Goldman Warns Shutdown Could Halve US Growth in Fourth Quarter
The bank forecasts a prolonged government shutdown could slash Q4 GDP growth by over a percentage point as political stalemate in Washington continues.
A prolonged U.S. government shutdown threatens to derail the nation's economic momentum, with Goldman Sachs warning that a continued stalemate could cut fourth-quarter growth by more than a full percentage point.
In a recent report, economists at the influential investment bank projected that a shutdown lasting six weeks would reduce the annualized Q4 2025 GDP growth rate by 1.15 to 1.4 percentage points. Such a drag would slash the current consensus growth forecast to just 1%, posing a significant risk to the economy heading into the crucial holiday season.
The economic damage stems from the direct impact of suspending government operations. Furloughed federal workers lose income, government contractors face delayed payments, and crucial economic data reporting is halted, creating uncertainty for businesses and investors. The impact accumulates with each passing week of political impasse.
Other Wall Street firms have issued similar warnings. Analysts at JPMorgan estimate that each week of a shutdown subtracts approximately 0.1% to 0.2% from annualized GDP growth. Moody's Analytics echoed this sentiment, calculating a 0.1% weekly reduction and cautioning that the fallout from a lengthy shutdown "could rival a mini-recession."
This economic uncertainty is rooted in a political deadlock in Washington. Hopes for a swift resolution have faded, with some lawmakers bracing for a protracted fight. Representative Tim Burchett of Tennessee warned that the shutdown is likely to extend beyond the Thanksgiving holiday, a critical period for consumer spending.
"The pain is going to continue," Burchett stated, placing responsibility on the Senate for rejecting funding bills passed by the House. The comments underscore the deep divisions that prevent a compromise on federal spending, leaving the economy vulnerable to self-inflicted wounds.
The White House has repeatedly warned that a shutdown weakens the country and introduces unnecessary risks to an otherwise resilient economy. While economists, including those at Goldman Sachs, expect a rebound in growth in the first quarter of 2026 once the government reopens and back pay is issued, the immediate disruption can damage consumer and business confidence.
For investors, the ongoing fiscal paralysis adds a layer of uncertainty to markets already navigating shifting monetary policy and global geopolitical tensions. As the shutdown drags on, market participants will be closely watching for any signs of a breakthrough in negotiations, aware that the longer Washington remains at a standstill, the greater the cost to the U.S. economy.