed their families. Roughly 1.4 million federal employees haven’t been paid – even though many are still working. And investors and policymakers are in the dark about what’s happening in the US economy because the release of government data has stalled.

“The current shutdown looks likely to have the greatest economic impact of any shutdown on record,” Alec Phillips, chief political economist at Goldman Sachs, wrote in a recent report.

Even if the shutdown ends by next week, it will likely slow down the growth of real gross domestic product (GDP) — the broadest measure of economic output, without considering inflation — by 1.15 percentage points during the fourth quarter, according to Goldman Sachs.

The nonpartisan Congressional Budget Office estimates the shutdown will reduce GDP by one to two percentage points.

“Those effects will intensify the longer the shutdown lasts,” the CBO wrote in a letter last week.

Although “most of that decline” will eventually be recovered, CBO estimates between $7 billion and $14 billion will be permanently lost during the shutdown.

In 2025, a ‘much greater hit’ to US economy

Goldman Sachs is now penciling in weaker fourth-quarter GDP growth of just 1%. That would represent a significant slowdown from the 3% or even 4% growth that was projected for the third quarter.

Phillips wrote that the current shutdown is expected to result in a “much greater hit to growth than any prior shutdown” because it’s the longest on record and is much broader than previous shutdowns.

The 2018-2019 shutdown, previously the longest on record at 35 days, was only a partial shutdown, impacting just 10% of government spending, according to Goldman Sachs. The 2025 shutdown, by comparison, has derailed 100% of appropriations.

The current shutdown also comes at a bad time, said David Kelly, chief global strategist at JPMorgan Asset Management: “The economy was already going to slow down, and this just made it worse.”

Kelly cited a range of factors slowing the economy in the fourth quarter, including historically high tariffs, low immigration and the return of student debt payments.

He added that it’s “shocking” to see “how much public pain (Democrats and Republicans) are willing to inflict just to get a political gain.”

Economic data blackout

The precise economic damage from the shutdown is difficult to measure, in part because of the information blackout caused by the shutdown itself.

“We are flying blind in this economy,” Kelly said.

Only one major economic report has been released by the federal government during the shutdown: the September consumer price index (CPI), the final piece of data required to determine annual cost of living adjustments for Social Security benefits.

Other data releases, including the all-important monthly jobs report and the Fed’s go-to inflation metric as well as key insights on consumer spending, have been sidelined.

That’s a major shift from the 2018-2019 shutdown, when the Bureau of Labor Statistics still received funding. That allowed the agency to continue collecting and releasing key economic data.

Policymakers have been forced to make decisions with limited information. Last week, for the first time ever, the Federal Reserve decided on interest rates without the monthly jobs report.

If the government shutdown continues to limit Fed officials’ visibility, it could persuade the central bank to forgo cutting rates at the December policy meeting.

“What do you do if you’re driving in the fog? You slow down,” Fed Chair Jerome Powell said during a press conference last week. “I’m not committing to that, I’m just saying it’s certainly a possible that you would say, ‘We really can’t see, so let’s slow down.’”

Even after the government reopens, the quality of economic data could be eroded by the fact the BLS was unable to conduct critical surveys of businesses and consumers during the shutdown period.

The shutdown will also likely inflate the unemployment rate for the month of October because the BLS typically counts furloughed workers as unemployed unless they find work elsewhere.

A bounce-back in 2026?

The good news is most of the shutdown-induced damage to the economy is expected to quickly unwind after the government reopens.

Goldman Sachs expects the shutdown effect to “more than reverse” in the first quarter, boosting GDP by 1.3 percentage points as furloughed workers return and delayed federal spending recovers. The bank expects that reversal to lift first-quarter GDP growth to a solid pace of 3.1%.

The CBO estimated that some of the output lost due to employee furloughs would be permanently lost, costing the economy up to 14 billion in an eight-week shutdown.

Of course, those forecasts for a rebound hinge on a key element of shutdowns: Federal workers are repaid once the government reopens.

However, President Donald Trump has questioned the policy of paying furloughed workers – despite signing a law during his first term that has been widely interpreted as guaranteeing back pay for furloughed workers.

The White House on Tuesday would not commit to paying furloughed workers at the end of the shutdown, raising the risk of lasting economic damage.

CNN’s Tami Luhby contributed reporting.

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