'Permanent damage' predicted for US economy as shutdown fallout crushes businesses

The economy could take on "permanent damage" after the longest government shutdown in U.S. history, according to a top economist.

Chief economist Gregory Daco estimated that some damage to the economy will be permanent, as certain business sectors will not recover their lost income. The EY-Parthenon economist, speaking to The Wall Street Journal, explained that the money lost by federal employees delaying purchases of flights or homeware items would be recuperated in the months to come. But bars, restaurants, and other services that rely on foot traffic may struggle to regain ground following the shutdown.

As much as 20% of the economic hit from the shutdown "will be permanent," according to Daco, who says much of the damage comes from lost spending that cannot be regained. While there may not be long-term damage, some Americans are feeling the cost-of-living crunch more than ever.

The Founding Farmers Restaurant in Washington, D.C., shared that its revenue is down 15% compared to last year's figures. Co-founder Dan Simons told the Journal that fewer government workers were showing up for breakfast and lunch, and even those not affected by the shutdown were keeping an eye on their spending.

Columnists Justin Lahart and Konrad Putzier suggested it would be hard to grasp the full impact of the lengthy government shutdown should the economy shrink in the fourth quarter. They wrote, "If the economy softens in the fourth quarter, it will be hard to disentangle how much of the weakness is because of the shutdown, and how much might be because of other issues, such as a continued slowdown in the job market or continuing uncertainty over tariffs."

Recent polling suggested the biggest issue for voters is Supplemental Nutrition Assistance Program (SNAP) eligibility. Pollster Nate Silver has since indicated the fight over SNAP benefits could be a reason for Trump's approval rating declining.

He wrote, "It seems very likely that threatening SNAP benefits was the primary cause of the big downshift in Trump's approval ratings beginning ~3 weeks ago."

The Trump administration had just last week appealed a court ruling requiring SNAP payments to be made. The U.S. Department of Agriculture (USDA) confirmed to states that payments would be fulfilled just hours later.