Shutdown Hangover Smacks U.S. Economy, GDP Crawls At 0.7 Percent

The U.S. economy hit the brakes hard at the end of 2025, with a fresh government tally showing growth limping along at a 0.7% annual rate in the fourth quarter. What had looked like a reasonably solid finish to the year now looks more like a near stall, sharpening attention on the lingering economic damage from last fall's drawn-out federal shutdown.

The Bureau of Economic Analysis rolled out its second estimate on Friday as part of its standard update cycle, after earlier delays tied to the October and November shutdown, according to Bureau of Economic Analysis. The agency had pushed back parts of its release schedule while it filled in missing source data, setting the stage for potentially larger than usual revisions.

Downgrade Cuts Growth Sharply

The latest estimate pegs fourth-quarter growth at a 0.7% annual pace, roughly half the initial 1.4% reading, after a brisk 4.4% surge in the third quarter. The comedown reflects a sharp pullback in federal spending, softer exports, and a slowdown in goods purchases, according to The Associated Press.

Shutdown Shows Up In The Data

BEA officials report that the lapse in federal funding reduced the labor services provided by federal employees, and that drop shaved about one full percentage point off fourth-quarter growth. The agency also noted that it had to estimate missing October price and trade figures, a technical workaround that tends to make later revisions more pronounced, according to BEA.

What It Means For 2026

For all of 2025, the economy still managed to grow about 2.1%, but the weaker fourth quarter narrows the runway for a faster cooldown in inflation and raises the stakes for the next round of jobs and price data. Investors and policymakers are now parsing whether the slowdown is mostly statistical noise tied to missing data or an early signal that hiring and consumer spending are genuinely losing steam, according to The Associated Press.

Why Local Readers Should Care

Slower national growth does not slash grocery bills or rents overnight, but a cooler economy can filter down into weaker hiring, flatter paychecks, and tighter city and state budgets, trends that hit everything from housing costs to transit funding and neighborhood services. Local and national outlets have been flagging those risks, including coverage from WBAL and broader analysis in The Washington Post.