The ongoing federal government shutdown has begun to inflict deep operational and economic damage across the United States. Ten days after the start of the funding lapse, agencies have started issuing layoff notices, museums and parks are closing, and hundreds of thousands of federal workers are facing missed paychecks.
The standoff, which began October 1 after Congress failed to approve appropriations for the 2026 fiscal year, stems from disputes over spending levels and healthcare subsidies. The White House has warned that continued inaction could cost the economy an estimated $15 billion per week, according to Politico.
“These are not furloughs anymore — they’re reductions in force. The administration has made clear it will begin permanent layoffs if Congress fails to act,” Shalanda Young, Director of the Office of Management and Budget, said to reporters.
Layoffs begin across agencies
The Office of Management and Budget confirmed that reduction-in-force notices have been sent to select federal workers, marking the first major workforce cuts tied to a shutdown in modern U.S. history. Affected agencies reportedly include the Departments of Health and Human Services, Treasury, Education, and portions of Homeland Security, Reuters reported.
“Our members are scared. They’ve been through this before, but never with layoffs on the table. It feels different this time,” Everett Kelley, President of the American Federation of Government Employees, said in a union statement.
While most furloughs are temporary, the notices could lead to permanent layoffs if the shutdown persists beyond mid-November. Federal employee unions have already filed lawsuits, arguing that the move violates the Antideficiency Act, which prohibits agencies from creating new obligations during a lapse in appropriations.
Key institutions shutter
The Smithsonian museums and National Zoo in Washington, D.C., announced they will close their doors this weekend after exhausting reserve funding, according to Time Magazine. The Internal Revenue Service is also sending home roughly 34,000 employees, about 46 percent of its workforce.
“We’ve run out of reserves. Without appropriations, the doors have to close,” Lonnie Bunch, Secretary of the Smithsonian Institution, confirmed in a statement on the closure of museums and the National Zoo.
The Department of Labor, however, has recalled some furloughed staff to compile critical inflation data used in cost-of-living adjustments and monetary policy decisions. A department spokesperson told Politico that without this intervention, “the absence of economic data could trigger broader market instability.”
Economic and human toll
Federal contractors, small businesses, and state programs dependent on federal grants are feeling the ripple effects. Transportation officials warned that air traffic control operations could face staffing disruptions, while the military is preparing for potential pay delays by mid-month.
Every week this shutdown continues, we’re taking roughly $15 billion out of the economy — that’s lost output, lost wages, and lost confidence,” Jared Bernstein, Chair of the Council of Economic Advisers, said in a White House press briefing.
“The human cost of this shutdown grows every day,” said Everett Kelley, president of the American Federation of Government Employees. “Public servants shouldn’t be collateral damage in a political fight.”
Political gridlock continues
Despite mounting pressure, Congress remains at an impasse. House Speaker Mike Johnson has accused Senate Democrats of blocking “reasonable” spending cuts, while Senate Majority Leader Chuck Schumer countered that Republicans are “holding the economy hostage” to score political points.
President Donald Trump has urged negotiators to reach a deal but has also defended the spending standoff as “necessary to rein in government waste.”
“We will not rubber-stamp bloated spending bills. Fiscal responsibility must come first,” President Trump, said to to reporters outside the White House.
With no end in sight, economists warn that even a short-term continuation could slow growth and further erode public trust in Washington.
