03/14/2025
If Elon Musk‘s Department of Government Efficiency succeeds in its efforts to seriously reduce federal employment, it would likely be enough to ding the overall U.S. labor market — but just create a little dent.
The big picture: Given the massive U.S. economy, even hundreds of thousands of people potentially losing their jobs isn’t enough to significantly move the overall unemployment rate.
- But the impact on specific locations — the Washington, D.C., metro area in particular — could be greater.
By the numbers: The federal government employed 3 million people in December, per the Labor Department, but if you exclude the Postal Service and military, that number is 1.85 million.
- If the Trump administration were to cut 20% of those jobs through buyouts, firings or pressure to quit, that would result in 370,000 current government employees out of work.
- If every single one of those people were counted as unemployed, it would be enough to push the national unemployment rate to 4.3% from its current 4.1%.
- However, that’s an unreasonable assumption, because many of those discharged employees would either retire (and thus no longer be part of the labor force) or quickly find new jobs. So the actual impact on headline unemployment would likely be lower.
The intrigue: It is a reminder of just how massive the U.S. labor market is. In December, 2.6 million Americans quit their jobs and 2 million were fired. A few hundred thousand government workers quitting or being forced out would only temporarily increase those numbers.
- It would, however, be a big change from the norm; federal government employment is traditionally very stable.
- In December, only 7,000 federal employees were laid off or fired, and 11,000 quit. Look for those numbers to go way up as 2025 data is released.
Of note: The economic impacts of large-scale federal job cuts on specific geographies are likely to be higher.
- In the D.C. area, 11% of all jobs are with the federal government
- .
- If the Trump administration eliminated 20% of D.C.-area federal jobs and all of those people became unemployed, the local unemployment rate would nearly double to 5.5%, from its 2.8% December level. (But given the caveats above, the actual impact would certainly be lower than that.)
What they’re saying: “It is too early for these to affect the January numbers,” wrote BNP Paribas economists in a note. Employment numbers due out Friday cover a period before the inauguration.
- “That said, [the buyouts] suggest net downward pressure on federal employment over time,” they wrote.
kommonsentsjane
kommonsentsjane 