MW How much could the government shutdown cost? These numbers show the potential economic hit.
By Victor Reklaitis
The threat of mass layoffs makes this shutdown different, and the 'RIFs' could start in a day or two
A sign at the Washington Monument in Washington, D.C., on Wednesday indicated that it's closed due to the government shutdown.
The economic hit from a U.S. government shutdown isn't easy to estimate, but economists still put on their thinking caps and have a go at it.
So what's their assessment?
The shutdown will subtract 0.1% from U.S. economic growth for each week that it persists, according to Joe Brusuelas, chief economist at consulting firm RSM US. He said in a note Wednesday that this estimate holds for a closure that's on the shorter side, and it assumes that federal workers will get back pay like they usually do once agencies reopen.
That amount of subtraction would be small. U.S. gross domestic product grew 3.8% in the second quarter, according to an estimate released last week.
Other economists also have estimated a 0.1% hit per week to the country's GDP from a shutdown. In fact, that was the estimate given by White House officials during President Donald Trump's first term, when there was a 35-day closure that began in December 2018.
The current shutdown might be different from past ones, however, in that the Trump White House's Office of Management and Budget has indicated that agencies could pursue mass layoffs. In prior shutdowns, federal employees who weren't classified as essential would get furloughed, but they didn't face the threat of layoffs.
So far, it isn't clear to what extent there may actually be mass layoffs, but analysts are keeping an eye on the situation.
Evercore ISI analysts said the Trump administration will probably try to use the threat of layoffs to pressure Democrats in negotiations to end the shutdown, but any attempt to conduct immediate layoffs would likely lead to litigation and confusion, given that the Supreme Court recently reaffirmed a notice period of 30 to 60 days for federal mass layoffs. "Moreover, most agency shutdown plans released so far have pointed to the normal furlough process rather than layoffs, confirming our view that many Cabinet Secretaries are wary of further job cuts," the Evercore team wrote in a note.
The Office of Management and Budget's director, Russ Vought, told House Republicans during a call Wednesday afternoon that layoffs, also called reductions in force or RIFs in Washington, would start in a day or two, and they would be consequential, according to multiple published reports.
About 750,000 federal employees could be furloughed every day, according to a Congressional Budget Office estimate out Tuesday. "The number of furloughed employees could vary by the day because some agencies might furlough more employees the longer a shutdown persists and others might recall some initially furloughed employees," the CBO said.
The total daily cost of their compensation would be roughly $400 million, the nonpartisan U.S. agency said.
Federal contractors historically have not received back pay once a shutdown ends, as one nonpartisan watchdog group, the Committee for a Responsible Federal Budget, has emphasized. So households with a federal contractor - and the local businesses that rely on their spending - are likely to take a hit from those missed paychecks.
From MarketWatch's archives (January 2019): This furloughed worker found a unique way to make $2,000 a month during the shutdown
The current shutdown - which began at 12:01 a.m. Eastern Wednesday - has happened because Democrats and Republicans are locked in a standoff over including an extension for Obamacare subsidies in funding legislation.
It probably will be relatively short-lived, according to Evercore's analysts, lasting one or two weeks. "It will likely end when enough Democrats accede to a short-term funding bill that allows for healthcare negotiations and sets up another deadline later this fall," they wrote.
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Prediction markets were giving a similar outlook for the shutdown's length on Wednesday, with Kalshi putting it at 10 days and Polymarket giving a 66% chance of a resolution before Oct. 15.
The S&P 500 index SPX notched a record close Wednesday, brushing aside closure concerns and stretching its week-to-date gain to 1%. The gauge is up 14% so far this year, and it's widely expected to keep shrugging off the shutdown.
"Because investors have been conditioned to the political theater around such brinksmanship, these shutdowns simply no longer hurt equity markets or move broader financial markets," RSM's Brusuelas said.
-Victor Reklaitis
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October 01, 2025 16:04 ET (20:04 GMT)
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