Mass Layoffs in the Federal Government & Effects on the Economy

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Hi Friends,

Today, I want to discuss the layoffs of federal government workers in the US and how this could severely impact the job market. First, I want to state that all federal workers were given a notice that they could accept a deferred resignation, in which they would be paid for an additional year without work on their current salary. However, the downside to this offer is that they would be resigning after that.

The first effect is likely to be private school admissions. Many kids are going to private high school next year or are already in private high school. However, admissions for those schools are dropping severely, as many families are worried that they will get fired from their government jobs and not be able to afford private schools. As a result, these schools are far below their admissions goals and could even lose money this year.

In January, the federal government employed 2.4 million people. There have been some decent cuts already, and the number could increase. The actual cuts are roughly 30,000 cuts of federal workers. Even though this seems like a lot, an average of 237,000 jobs are created every three months, making the federal worker layoffs seem minimal.

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Even though this number seems small, it is expected to grow significantly. The deferred resignation offer is expected to credit a significant amount of resignations. Especially with all the worry that has been going around, it is expected that the amount of people who take the deferred resignation offer is going to increase and maybe even exponentially.

The federal government is firing workers who are still in their probationary period. This means if they were in the process of getting hired or fired or have only been in the position for a year or less. More than 200,000 employees who fit this criteria are due to be fired. If this keeps up, the federal government might lose up to 475,000 workers in 2025, or 20% of the total employment of the federal government.

Although these cuts are expected to happen, they haven’t happened yet. These cuts are just what they have stated and President Trump might be swayed by Congress, court orders, or people getting mad at him for it. The current administration’s goals could also cause hiring for the federal government in certain areas.

Washington D.C. is the most vulnerable area in the country for these firings as conducted in a 2023 census is left-leaning by the Economic Policy Institute. Although, 5-10% of the entire population of DC is employed in the federal government. This causes Washington D.C. to be vulnerable as it is known and proved to be left-leaning.

In addition to these cuts, many federal contractors are becoming unemployed. In Maryland in February, 1,350 workers were slated for layoffs, according to notices filed by employers with 100 full-time workers or possibly more. These mass layoffs are likely to affect the economy one way or another.

Federal workers are a lot more educated and trained than most workers and this could cause mass unemployment. These federal workers with specialized skills could be having trouble finding new job offers near them as most government employees are training specifically for their department. Considering that the employment rate is below pre-pandemic levels this could become a huge issue.

Government layoffs are not the only thing that is impacting the labor market currently. President Trump’s expected tariffs are going to have huge effects on our economy and other countries’ economies due to these taxes. This could also impact our relationships with our allies and other countries.

Anyway, thank you so much for reading this edition of Friday Finance. Thank you to our subscribers for helping Friday Finance build and create quality newsletters. If you have any questions, suggestions, ideas, or anything else you want me to know about please feel free to email [email protected]. Have a great week and see you next week.

Thanks,

Jacob Gans

Friday Finance