Partial federal shutdown begins

San José, CA – On Wednesday, October 1, the federal government began a partial shutdown at 12:01 a.m. About 750,000 federal workers will be furloughed and sent home without pay. About 400,000 will continue to work without pay, while more than 800,000 will continue to work with pay, of which three-quarters do military-related work. Those who are furloughed and work without pay will be paid when the shutdown ends.

But there are twice as many workers contracted by the federal government than there are federal employees. These more than 4 million workers will be furloughed, and their lost wages will not be made up.

Depending on the length of the partial shutdown, making ends meet will be difficult for federal employees who lose pay, estimated at about $400 million each day. But the partial shutdowns have had a relatively small economic impact once they end, when back pay is made to employees the programs resume functioning.

However, this time could be different. During the last major shutdown, in Trump’s first term, new job creation was good, with about 150,000 new jobs being created each month. But in this time, job growth has only been about 25,000 jobs per month and is more likely to be hit harder by the losses from a partial shutdown.

In the first sign that the economy took a turn for the worst in September, the ADP, or Automatic Data Processing, report on non-government jobs showed a loss of 32,000 jobs, when a gain of 45,000 jobs was expected. Further, the August report was revised down to a loss of 3000 jobs, when the initial report was a gain of 54,000. Together with the loss of 23,000 jobs in June, this is the longest stretch of job losses reported since the recession of 2020.

Government job losses will add to decline in private sector jobs, as more than 150,000 federal workers who accepted a buyout during the DOGE cuts earlier this year will lose their severance pay September 30 and be unemployed. Further, Trump and other Republicans have threatened to fire even more federal workers, which hasn’t been done in previous shutdowns.

At the center of the political disputes are the large cuts in health insurance in the so-called Big Beautiful Bill. The cuts to Medicaid, the federal government health insurance for low income households, will lead to more than 10 million people losing their Medicaid insurance coverage. To make things worse, there is no money in the budget to extend subsidies to buy private insurance, causing those costs to more than double in 2026, forcing another 4 million to give up their health insurance. Last but not least, insurance companies are planning to increase premiums on average 20% next year.

Democrats have refused to vote for these cuts to health insurance, which is blocking the budget vote. But Republicans have been unwilling to negotiate, with the House of Representatives voting to keep the cuts and then headed home. President Trump and Senate Republicans are also insisting on the cuts, leading to a stalemate and the partial government shut down.

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