All into Account Beyond the Surface: The US Shutdown – Economic and Market Perspective
Oct 16, 2025
Abiel Reinhart, an Executive Director and Economist at J.P. Morgan, dives deep into the current U.S. federal government shutdown. He discusses the political tensions around healthcare subsidies that ignited the crisis. Reinhart estimates a small but immediate GDP impact and outlines potential labor market disruptions, including furloughs and layoffs. He also explores how consumer sentiment is shifting and the implications for the Federal Reserve's policy decisions amidst these uncertainties.
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Healthcare Subsidies Drive The Shutdown
- The shutdown centers on whether enhanced ACA subsidies from 2021-22 continue into 2026 and beyond.
- Democrats fear losing enrollment if subsidies lapse as the marketplace opens November 1.
GDP Impact Is Small But Reversible
- The direct GDP hit from typical shutdowns is usually small and temporary, often well under 0.5% of annual GDP.
- Losses mainly reflect reduced federal hours and typically reverse the next quarter when workers return.
Federal Job Ink Creates Consumption Risk
- Federal employment dynamics make this shutdown riskier for consumption than past episodes because of threats of layoffs.
- Around 750,000 federal workers could be furloughed daily, raising household income uncertainty.