A Qualitative Analysis of the Effects of the Government Shutdown on the Economy as of October 17, 2025
Report
In response to a request from Chairman Jodey Arrington, CBO provides a qualitative analysis of the effects of the government shutdown on federal employment, real GDP, the labor market, business activity and income, and tourism.
CBO was asked for information about the effects on the economy of the lapse in discretionary appropriations (often called a government shutdown) that began on October 1, 2025. The analysis in this letter is based largely on the framework CBO developed in 2019 after the five-week partial shutdown that lasted from December 22, 2018, to January 25, 2019. CBO will continue to analyze the budget and economic effects of the government shutdown and will publish additional information when it is available.
The magnitude of the effects of the shutdown will depend on the Administration’s decisions regarding which executive branch activities continue and which are halted. The Administration has paid active-duty members of the military (including the Coast Guard) this week, and it has stated it will pay certain federal law-enforcement officers. Some agencies, such as the Internal Revenue Service, were able to continue to pay workers during the initial days of the shutdown. In addition, any federal employment that ends because of a reduction in force that would not have occurred in the absence of a shutdown would reduce outlays for federal employees’ compensation beyond the shutdown period.
The magnitude of the effects of the shutdown will also depend on its duration. In CBO’s assessment, the negative effects of the shutdown on the economy will grow the longer the shutdown is in effect. In addition, the economic effects will vary slightly each week, in part because many federal employees are paid every two weeks.
