A government shutdown may seem like a minor event for the stock market and economy, but experts say that’s no longer true. This time could be different due to the Trump administration’s threat of mass layoffs during a shutdown, which could raise concerns about long-term economic effects.
Unlike past shutdowns, when furloughed workers are rehired upon reopening, the US government has threatened to lay off hundreds of thousands of federal employees. This would be a major problem for investors and economists, who fear it could lead to higher unemployment rates and unsustainable economic impacts.
The delay in collecting and releasing key economic data, including the Bureau of Labor Statistics’ jobs report, also poses significant challenges. Without accurate data, CEOs, investors, and even Federal Reserve officials may find themselves flying blind when making decisions.
The timing of this shutdown couldn’t be worse. The US economy is already facing job market struggles, and adding more chaos and uncertainty only exacerbates the issue. Experts warn that a prolonged shutdown could harm the quality of future economic data, including inflation reports that inform interest rate decisions by the Federal Reserve.
While the stock market has been largely unfazed about government shutdowns in the past, this time may be different. Market veterans know that shutdowns tend to have minor effects on the economy, but the unique threats posed by this episode make it hard to ignore the risks.
Source: https://edition.cnn.com/2025/10/01/business/401k-markets-economy-shutdown