The U.S. government shutdown has entered its second week, and the economic impact continues to spread

The U.S. government shutdown has entered its second week with no signs of ending, and the economic impact is spreading from initial localized effects to broader areas. According to media reports on Friday, government functions such as air travel, taxpayer services, and national parks are under pressure first, with some agencies responding only to emergencies to save funds.

More than 250,000 federal employees did not receive their paychecks on time this week, and another 2 million are expected to face the same predicament next week. The Pentagon's next military pay date on October 15 may become a political focal point, marking the first time in decades that the military faces the risk of unpaid wages.

Economists estimate that each week of the shutdown will reduce U.S. GDP by 0.1 to 0.2 percentage points. The impact is further amplified due to the near-complete interruption of government data releases, leaving the Federal Reserve and private forecasting agencies in an information blackout.

Unlike previous shutdowns, the Trump administration is employing a new legal interpretation to rewrite its response strategy, attempting to increase the impact on federal employees in Democratic districts while maintaining funding for Republican priorities.

Scope of Service Disruptions Continues to Widen

Air travel has become the most visibly affected area. Airports from Dallas to Chicago to Washington, D.C. are experiencing flight delays due to a shortage of air traffic controllers.

Transportation Secretary Sean Duffy stated that personnel shortages typically cause about 5% of delays, but currently, more than half of delayed flights are due to this issue. The U.S. Travel Association estimates a loss of $1 billion in spending each week.

The IRS has cut nearly half of its employees after running out of carryover funds, significantly shrinking taxpayer services. About 34,000 employees were forced to take leave this week, while the remaining 40,000 continue to prepare for next year's tax season and implement Trump's new tax law. The Taxpayer Advocate Service has been completely shut down.

The $8 billion Women, Infants, and Children nutrition program is being sustained by $150 million in emergency funds, which are about to run out. The White House has stated it will use tariff revenues to maintain the program but has not specified the exact transfer methods or timing. The funding for the Supplemental Nutrition Assistance Program, which serves 41 million Americans, will only last until the end of October.

Agencies Adopt "Rolling Shutdown" Strategy

After the 35-day shutdown in 2019, the Government Accountability Office criticized the Trump administration for failing to plan for long-term funding interruptions. During this shutdown, some agencies are recalling or laying off employees as needed to balance conflicting legal requirements.

Department of Justice lawyers are forced to take leave during case suspensions but are recalled for cases where judges refuse to grant extensions. IRS employees may also return to work as tax season approaches.

Some agencies are circumventing the restrictions of the Antideficiency Act by using special funds that were not expired at the end of last year, but these funds are quickly running out. According to the largest union at the EPA, the agency began issuing furlough notices starting Wednesday evening. The EPA's emergency plan requires nearly 90% of its employees to take leave after funding interruptions, halting most enforcement and permitting work.

The Department of Homeland Security anticipates a long-term funding interruption and plans to recall nearly 1,800 employees in the second week, primarily involving senior management, Coast Guard, and Customs and Border Protection personnel.

Economic Data Releases in Disarray

The large-scale interruption of government data releases has exacerbated the economic impact of the shutdown. The Bureau of Labor Statistics delayed the release of last week's employment report but recalled employees to prepare the latest Consumer Price Index.

Reports from the Census Bureau, such as retail sales, housing starts, and business inventories, are at risk of delays. The Bureau of Economic Analysis has suspended operations, and the preliminary GDP estimate for the third quarter, originally scheduled for release on October 30, may be affected. The lack of these official data leaves the Federal Reserve and private forecasting agencies making blind decisions.

These official data are crucial for the federal government's annual inflation adjustments, including cost-of-living increases, tax brackets, loan subsidies, and cost-benefit analyses of federal programs.

While back pay for federal employees after the shutdown may alleviate some economic impacts, Trump has questioned whether all federal employees will receive full compensation and threatened to fire thousands of federal workers, reducing the certainty of an economic rebound.

Political Game Strategies Clearly Diverging

Historically, the increasingly severe impacts on travelers, taxpayers, and the military have typically pushed Congress to break the deadlock and approve new funding arrangements. The airport chaos in 2019 forced the White House to reach an agreement after 35 days.

This time, Trump and his Republican allies believe they have the upper hand. The government is attempting to increase its influence over Democratic districts—threatening to fire thousands of federal employees living and working in Democratic districts while maintaining funding for Republican priority projects such as immigration enforcement.

The White House stated last week that large-scale layoffs would occur "within two days, imminently, soon," but these measures have yet to materialize. If implemented, layoffs could place additional pressure on agencies that have already reduced staff earlier this year due to government efficiency initiatives