Economists say long shutdown's end should reverse some costs, as government catches up on spending

WASHINGTON — The U.S. economy is expected to recover from the blows it experienced during the record six-week federal shutdown, but even as federal spending resumes economists warn some financial losses will never be recovered.

During the 43-day shutdown, scores of federal workers missed paychecks, airlines had to cut back flights due to airport worker shortages, and millions of Americans who rely on federal food assistance were left waiting for their November stipend, all factors that contributed to a period of heightened economic anxiety, economists told Newsday.

Roughly 1.3 million federal workers were unpaid, according to an analysis by the Bipartisan Policy Center. 

Workers staying home and travelers foregoing trips all led to permanent financial losses from "missed restaurant meals, canceled trips and deferred services that never occur," said Gregory Daco, chief economist for the accounting firm EY, in an economic impact report.

"Short-lived shutdowns are usually invisible in the data, but this one will leave a lasting mark — both because of its record length and the growing disruptions to welfare programs and travel," Daco said.

White House Chief Economic Adviser Kevin Hassett, speaking to reporters Thursday, a day after President Donald Trump signed a bill to reopen the government, said "there really has been an aggressive effort to get people to get their checks as soon as possible."

Hassett said the White House Council of Economic Advisers estimates the shutdown cost the United States about $15 billion in reduced economic output, and led to the loss of 60,000 private-sector jobs.

The non-partisan Congressional Budget Office offered similar projections, stating in a recent report that the United States was expected to lose between $7 billion and $14 billion in economic output in the final three months of the year due to the shutdown.

The "shutdown will delay federal spending and have a negative effect on the economy that will mostly, but not entirely, reverse once the shutdown ends," said CBO Director Phillip L. Swagel in an Oct. 29 report to lawmakers.

Falling consumer confidence

Economic data before the Oct. 1 start of the shutdown was already showing declines in consumer confidence, but the shutdown led to a further three-point dip over the past month, according to the long-running Michigan Consumer Sentiment Index, a monthly national survey conducted by the University of Michigan.

The latest survey results, released Nov. 7, show consumer confidence at the start of November fell to 50.3 points, its lowest level since 2022 when post-pandemic inflation alarmed consumers.

Some of the overall decline in consumer confidence is due to President Donald Trump’s sweeping tariffs on foreign products, and the rising cost of goods, but the shutdown further rattled consumers, said Hofstra University finance professor Anoop Rai.

"People have already been cautious about their spending because of the tariffs," Rai said in a phone interview. "The uncertainty that comes with a shutdown, and not knowing when exactly it will end, has already led a lot of people to stop, or at least slow down on their spending."

Even so, Rai said the period of economic uncertainty caused by this latest shutdown is a "blip" and he expects a quick rebound as government spending resumes.

"In the broad scheme of things, everything will come back to normal with a slight dip in [gross domestic production], but the question is — was it necessary?" Rai said. "The disruption the shutdown has caused should be measured in terms of the pain it has inflicted on a lot of people."

Delayed food aid

More than 42 million Americans who rely on the federal Supplemental Nutrition Assistance Program, formerly known as food stamps, are expected to receive their full November stipends after the Trump administration delayed issuing the full payments. 

Retailers raised concerns to the administration that a delay in releasing the $8 billion in monthly SNAP benefits would impact their businesses.

The "disruption to program funding may lead to reduced employee hours, perishable food losses, and declining sales for many community grocers across our nation," National Grocers Association CEO Greg Ferrara said in a Nov. 3 statement.

A month into the shutdown, the Federal Aviation Administration ordered 40 of the nation’s most congested airports — including New York’s LaGuardia and Kennedy airports — to cut flights by 10%. The tens of thousands of canceled flights over the past two weeks were in response to air traffic controller shortages as unpaid workers called out.

Travel experts contend that while the shutdown ended just before the Thanksgiving holiday rush, there are concerns the airline industry will still be dealing with the residual backlog of canceled flights, prompting consumers to hold off on travel plans.

In a letter to Congress earlier this month, the U.S. Travel Association, a trade group representing the interests of the travel industry, said the "damage from this shutdown is growing by the hour with 60% of Americans reconsidering their travel plans."

Data collected by Airlines for America, a group that advocates on behalf of the nation’s largest air carriers, found "more than 5 million passengers and countless cargo shipments have been impacted by delays and cancellations related to the shutdown."

"We are preparing for record Thanksgiving travel, with some 31 million passengers expected, and the busy shipping season is coming up," Airlines for America CEO John Sununu said in a statement to lawmakers before Wednesday’s vote. "However, airlines cannot flip a switch and resume normal operations immediately after a vote — there will be residual effects for days."

Stony Brook University economics professor Juan Carlos Conesa said the travel industry is "such a significant" part of the U.S. economy, that part of the post-shutdown recovery hangs on how quickly airlines resume their regular holiday travel schedules.

"I'm hoping there is still enough time for the airlines to address the situation and have a normal Thanksgiving and holiday travel season," Conesa said.

Volatile markets

The stock market has also reflected the ripple effects of the shutdown.

On Monday after the U.S. Senate voted to approve a spending deal to reopen the government, U.S. markets closed with across the board gains.

But by Thursday stocks tumbled after the White House said key economic reports used by investors to gauge the health of the economy — including the October jobs report and last month’s consumer price index — would likely not be released. The agencies that compile the reports had been furloughed.

By Laura Figueroa Hernandez

laura.figueroa@newsday.com@Laura_Figueroa

Laura Figueroa Hernandez is the White House correspondent and previously covered New York City politics and government. She joined Newsday in 2012 after covering state and local politics for The Miami Herald.