WASHINGTON — The federal government shutdown, now the longest in U.S. history, is winding down but has already left an undeniable impact on the economy, which was already facing challenges. Since the shutdown began on October 1, approximately 1.25 million federal employees have gone without pay. The aviation sector, heavily affected by staffing shortages due to the absence of federal workers, has canceled thousands of flights, a trend expected to persist even as Congress prepares to address the government’s status.

Economic activity has been significantly disrupted, leading to a halt in government contract awards. Food assistance programs for some recipients have also experienced interruptions, compounding the challenges many Americans face during this difficult period. While federal employees will receive back pay once the government reopens, the loss of wages, canceled travel plans, and missed dining experiences cannot be fully recovered.

Economist Gregory Daco from EY warned that the lengthy shutdown will leave a lasting economic footprint due to its unprecedented duration and widespread ramifications on travel and social services. The Congressional Budget Office (CBO) projected that a six-week shutdown could slash fourth-quarter growth by approximately 1.5 percentage points, effectively halving the growth rate from the previous quarter. Although reopening the government may boost growth in the first quarter of next year, an estimated $11 billion in economic activity could be permanently lost.

Previously, the longest shutdown spanned 35 days and only partially affected the economy, resulting in only a small dip in GDP. The current lengthy disruption has intensified existing economic hurdles such as sluggish job growth and persistent inflation, yet most economists remain hopeful that these conditions will not lead to a recession.

During the shutdown, around 650,000 federal workers were sidelined, which is anticipated to raise the unemployment rate by approximately 0.4 percentage points in coming reports. This rise, however, is likely to be temporary as those employees will be counted as working once federal operations resume. The CBO estimates that by mid-November, federal workers could collectively miss about $16 billion in wages, leading to decreased consumer spending and delaying holiday travel plans.

In addition to affecting federal employees, the shutdown has created ripple effects throughout the economy. Travel industry analysts noted that prior to flight cancellations, the shutdown had already begun to diminish travel spending by an estimated $63 million per day. The loss of flights reduces business for hotels and restaurants, further hindering local economies.

Consumer sentiment has also taken a hit. According to recent surveys, Americans’ views on the economy have dimmed significantly, which could impact spending patterns moving forward. The University of Michigan’s consumer sentiment index recently fell to a three-year low, underscoring rising concerns over financial stability and economic conditions.

Although various sectors of the government continue to operate, the halt in new contract awards has prompted organizations to pause major expenditures. Estimates suggest that up to $800 million in new contracts may not be awarded each day, stifling potential growth for industries dependent on federal contracts.

Furthermore, the shutdown has postponed critical food assistance for millions. The transfer of SNAP benefits to around 42 million Americans has encountered delays, causing significant stress for many households. Some states have managed to provide benefits this month, but the ongoing situation remains precarious.

Meanwhile, the lack of economic data stemming from the shutdown has elicited caution from the Federal Reserve. This data is crucial for assessing the economic landscape and making informed decisions regarding interest rates. The unavailability of recent reports on employment and inflation may influence the Fed’s meeting scheduled for December, where decisions regarding potential interest rate cuts will be made.

As the government prepares to reopen, the lingering effects of this unprecedented shutdown will likely resonate throughout the economy, reminding the nation of the delicate balance between government operations and economic stability.