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Data On Goverment Shutdowns

Data On Goverment Shutdowns

September 28, 2023

You cannot turn on the TV or radio without hearing talking heads wringing their hands regarding a potential government shutdown. Does history warrant all the fear? Not really. There have been 20 funding gaps or shutdowns since 1976, averaging about 9 days. During these past episodes, the S&P 500 averaged a 0.04% return. In the longest shutdown, lasting 35 days, investors saw a return exceeding 10%.

Contrary to some political narratives that suggest a government shutdown could trigger an economic downturn, historical data does not support this claim. In cases where GDP declined during a shutdown quarter, the recession had already started in the previous quarter. According to analyses from JPMorgan, each week of a government shutdown cuts GDP growth by 0.1%. However, it's worth noting that federal workers usually get back pay after a shutdown, thereby allowing the economy to recuperate any lost GDP growth.




Source: Forbes - The Economic and Market Impacts of a Government Shutdown