An attendee places their resume in a drop box at the Albany Job Fair in Latham, New York, on October 2, 2024. Photographer: Angus Mordant/Bloomberg.
Today’s report on applications for U.S. unemployment benefits may be the first place to see the effects of the Trump administration’s sweep of the federal workforce. It will just be the start.
Initial jobless claims were already on the rise in and around Washington, D.C., and economists have begun bracing for broader impact. So far, President Donald Trump and Elon Musk’s Department of Government Efficiency has fired more than 10,000 government workers, based on press reports. Approximately another 200,000 probationary workers are also being targeted. Then there’s a multiplier effect that ripples out to millions of federal contractors and others who do business with Washington, plus state and local governments and organizations that rely on its services. And it’s not just the direct hit to employment; layoffs have the potential to further dent housing activity as well as broader economic growth.
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“Right now we are definitely talking a lot about D.C. federal employment being affected,” said Tara Sinclair, an economics professor at George Washington University. “But it could go broader, either directly from layoffs or indirectly because there are a lot of people that have jobs because of the type of work that the federal workforce does.”
That said, weekly jobless-claims data can be volatile, and it’s unclear how many government workers are eligible for unemployment benefits. As it turns out, applications for U.S. unemployment benefits were little changed last week, hovering around pre-Covid levels that indicate solid demand for workers.
Nationwide, initial claims increased by 5,000, to 219,000, in the week ended February 15, according to Labor Department data released today. The median forecast in a Bloomberg survey of economists called for 215,000 applications. Continuing claims, a proxy for the number of people receiving benefits, increased to 1.87 million in the week ended February 8. These initial claims are generally consistent with levels seen in 2019, supporting the Federal Reserve’s intention to keep interest rates on hold until inflation progress resumes. That said, some high-profile companies like Meta Platforms Inc. and Southwest Airlines Co. have said they plan to reduce staff. The four-week moving average of new applications, a metric that helps smooth out fluctuations from week-to-week, was little changed at 215,250.
That number will likely rise—the baseline expectation from Moody’s Analytics is for almost 100,000 federal government positions to be eliminated or moved out of the capital, which would result in a double-digit decline in employment by the second half of 2026, economist Adam Kamins said in a February 18 analysis. The lost positions will primarily be well-paid roles held by highly educated workers, which will spill over to consumer-facing industries and housing. That will push Washington into a mild recession by the summer, Kamins said.
Beyond employment, other parts of the economy are also at risk. Layoffs at the Federal Housing Administration and the Department of Housing and Urban Development could further hamstring a housing market already constrained by high prices and borrowing costs. And broader cuts to federal spending—which has largely added to gross domestic product (GDP) in the past two years—stand to undermine growth.
The recent firings are likely to show up in the March jobs report, which is due April 4, said Gregory Daco, chief economist at EY-Parthenon. If all the probationary federal workers are fired as well, that could result in the first drop in job creation since 2020, he said.
In addition, around 75,000 federal employees took the Trump administration’s offer to resign and still be paid through September, which could temporarily boost payrolls if those workers take another job between now and then. At the same time, Trump’s push to bring federal workers back into the office may offset some of that impact, as it could boost consumption in downtown D.C.
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