U.S. Economy: A Rundown on the Shutdown | Lord Abbett
Image alt tag


There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.


We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.


We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.



Economic Insights

Economic effects of the partial shutdown of the U.S. government appear to be limited, for now. An extended closure could be a different story.


In Brief

  • The partial shutdown of the U.S. government that began on December 22, 2018, could, in our estimation, shave up to 0.5% off U.S. gross domestic product (GDP) in the first quarter of 2019.
  • A worse impact on GDP could develop if a prolonged shutdown began to weigh on consumer and capital spending more broadly through effects on sentiment.
  • Based on surveys of consumer confidence and business sentiment, spillover to the broader economy appears limited thus far.
  • However, the drag on growth could accelerate if the shutdown extends into February or March 2019.


[Editor’s note: As this article went to publication, President Trump and Congressional lawmakers agreed to re-open the federal government under a short-term spending bill through February 15, 2019, according to a Bloomberg report.]

While the partial U.S. government shutdown (which has been in effect since December 22, 2018) is expected to reduce U.S. economic growth in the first quarter of 2019, we think the impact on gross domestic product (GDP) is likely to be less than 0.5%; what might otherwise have been 2.5% GDP growth would end up at roughly 2.0%. The drag on growth will increase, probably at an accelerated pace, if the shutdown, prompted by disagreement between the U.S. House of Representatives and the White House over funding for President Trump’s plan to build a wall on the U.S. border with Mexico, extends deeply into February or March 2019 and some of the lost GDP is irretrievable. The dollar amount of economic activity (purchases, travel, dining, dry cleaning, etc.) postponed because of an extended shutdown likely would not be fully replaced once the dispute between Congress and the White House is resolved and conditions return to normal.  

A worse impact on GDP could develop if a prolonged shutdown began to weigh on consumer and capital spending more broadly through effects on sentiment; heightened uncertainty can’t be positive for purchases of durable goods and inventory building. As the chart below demonstrates, economic uncertainty definitely has spiked upwards during the shutdown, with a partial pullback in recent days; perhaps people are becoming accustomed to unusual events that seemed absurd just a few weeks ago.


Chart 1. Government Shutdown Drama Has Heightened U.S. Economic Policy Uncertainty
Baker, Bloom, and Davis Economic Policy Uncertainty Index, July 7, 2015–January 24, 2019

Source: Federal Reserve Bank of St. Louis and Economic Policy Uncertainty. MA=moving average. Index measures policy-related economic uncertainty based on three types of underlying components: newspaper coverage of policy-related economic uncertainty; the number of federal tax code provisions set to expire in future years; and disagreement among economic forecasters as a proxy for uncertainty.


But spillover effects appear limited thus far, based on recent U.S. economic data:

  • Weekly consumer confidence (as measured by the Bloomberg Consumer Comfort Index) is off its recent highs but the drop has been modest and gradual through mid-January.
  • Most January business surveys from regional U.S. Federal Reserve Banks show that capital spending plans remain intact at relatively high levels.
  • The U.S. Bureau of Labor Statistics’ weekly jobless claims report released January 24 showed an unexpected drop to only 199,000 for the week of January 18, as layoffs remain very low.
  • Flash purchasing manager index reports for January (based on data from Bloomberg) showed an improvement in the United States even as sentiment drooped in other countries.

Thus, while the impact of the partial government shutdown will increase the longer it lasts and more severe spillover effects could yet materialize, there is little evidence that those second round effects have been very material thus far. The optimal outcome for the economy and markets would be a quick resolution to the stalemate; based on the current positions of the White House and Congress, that may not happen as quickly as investors might wish. 



About The Author


Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field