Goldman Sachs: U.S. Shutdown Threatens Unprecedented Economic Impact

Bassyonni

ago 7 hours

Goldman Sachs has issued a stark warning regarding the potential economic ramifications of the ongoing U.S. government shutdown. This shutdown could become the largest in history in terms of both its scale and duration.

Unprecedented Economic Impact

The financial institution underscored that the current federal shutdown is more comprehensive than the previous 35-day partial shutdown experienced from late 2018 to early 2019. It is affecting a wider array of agencies and government functions.

Duration and Output Losses

If the shutdown lasts two to three weeks, it will mainly result in productivity losses from furloughed employees. However, should it extend longer, the ramifications could extend to federal spending, investment, and broader private sector activities.

GDP Projections

Goldman Sachs estimates that if the shutdown continues for approximately six weeks, it could decrease U.S. GDP growth by 1.15 percentage points in the fourth quarter of 2025. This would be measured quarter-on-quarter, annualized.

Fortunately, a projected rebound of about 1.3 percentage points is expected in the first quarter of 2026 as delayed federal purchases and investments are finally realized.

Market Reactions

Goldman’s analysis highlights an increasing economic risk posed by a prolonged government shutdown. Markets are likely to respond by factoring in short-term growth weaknesses before any recovery materializes in early 2026.

Political Considerations

Despite being known as a savvy negotiator, former President Trump has yet to take effective steps to resolve the current shutdown. His actions—or lack thereof—are raising concerns among stakeholders and observers alike.

Prolonged shutdown could lead to unprecedented economic impacts.
Goldman Sachs forecasts a 1.15% GDP decline in Q4 2025.
Potential recovery of 1.3% GDP growth in Q1 2026.
Wider federal impact compared to past shutdowns.

Overall, the situation demands attention as the prospects for the U.S. economy hang in the balance during this uncertain period. The implications for growth could be far-reaching, making it crucial for authorities to find a resolution swiftly.