Shutdown Hits Economy Hard with Lost Wages, Canceled Aid & Flights/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The longest federal government shutdown in U.S. history is nearing its end, but not without economic consequences. Unpaid federal workers, flight cancellations, disrupted food aid, and lost government contracts are weighing down an already fragile economy. The shutdown may cost the U.S. $11 billion in permanently lost growth.
Shutdown Economic Fallout Quick Looks
- Federal shutdown disrupts paychecks, travel, food aid, and consumer confidence
- Over 1.25 million federal workers missed wages since October 1
- Canceled flights, frozen contracts, and delayed SNAP payments strain economy
- Shutdown expected to shave 1.5% off Q4 economic growth
- $11 billion in economic activity projected to be permanently lost
Shutdown Hits Economy Hard with Lost Wages, Canceled Aid & Flights
Deep Look
The longest government shutdown in U.S. history, now approaching six weeks, is poised to end, but its economic consequences are already being felt across the country. From unpaid workers to grounded flights and disrupted welfare programs, the shutdown is adding to the stress of an economy already grappling with inflation, trade uncertainty, and slow hiring.
Since October 1, about 1.25 million federal employees have gone without pay. While they’re set to receive back pay when the government reopens, the short-term impact has been severe. Workers have cut back on spending at restaurants and stores, delayed major purchases, and canceled holiday travel plans — all of which ripple through the broader economy.
Gregory Daco, chief economist at Ernst & Young (EY), noted that most brief shutdowns tend to leave minimal economic trace, but this one is different. “Short-lived shutdowns are usually invisible in the data, but this one will leave a lasting mark,” he said, citing both its unprecedented length and the range of disruptions affecting welfare programs and travel.
The Congressional Budget Office (CBO) estimates the shutdown will reduce fourth-quarter GDP growth by 1.5 percentage points, slicing expected growth in half compared to the previous quarter. Though reopening the government should lead to a 2.2 percentage point rebound in the first quarter of 2026, approximately $11 billion in economic activity is expected to be permanently lost.
Unpaid Wages Drag Down Local Economies
The impact has been especially acute in the Washington, D.C. metro area, where many federal workers are concentrated. Already suffering from a 6% unemployment rate following federal workforce cuts earlier this year, the region has been further squeezed by the loss of income from furloughed workers.
Nationally, the CBO estimates that $16 billion in wages were missed by mid-November. Maryland, Alaska, New Mexico, and Oklahoma — all states with relatively high percentages of federal workers — are among those most affected. Compounding the problem is that many federal contractors — potentially numbering over 5 million — are not guaranteed back pay at all.
Flight Cancellations Spread Travel Industry Losses
The Federal Aviation Administration, struggling with underpaid and overworked air traffic controllers, ordered airlines to reduce activity. As a result, more than 7,000 flights have been canceled since Friday. Airlines had already scrapped 2,000 additional flights by Monday evening, worsening the economic toll on the tourism industry.
According to Tourism Economics, the shutdown is costing the travel sector an estimated $63 million per day, potentially totaling $2.6 billion if the standoff had lasted the full six weeks. That includes lost revenue for hotels, restaurants, and transportation services tied to federal travel, much of which won’t be recoverable even after the government reopens.
SNAP Aid Delays Impact Millions
The Supplemental Nutrition Assistance Program (SNAP), which provides food aid to 42 million Americans, faced an $8 billion delay in monthly disbursements for November. This disruption created financial stress for millions of households, reducing their ability to spend on basic goods and services. Although some states managed to fulfill benefits independently, the Trump administration continued to battle in court over full funding. The current congressional deal includes resumed funding for the program.
Government Spending and Contracts Freeze
Federal agencies have been unable to issue new contracts or make planned purchases during the shutdown. Economist Bernard Yaros of Oxford Economics estimated that up to $800 million in new contracts went unawarded each day. Departments like Defense, NASA, and Homeland Security have largely paused procurement, impacting companies that depend on federal contracts for business stability.
This paralysis has created uncertainty for thousands of private-sector jobs tied to federal spending and delayed technological and infrastructure development in key sectors.
Consumer Confidence Sinks
The shutdown also appears to have dealt a psychological blow to the American public. Consumer sentiment — a key indicator of future spending — has dropped sharply. The University of Michigan’s latest survey pegged the consumer sentiment index at 50.4 in November, down 6.2% from October and nearly 30% from a year earlier.
Sentiment is now hovering near all-time lows, driven by concerns over personal finances and skepticism about future business conditions. While recent years have shown Americans may continue to spend despite poor sentiment, prolonged pessimism often leads to reduced discretionary purchases and a drag on growth.
Federal Reserve’s Tools Blunted
Economic forecasting has also been disrupted. The Federal Reserve relies heavily on monthly economic data to inform interest rate decisions. But with federal statistical agencies offline, key reports on employment, inflation, and retail sales have not been published.
Fed Chair Jerome Powell said the central bank is “driving in the fog” due to the lack of data, suggesting the shutdown may delay or derail a widely expected interest rate cut at the next Federal Open Market Committee meeting in December. A delay in rate cuts could curb borrowing, investment, and spending at a time when the economy needs support.
As Powell noted, “When you’re driving in the fog, you slow down.” That caution may translate to a more conservative Fed in the months ahead.
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