US Shutdown: A New Source of Uncertainty

Federal agency funding expired at the end of the 2025 fiscal year on September 30. As the 2026 fiscal year begins, no new appropriations have been passed by Congress, forcing the federal government to suspend a large portion of its activities. Essential services—particularly those related to national security (defense, security agencies, airports and air traffic control, the Coast Guard, border control, disaster management, etc.)—continue to operate. Congress itself is unaffected, as are the postal service and the Federal Reserve, which do not rely on congressional appropriations for their operations. Programs that do not require annual funding, such as Social Security and healthcare, are also not impacted by the shutdown.

Unlike the 2018–2019 shutdown, which affected roughly a quarter of federal agencies, the current impasse is much broader. No funding legislation has been passed, not even short-term measures. As a result, a significantly larger number of federal employees are being furloughed without pay. The Congressional Budget Office (CBO) estimates that 750,000 workers are affected, with their combined daily wages amounting to US$400 million. The situation could be further complicated by the Trump administration’s stated preference for layoffs over temporary unpaid furloughs—wages for which were typically reimbursed retroactively in previous shutdowns. The absence of these workers could have daily consequences for the private sector, particularly in areas such as case processing, permit issuance, information dissemination, and the provision of aid or subsidies. The tourism sector may also be impacted, as operations at national parks and museums are disrupted, though not entirely shut down.

It is clear that the economic effects of the shutdown will depend primarily on its duration. A swift resolution to the budget impasse would help limit the impact on economic growth. Conversely, a prolonged and broader shutdown—similar to but more extensive than the one in 2018–2019—could result in more substantial negative consequences. On average, shutdowns over the past few decades have lasted eight days (graph). According to the CBO, the 2018–2019 shutdown led to a 0.2% shortfall in real GDP.

The current budget impasse is already affecting the release of economic indicators. The Census Bureau has postponed the publication of August construction spending data, which was scheduled for release this morning. The Bureau of Labor Statistics has announced that its regular publications will be suspended during the shutdown, including the September employment report expected this Friday and the inflation data scheduled for October 14. Data collection will also be halted, potentially leading to lasting gaps in economic information and complicating economic analysis. It is worth noting, however, that despite the federal budget deadlock, other economic indicators will continue to be published by alternative sources, including ISM indices, confidence indicators, and data released by the Federal Reserve and its branches. In the absence of federal statistics, these alternative data sources may take on greater importance.

The lack of clarity surrounding the scope and duration of the shutdown, combined with the absence of key economic data for markets and the Federal Reserve, adds to an already elevated level of uncertainty. The current environment is already challenging for businesses and households, and this new setback could further erode confidence. At the time of writing, a swift political resolution appears unlikely, though it cannot be ruled out entirely. The longer the impasse persists, the greater the potential economic fallout.