White House Advisor Reportedly Says Government Shutdown ‘Far Worse’ Than Expected – Warns Q4 Growth Could Get Cut In Half

White House economic advisor Kevin Hassett on Friday warned that the ongoing U.S. government shutdown is having far-reaching consequences on the economy, with growth for the fourth quarter now projected to be roughly half of the previously expected 3%.

"The impact on the economy is far worse than we expected because it's gone on for so long," he said in an interview with Fox Business.

Hassett cited the 38-day shutdown, the longest in U.S. history, as a primary driver of disruptions across multiple sectors, particularly government services and air travel. The Federal Aviation Administration has already implemented a 10% reduction in flights at 40 major airports, impacting both business and holiday travel.

Economic Growth Takes A Hit

Hassett also warned that the compounding consequences extend beyond federal payrolls and travel, affecting construction projects, business deals, and hotel occupancy. These multiplier effects, he warned, could trigger localized economic slowdowns if the shutdown persists.
 

Hassett expressed concern about the future of the government workforce, questioning whether the positions would remain attractive if shutdowns continue. “I wonder who's going to want these jobs if we don't get this solved quickly,” he said.

Ripple Effects Across Industries

Hassett also warned of the compounding consequences, confirming that the shutdown is slowing construction projects and creating broader economic ripple effects, including delays in supply chains and disruptions to local economies. 

“If we go another month or so, who knows how bad the economy could be this quarter."

– Kevin Hassett, Director of the National Economic Council

On trade, Hassett said the administration is prepared for potential Supreme Court decisions on emergency tariffs and emphasized the importance of a top-down economic strategy to maintain momentum despite disruptions.

He added that capital spending and productivity gains, especially from artificial intelligence, could support growth if the government reopens. He highlighted that AI is boosting productivity across sectors, increasing efficiency and wage potential, even as it disrupts some jobs.

U.S. equities were in the red during morning trade on Friday. The SPDR S&P 500 ETF (SPY) was down 0.35%, the SPDR Dow Jones Industrial Average ETF (DIA) slipped 0.22%, and the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) moved 0.55% lower. However, retail sentiment around QQQ on Stocktwits improved to ‘neutral’ from ‘bearish’ territory over the past day, accompanied by ‘high’ levels of chatter.

Read also: XRP, Bitcoin, Ethereum Extend Losses Despite ETF Boost But Dogecoin Defies The Drop

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