Recent core-lab study of Marcellus Shale illustrated that effect of gas slippage and matrix compaction are significant on gas production because of substantial reservoir pressure depletion, especially during the late time of gas production. However, the impact of gas slippage and matrix compaction on gas recovery evaluation and hydraulic fracturing design is still not clearly understood and systematically investigated. Additionally, such impact varies with production time and completion/production circumstances. Therefore, it is critical to develop a laboratory-modeling based approach that properly characterizes the two permeability effects and evaluates their impact on well production evaluation and hydraulic fracturing design. In this study, a comprehensive parametric study is conducted by running reservoir simulations using empirical permeability correlations developed from core-lab tests under different confining stress and pore pressure conditions. Simulations of different case scenarios are run in two contrast groups. One group considers the effect of gas slippage and matrix compaction on gas production and the other group ignores the two effects. By comparing the simulated gas production, critical conductivity, and proppant pumping amount/cost of the two contrast groups, a better understanding of the effect of gas slippage and geomechanics on shale gas well performance and hydraulic fracturing design can be developed for operators. The results show that ignoring the two permeability effect in reservoir simulation leads to an overestimation of gas production evaluation, which is up to 11% for Marcellus Shale. It also leads to an over-design of proppant pumping amount, resulting in early staging, screening-out, and excessive pumping cost. Calculations further show that, an average of over 2 million dollars can be wasted for fracturing a single horizontal well in Marcellus Shale if excluding the two effect from a fracturing design. The two effects are more significant for lower BHP, longer hydraulic fracture, and larger stage spacing conditions.