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The US government shutdown continues into its 33rd day, and while a resolution may soon be near, economists warn that the economic fallout is already underway.
In a note to clients on Monday, Goldman Sachs economist Alex Phillips He said the standoff in Washington is likely to cost the U.S. economy more than a full percentage point of growth in the final quarter of 2025, reducing GDP growth to just 1.0%.
That is a significant reduction. Goldman had previously expected a stronger end to the year, but now believes the shutdown will result in postponed federal spending, a delay in hiring and reduced investment.
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If current odds are any guide, the shutdown could be extended further.
Prediction markets tracked by the CFTC-regulated betting platform Kalshi set the average expected duration at 45.9 days, or until November 15.
As of now, there is a 75% implied chance that it will last longer than 40 days and a 35% chance that it will extend beyond 50.
The standoff is shaping up to be the longest government shutdown in U.S. history, surpassing the 35-day shutdown in 2018-2019.
However, the pressure is increasing. The failure to pay air traffic controllers and TSA screeners on Oct. 28, and another payment on Nov. 10, threatens a repeat of the 2019 shutdown, when delays at airports forced a last-minute compromise.
Meanwhile, SNAP food benefits, which are typically awarded the first week of each month, are at risk, although a recent court ruling may allow for partial disbursement using contingency funds.
Unlike previous shutdowns that focused on specific agencies, this one involves a complete shutdown of congressional appropriations, making it broader in scope and impact.
“This shutdown will have the largest economic effect ever recorded,” Goldman said in the note. “A longer duration could affect private sector activity, delaying investments and stagnating consumption.”
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Immediate damage is expected to come from furloughs of federal employees and delays in government purchases.
If the shutdown lasts six weeks, federal spending delayed until the first quarter of 2026 could slightly boost growth by 1.3 percentage points in that quarter, according to Goldman models.
Goldman Sachs sees growing signs that the shutdown could end soon. The start of ACA enrollment on Nov. 1 has intensified attention on health care subsidies, while the Nov. 4 election and upcoming congressional recess could change political incentives. Public sector unions, including AFGE, are now calling for a resolution, increasing pressure on Democrats and Republicans to reach an agreement.
Democrats have so far resisted a clean funding bill, but polls show voters largely blame Republicans and President Trump. One possible compromise could involve reopening the government now, with a promise to vote on health subsidies before the Nov. 21 deadline.
Goldman considers it unlikely that more drastic measures, such as eliminating the Senate filibuster, will be taken. Still, with prediction markets pointing to a resolution in mid-November, momentum appears to be gaining toward a deal.
“We underestimated how long this shutdown would last,” Alec Phillips said. “But political and financial pressure is increasing and the window for a compromise is finally opening.”
Image: Shutterstock
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This article Shutdown Nears End, But Economic Damage Is Mounting, Goldman Says originally appeared on Benzinga.com
