Goldman Sachs expects the ongoing U.S. government shutdown could become one of the most extensive and longest in history, warning that the economic hit will grow the longer it lasts.
In a research note, Goldman economist Phillips said the situation
- seems like it has a decent chance of going on for a while
- possibly extending for weeks
- and affecting all government agencies
- based on the way things feel right now, it could actually be one of the biggest shutdowns we’ve had
Phillips estimates that each week of closure will subtract roughly 0.11 percentage points from annualized GDP growth in the fourth quarter, though output would likely rebound once the government reopens. However, he cautioned that a shutdown lasting beyond a few weeks could cause wider disruptions — delaying federal contracts, infrastructure projects, and new listings, as the Securities and Exchange Commission slows operations.
Despite those risks, markets have taken the standoff in stride. Goldman believes that’s partly because investors expect a political resolution and partly because the Federal Reserve remains in an easing cycle:
- Without new data, the Fed is still likely to cut again, the bank said
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Goldman’s warning underscores growing downside risks to U.S. growth if the government shutdown lingers. The note suggests GDP could take a hit each week the impasse continues, though markets appear unfazed — betting that the Fed will stay on track with further rate cuts even as economic data flow pauses.
