The US economy after a historic government shutdown

A historic government shutdown stunted economic activity. The US economy now faces easing growth this quarter, with a recovery seen early next year.

The longest government shutdown in US history concluded, as President Donald Trump signed an interim spending package to fund operations through January 30, 2026.

While economic recovery is anticipated on the back of resumed economic activity, investors are careful amid a still-dim economic outlook.

What is the economic impact of the shutdown?

Shutdowns halt most “non-essential” federal functions, placing many employees in a temporary non-pay, non-duty status called furlough.

The 2025 shutdown was more disruptive compared to past instances. While previous long shutdowns typically affected around 800,000 workers, the 2025 closure saw an estimated 900,000 employees furloughed, according to the Partnership for Public Service, a US nonprofit, nonpartisan organization. That is on top of those working with delayed pay.

The economic impact is also expected to be greater. Adjusting for inflation, the economic cost of past long shutdowns averaged USD 1.9 billion per week due to reduced spending and disrupted government revenue, Metrobank Trust Banking Group computations showed.

However, estimates show that the cost of the 2025 shutdown has reached an expected total of USD 28 billion, or roughly USD 4.6 billion per week, according to the US Congressional Budget Office. This far exceeds the historical average.

*Initial estimate of the US Congressional Budget Office

Sources: US Government Publishing Office, US Congressional Budget Office, Metrobank Trust Banking Group

This mounting damage is expected to slash economic growth in the last quarter by up to 1.5 percentage points, according to the US Congressional Budget Office.

Although the economy is anticipated to recover in early 2026, consistent with the historical pattern, substantial foregone spending suggests a portion of the economic loss may never be recouped. This may curb investor confidence despite initial positive market sentiment following the resolution.

What strategy can investors take?

The US Federal Reserve is expected to further reduce policy interest rates to stimulate the economy amid headwinds exacerbated by the government shutdown.

For the fixed income space, the strategy is to maintain a neutral duration stance, balancing anticipated monetary policy easing against persistent inflation and government debt concerns. Meanwhile, heightened investor caution amid the weakening economic outlook, combined with valuation concerns, supports a neutral position on US equities.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)

SOPHIA THERESE “PIA” BONIFACIO is a Markets Research Analyst at Metrobank’s Trust Banking Group, covering local and offshore macroeconomic research. She obtained her Bachelor’s degree in Economics with a Specialization in Financial Economics, cum laude, from the Ateneo de Manila University and is a Certified UITF Sales Person (CUSP). Pia enjoys long road trips and is a self-proclaimed milk tea connoisseur.

ANNA DOMINIQUE CUDIA, MBA, CSS, is the Head of Markets Research at Metrobank’s Trust Banking Group, spearheading the generation and presentation of financial markets insights to clients. She used to be with Metrobank’s Investor Relations, where she brought in international awards and took part in various multi-billion peso and dollar capital raising activities. She holds a Master of Business Administration (Finance) degree, with distinction, from the University of London, and industry certifications in finance. She is a naturally curious person and likes to travel here and abroad.