February 20, 2026
GDP Slows as Government Shutdown Drags on Economy
The 43-day shutdown subtracted a full percentage point from Q4 growth
🔐Ethics🏛️Government
The Bureau of Economic Analysis reported Q4 2025 GDP growth at 1.4% on an annualized basis, released on February 20, 2026. Economists surveyed by LSEG had forecast 3.0% growth, making the 1.6-percentage-point miss one of the largest GDP surprises in recent years.
The government shutdown ran 43 days, from October 1 through November 12, 2025, surpassing the 35-day shutdown of 2018-2019 to become the longest in U.S. history. The Congressional Budget Office estimated that each week of closure cost roughly $7 billion in lost economic output.
BEA estimated the shutdown subtracted approximately 1.0 percentage point from Q4 GDP growth, as both defense and nondefense federal consumption expenditures for employee compensation declined sharply. Without the shutdown drag, GDP would have grown closer to 2.4%.
About 670,000 federal workers were furloughed during the shutdown, while roughly 730,000 others continued working without pay. The CBO estimated the shutdown cost $3 billion in back pay alone, plus $2 billion in lost IRS tax revenues from reduced enforcement.
Core PCE inflation — the Federal Reserve's preferred price measure — came in at 2.7% for Q4, while the year-over-year rate hit 3.0% in December. That's a full percentage point above the Fed's 2% target, reducing the likelihood of near-term interest rate cuts.
Real final sales to private domestic purchasers — the sum of consumer spending and business investment — grew 2.4% in Q4, compared with 2.9% in Q3. This measure strips out government spending and trade, showing that underlying private demand remained relatively healthy despite the headline GDP weakness.
The shutdown began after Senate Democrats blocked a House-passed continuing resolution on October 1, 2025. It ended when eight Senate Democrats joined Republicans to advance an updated funding deal that included a commitment to vote on extending Affordable Care Act premium subsidies.
The CBO projected that much of the lost economic activity from furloughed workers was unrecoverable — lost working hours can't be made up — though federal purchases and back pay did resume after the shutdown ended on November 12.
🔐Ethics🏛️Government
People, bills, and sources
Vipin Arora
Director of the Bureau of Economic Analysis
Jerome Powell
Chair of the Federal Reserve
Mike Johnson
Speaker of the U.S. House of Representatives
John Thune
Senate Majority Leader
Chuck Schumer
Senate Minority Leader
Russell Vought
Director of the Office of Management and Budget
Hakeem Jeffries
House Minority Leader
What you can do
1
civic engagement
Contact your members of Congress about government funding deadlines and shutdown prevention
The next funding deadline is January 30, 2026, when the current continuing resolution expires. Government shutdowns cost about $7 billion per week in lost economic output and directly affect federal services you rely on. Calling your senators and representative before funding deadlines puts pressure on them to negotiate rather than let services lapse.
2
civic education
Track how the Federal Reserve responds to the conflicting growth and inflation signals
The Fed's next rate decision will reflect whether Powell weighs weak GDP growth (favoring cuts) or sticky 3% inflation (favoring holds). The Federal Open Market Committee publishes meeting minutes and economic projections after every meeting, giving you direct access to their reasoning.
3
civic monitoring
Check whether federal services in your area have fully resumed after the shutdown
The CBO found that much of the economic activity lost during the shutdown was unrecoverable. National parks, food safety inspections, tax processing, and other federal services may still be catching up. You can verify service levels through agency websites or by contacting your local federal offices.