US shutdown drags on, cracks show in fragile economy

The United States is inching toward the longest federal government shutdown in its history, having remained closed for an entire month with no resolution in sight, The Times of India reported.

Economists warn that the longer the impasse drags on, the higher the risk the fragile economy could shift from bending to breaking.

“The economy is fragile and, therefore, something like a government shutdown could become a bigger problem a lot faster than people might think,” said Mark Zandi, chief economist at Moody’s Analytics, as quoted by CNN.
According to fresh estimates from the Congressional Budget Office (CBO), the shutdown has already shaved off $7 billion in economic output permanently. If it continues for six weeks, the losses could reach $11 billion, and $14 billion after eight weeks.

KPMG chief economist Diane Swonk compared the cascading effects to a snowball, “That’s kind of like a snowball rolling down a hill, gathering momentum and mass.”

Weak Job Market

The shutdown has hit amid an already fragile labor market with low hiring, low firing, and minimal movement. Employers are delaying investments and staffing decisions due to policy uncertainty, while AI-led automation has triggered layoffs.“We’re not creating any jobs of consequence, really,” Zandi told CNN.If the shutdown persists, weak job creation could flip into job losses as small businesses and federal workers cut spending, TOI reported.

A US Chamber of Commerce report cited by CNN found 65,500 small business contractors have $12 billion in payments at risk.

“However, tariffs are projected to dampen consumer spending before year’s end, and a prolonged shutdown could further erode consumer confidence,” said Nicole Bachaud, labour economist at ZipRecruiter, as quoted by CNN.

Health & Aid at Risk

The political deadlock centers on the Affordable Care Act subsidies. Democrats want the funding bill to extend the aid, while Republicans refuse to act until the government reopens.

Without renewed subsidies, 22 million Americans could see 26% premium hikes, according to KFF analysis cited by CNN. More than 65,000 children across 41 states also risk losing access to Head Start early education programs.

Spending Freeze Hurts Confidence

Economists say delayed spending, hiring, and travel may not rebound later.

“This isn’t economic activity that is just deferred… it just simply doesn’t happen,” said Joe Brusuelas, RSM US chief economist, to CNN.

Zandi added, “When this thing really metastasizes and takes out the broader economy is when it starts to affect confidence… and instead of going straight up, [the market] starts going down.”

He warned that if the shutdown stretches beyond Thanksgiving, “there’s no coming back from that quickly.”

Inflation, Inequality, and Political Strain

Zandi said the Federal Reserve may be forced to cut rates further as the labor market weakens.

“The Fed’s putting a higher weight at this point on the weak job market than they are on inflation,” he told CNN.

Millions reliant on SNAP food aid face uncertainty.

“It just adds insult to injury on an economy that was already showing some cracks,” said Swonk, adding that inequality “stokes political divisions.”

No Breakthrough

The shutdown began after Congress failed again to pass a temporary funding bill. The House cleared a measure to keep the government open until Nov 21, but it stalled in the Republican-led Senate.

It is now the second-longest shutdown in US history, just shy of the 34-day standoff of 2018–19, according to TOI.

By the Numbers

• 670,000+ furloughed workers, costing $400 million daily (CBO)
• 730,000 working without pay, per CBS News
• 4,000 facing layoffs, per a federal court filing
• $130 million private donation to maintain military pay, CBS reported
• Up to $14 billion GDP loss, if the stalemate extends eight weeks (CBO)