Would a partial government shutdown impact the economy? Experts weigh in

The federal government hurtled toward a partial shutdown on Friday as the Senate negotiated a funding deal with hours left before a midnight deadline.

The shutdown is set to arrive as the economy navigates a delicate combination of elevated inflation and sluggish hiring.

A potential partial government shutdown threatens only minimal damage for the U.S. economy, tracing mainly to furloughed public workers, who temporarily lose out on pay and put a dent in consumer spending, analysts told ABC News. Most of those losses would likely be recovered once workers were to receive and spend backpay, they added.

Still, analysts said, the ultimate economic effect would depend on the duration of a potential partial shutdown, with losses mounting if the impasse were to stretch from days into weeks or months. The interruption of government services could also impact Americans, they added, noting examples like support for tax filers and air-traffic control at airports.

"There is no upside to the economy of a partial government shutdown, but any downside will be on the margin," Mark Zandi, chief economist at Moody's Analytics, told ABC News.

"It would be only a partial shutdown, and it would be surprising if it lasted for more than a few days. Of course, if the shutdown drags on for more than a couple of weeks it will do some economic damage," Zandi added.

Senate Democrats said Thursday they had reached an agreement with the White House on a plan that would separate a bill funding the Department of Homeland Security (DHS) from a package of five other funding measures.

As of Friday afternoon, the Senate faced remaining obstacles to the agreement, as well as the prospect of an uncertain House vote.

A potential partial government shutdown would affect DHS, the Department of Health and Human Services, the Department of Labor, the State Department and the Department of Transportation, among others, Rachel Snyderman, managing director of economic policy at the Bipartisan Policy Center, told ABC News.

By contrast, many agencies would remain open, including the Department of Agriculture, the Justice Department and Veterans Affairs. Services would remain in place for programs like the Supplemental Nutrition Assistance Program, or SNAP, as well as Social Security.

Taken together, Snyderman added, the affected agencies account for 75% of spending appropriated by Congress annually, which excludes a large chunk of mandatory government spending on programs like Social Security and Medicare.

Federal workers affected by the shutdown will miss out on their first paycheck on Feb. 13, Snyderman said.

That potential lost income for federal workers makes up the primary risk for the wider economy, analysts noted, since some workers would, in theory, forego spending which, in turn, would slow business in areas with high concentrations of federal employees.

"Some local businesses rely on commuters and contractors to be going into work every day," Synderman said.

Ultimately, she added, the economic impact of a potential shutdown will be "directly determined by how long the government shutdown lasts."

Typically, lawmakers resolve government shutdowns quickly. Since 1977, the U.S. government has failed to meet a funding deadline on 20 separate occasions, posting an average shutdown length of 8 days, the Bank of America Institute -- a think tank set up by the financial institution -- said in a memo in September.

A 43-day complete shutdown last fall marked the longest in U.S. history, incurring economic losses that amounted to 0.8% inflation-adjusted gross domestic product, according to accounting firm EY.

For context, the economy grew by an average annualized rate of 1.6% over the first half of 2025, which means that shutdown temporarily wiped away economic growth equivalent to about half of that achieved over a preceding six-month period. Most of those losses were ultimately restored, analysts said.

For its part, the stock market has defied financial fears during recent government shutdowns. The S&P 500 moved upward during each of the last five shutdowns, including the 2025 shutdown, during which the S&P 500 climbed 2.4%.

"The biggest takeaway from the 2025 shutdown is that while the U.S. market did rise in value, it did fairly substantially lag other global markets," Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, told ABC News.

"It wasn't necessarily a crisis scenario where markets sold off. But it definitely had a detrimental impact for U.S. stocks relative to global counterparts," Pappalardo added.

The potential partial shutdown that may begin on Saturday is unlikely to approach the economic impact incurred last fall, analysts said, noting some parts of the government would remain open and lawmakers appeared more willing to strike a deal.

Still, the interruption of government services could disrupt everyday life, including financial tasks such as tax filing, Snyderman said. Tax season kicked off this week as the U.S. Internal Revenue Service began allowing filers to submit completed tax forms.

The extent of a potential disruption for tax filers remains unclear, Snyderman said, but a shutdown could alter the services available over the coming weeks.

"It's very hard at this time to tell what tax filing season is going to look like," Snyderman said.