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A US federal government shutdown would have a temporarily negative impact on the US economy, prove highly disruptive for businesses, affected workers, financial markets, and the Fed.
If Congress and the White House fail to deliver a federal government funding package, then vast parts of the US government will cease regular functioning (for more see Government Shutdown Looms).
The hit to GDP growth is typically modest. Past shutdowns reveal that the effect on real GDP growth is transitory as spending and work resumes once the government reopens. Still, depending upon the duration, the initial cut to real GDP growth in the quarter it occurs could range from 0.1 percentage point to 0.3 percentage point. The longest federal government shutdown was for 35 days starting in late December 2018 and ending around mid-January 2019.
Labor market implications are uneven. Again, once the federal government reopens, federal workers who were furloughed or worked without pay du
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