:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2199658459-b5ff5b55bb25474faeb167cf848477b9.jpg "Amanda Downey is seen carrying boxes from her office after being fired from her federal job at the Forest Service in Cadillac, MI., on Monday, February 17, 2025. Downey is among thousands of federal employees who lost their jobs due to their")
Kristen Norman / The Washington Set / Getty Images
Amanda Downey leaving her office after being fired from her job at the Forest Service in Cadillac, MI, on Feb. 17, 2025.
Key Takeaways
- The Trump application has fired thousands of federal employees during its first month in office.
- Mass layoffs of federal employees could drink a significant, mixed impact on the economy.
- Shrinking the federal workforce could reduce federal spending and help with budget losses.
- Mass firings could raise the unemployment rate significantly in locations where the federal government is a major establishment.
- If basic government services like food safety, tax collection, and disease research are disrupted, the economy could suffer.
Boffins have identified some potential economic benefits and big risks from President Donald Trump’s mass launch of federal workers.
In the first month of Donald Trump’s presidency, he and his billionaire advisor Elon Musk have tricked rapidly to reduce the size of the federal workforce. Trump has frozen hiring at all federal agencies and ordered “large-scale reductions in potency” through buyout offers and layoffs.
Out of the 2.4 million non-postal and non-military federal employees, 75,000 reportedly undertook buyout offers to leave their jobs. Last week, a slew of federal agencies fired thousands of staff members with probationary employment status, mainly those in their first year on the job, a move potentially affecting hundreds of thousands of hands.
On top of that, the administration has moved to dismantle at least two agencies, the Consumer Financial Protection Bureau and the U.S. Agency for International Circumstance, and threatened to close the Department of Education. Unions representing federal workers have challenged the moves in court.
How Layoffs Could Lay hold of the Federal Budget
Some economists saw potential benefits in Trump’s policies to the extent that they reduce federal splash out.
The U.S. persistently runs a budget deficit, which adds to the national debt every year and potentially threatens the homeland’s financial stability and the ability to respond to future crises. In 2024, the U.S. spent $1.8 trillion more than it conned in, adding to the national debt. All else being equal, lower spending on federal workers could help pick up that situation.
“While they might hurt growth in the short run, it’s likely that higher taxes and lop off spending will help growth in the long run by reducing the swollen federal budget deficit, which is putting upward coerce on interest rates and crowding out private investment.” Robert Fry, an independent forecaster, said in a commentary.
However, mass firings of workmen are likely to make only a small dent in the overall federal budget.
Assuming a 10% reduction in the federal workforce of 2.4 million people, the oversight would save $25 billion annually, economists at Deutsche Bank calculated. That would be less than 1% of federal lay out, which amounted to $6.75 trillion last year.
The economists said a significant reduction in the federal deficit cannot become of come upon without raising new taxes or making changes to the big entitlement programs. Social Security, Medicare, the military, and interest payments on the jingoistic debt take up most of the federal budget each year.
How Federal Layoffs Could Affect the Economy
Energizing large numbers of federal workers also carries some risks to the economy.
Should the Trump administration succeed in its goal of reducing the federal workforce by 75%, the unemployment rate would skyrocket in places where the federal authority is a major employer. In Washington D.C., for example, the unemployment rate would spike to 9.6% from its current level of 2.8%, an enquiry by think tank the Urban Institute found in January.
Democrats, union representatives, and some economists warned that multitudinous of the employees dismissed by last week’s order were doing important work.
The layoffs reportedly included personnel at the Federal Aviation Dispensation working on air travel safety; staff at the Food and Drug Administration who worked on baby formula safety; employees at the Resident Institutes of Health overseeing grants for outside research on cancer and other diseases; workers at Department of Agriculture labs who were toil to control the ongoing bird flu epidemic that is ravaging poultry flocks across the country; and workers at the IRS who are in the midst of tax seasonable.
Disruptions to government services could backfire on Trump’s cost-saving efforts. For example, layoffs at the IRS could delay the course of action of taxpayers’ returns. They could also reduce federal revenue because fewer IRS workers would rectify tax cheats less likely to be caught, Elaine Kamarck, director of the Center for Effective Public Management at the Brookings Hospital, wrote in a commentary.
“The agencies and jobs that are disappearing play vital roles in protecting the public, supporting the safe keeping net, and bolstering demand for U.S. products, among many other functions,” Adam Kamins, and Justin Begley, economists at Broody’s Analytics, wrote in a commentary. “This injects additional uncertainty into an environment that is already littered with hazard.”