What government shutdown could mean for markets and the economy

A government shutdown could add another headwind to an already-precarious economy, but most analysts say that even a prolonged hiatus would have only a limited impact on the wider U.S. economy.

A government shutdown could add another headwind to an already-precarious economy, but most analysts say that even a prolonged hiatus would have only a limited impact on the wider U.S. economy.

With Republican and Democratic leadership at an impasse over the extension of health insurance subsidies, the U.S. government could temporarily cease operations at 12:01 a.m. Wednesday unless a deal is struck.

Government shutdowns put hundreds of thousands of “nonessential” federal workers on furlough, meaning they are forced to take a leave of absence without pay, while other “essential” workers will be required to show up to work without getting paid either. Often, such shutdowns lead to the closure of national parks and museums, fewer health inspections, slower services for veterans, longer wait times on Social Security phone lines and more.

While the government plays a big part in the economy, history shows that the lasting effects of shutdowns are limited.

Economic growth can be dented, but slightly and temporarily, with an array of estimates from Wall Street as well as the Congressional Budget Office finding that even the longest shutdown ever — 35 days in 2018 and 2019 — shaved only as much as 0.4% from total economic output.