Shutdown Ends, Yet This Economist Remains Cautious

The recent end of the U.S. government shutdown has prompted discussions about its economic impact. The shutdown lasted an unprecedented 43 days, concluding on November 12, 2025, after Congress passed a long-awaited funding bill, which President Donald Trump signed into law.

Short-Term Economic Effects of the Shutdown

The prolonged shutdown affected approximately 700,000 government employees. Many of these workers faced uncertainty about their future employment, which dampened consumer spending. As a result, the University of Michigan’s consumer sentiment index fell to a near record low for November, mirroring levels not observed since the height of the COVID-19 pandemic.

Retailers experienced immediate repercussions from this decline in consumer sentiment. The closure of national parks and monuments further reduced tourism, particularly affecting major tourist destinations such as Washington D.C. and Hawaii. This decline was compounded by restrictions on air travel, stemming from shortages of air traffic controllers.

• Tourism industry projected losses: US$1 billion per week due to the shutdown.

Long-Term Economic Considerations

The Congressional Budget Office estimates that the shutdown could cost the U.S. gross domestic product between $7 billion and $14 billion in lost productivity. Furthermore, this event has diminished international trust in the U.S. as a global economic leader. Even before the shutdown, political gridlock had already triggered a downgrade in the U.S. credit rating, potentially leading to higher borrowing costs.

Comparatively, the impact of the shutdown was not uniform across all demographics. Lower-income individuals were disproportionately affected, particularly those reliant on the Supplemental Nutrition Assistance Program (SNAP). This program serves over 42 million Americans, 92% of whom fall below the federal poverty line.

• Federal employee demographics:
  • Higher concentration of Black workers affected due to greater representation in federal roles compared to private sector jobs.
• States hit hardest:
  • California, Washington D.C., Virginia, and Hawaii faced significant furloughs.

Recovery Prospects Post-Shutdown

Recovery from shutdowns typically varies based on their duration. Historically, the long-term economic trajectory remains relatively stable following short-term disruptions. However, this shutdown’s unprecedented length and the uncertain prospects for backpay for furloughed workers may lead to lasting challenges.

Additionally, the reduction in domestic flights could further complicate recovery efforts. Federal monetary policy management also faces hurdles due to rising grocery prices and inflation concerns, compounded by the unavailability of government data during the shutdown.

In summary, while the U.S. government shutdown has concluded, its ramifications will linger across various economic sectors and demographics for the foreseeable future.