SNAP Payments Will Be Suspended During Shutdown. That’s Bad News for the Economy.

The U.S. Department of Agriculture has said it won’t use contingency funds to make government food-assistance payments. (Brandon Bell/Getty Images)

Key Points

• Federal food assistance for 42 million Americans, or one in eight people, is set to end starting Nov. 1 due to the government shutdown.
• The suspension of SNAP benefits, averaging $187.20 monthly per person, could impact 16 million people by Nov. 3.
• The shutdown is currently shaving about 0.2% a week from inflation-adjusted gross domestic product, with losses increasing over time.

Millions of Americans are set to lose access to federal food assistance as the government shutdown enters a fourth week. The funding lapse is likely to hurt grocery stores, transportation companies, local economies, and the broader U.S. economy.

The U.S. Department of Agriculture confirmed Sunday that funding for the Supplemental Nutrition Assistance Program, or SNAP, is set to end on Nov. 1. “Bottom line, the well has run dry. At this time, there will be no benefits issued November 1,” the USDA said in a notice published on its website.

The USDA also said last Friday that it won’t use contingency funds to maintain SNAP payments. The suspension of SNAP benefits will likely occur in phases as states start payouts, with Evercore ISI estimating that 16 million participants will be affected as of Nov. 5. Approximately 42 million Americans, or about one in eight people, rely on SNAP benefits for groceries that typically total an average of $187.20 a month, according to the USDA.

The lapse in payments will impact lower-income households disproportionately, but the effects will be felt beyond the household level. State and local economies will likely see a drag in sales tax revenue, while the retail and transportation sectors could be plagued by declining demand and activity. The effects will likely be felt first at the local level, but if the shutdown is prolonged, the suspension of SNAP payments could create a drag on aggregate consumer spending and economic growth.

“The economic and social costs of disrupting a program like SNAP are apparent, even for a short period of time,” wrote Joe Brusuelas, chief economist for RSM US.

The Trump administration has authorized funding, however, to ensure that the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC benefits) can continue during the shutdown.

SNAP provides direct assistance to low-income families and those with disabilities, but the program also has a multiplier effect. Each dollar generates $1.79 in economic activity, according to the Food Research & Action Center.

“Each dollar spent boosts the revenue of small businesses that serve the community, providing employment and paychecks that will be spent again and again,” Brusuelas wrote.

The $111 billion spent on SNAP in 2023, for example, amounted to 1.6% of total federal expenditures of $6.9 trillion. “That money was injected back into the U.S. economy at a rate of $9.25 billion per month, which provided jobs and income both locally and on a larger scale,” he wrote.

The One Big Beautiful Bill Act passed in July slashed $187 billion from SNAP. Those funding cuts were set to lower aggregate consumer spending in the long run by up to 0.5%. Typically, every 1% decline in SNAP benefits is associated with a 0.03% drop in total household consumption nationwide, calculated Bernard Yaros, Oxford’s lead U.S. economist.

“As families use the money they have to plug gaps in their food budget, [and] we can expect to see more families fall behind on their rent and utility bills,” says Luke Shaefer, a professor of public policy and social work at the University of Michigan. “That in turn hits landlords and utility providers.”

Grocery stores will be particularly hard hit, Shaefer says, noting the extent of the impact will depend on the duration of the shutdown. “There is a lot of reason to think it will get really bad, really quick for families, grocery stores and local economies,” he says.

So far, the shutdown is shaving about 0.2% a week from inflation-adjusted gross domestic product, Diane Swonk, chief economist at KPMG calculates. “Losses are nonlinear; they tend to rise the longer the shutdown lasts,” she said.

Jason Pride, chief of investment strategy and research at Glenmede, estimates that the shutdown’s cumulative drag on fourth-quarter real GDP growth has been approximately 0.4% so far. Pride notes that economic activity lost due to shutdowns has typically been recaptured once the government reopens, but there is evidence of a modest shortfall in the recovery following more extended shutdowns.

The current shutdown, which began Oct. 1, is now the second-longest in U.S. history.

Write to Megan Leonhardt at megan.leonhardt@barrons.com