Economists say the Trump administration’s quest to downsize the federal government could briefly add tens of thousands of bureaucrats and contractors to the nation’s unemployment rolls.
Finance experts told The Washington Times that purging this small fraction of the workforce could cost taxpayers millions of dollars in short-term welfare benefits if the workers don’t find new jobs or reverse their termination through legal appeals.
A Jan. 30 study from the Urban Institute found that if President Trump’s Department of Government Efficiency were to lay off 75% of the federal workforce, it would increase unemployment rates by about 1% on average in large cities like the District of Columbia and by about 2.5% in rural areas with large federal workforces, such as Texas border towns.
More recent estimates have been more modest. As of this month, economists said the president’s offer of contract buyouts — which do not guarantee unemployment benefits — and more limited attempts to fire 25% to 50% of workers in various agencies would add the merest fraction of a percentage point to unemployment rates.
“It’s not easy to tell you how DOGE’s actions are affecting the unemployment rate,” said Mary Hansen, an economist at American University. “The publicly available data does not distinguish between levels of government, so it’s not possible to calculate a separate unemployment rate for federal, state, and local levels.”
In the nation’s capital, where unemployment claims have surged and Ms. Hansen estimates one-third of the civilian labor force works directly or indirectly for the federal government, workers filing for benefits can receive a maximum of $444 a week for 26 weeks.
Workers must be fired without cause to qualify for unemployment benefits, which excludes those dismissed for misconduct and those who accept early retirement offers.
Over the past two months, Mr. Trump’s DOGE has offered contract buyouts, implemented mass layoffs and threatened to fire employees who don’t justify their work.
Roughly 75,000 government workers accepted buyouts in the weeks after Mr. Trump returned to office on Jan. 20. According to various media reports, another 62,000 have been laid off, with pending lawsuits threatening to reduce that number further.
Michael New, a professor of social research at the Catholic University of America, noted that 62,000 fired workers are only 0.36% of the nation’s labor force of more than 170 million people.
“At most, it would affect the national unemployment rate by less than one-tenth of one percent,” Mr. New said. “Furthermore, even this probably overstates the impact of these federal layoffs. Some laid-off workers will find employment elsewhere and will not be considered unemployed.”
He said the layoffs would likely have bigger impacts on the District, Virginia, Maryland and other regions with large federally funded workforces.
Many federal workers fired since January have continued receiving full pay and benefits and will not begin appearing in unemployment rolls until late this summer.
“Even if we assume quite boldly that 100,000 federal workers were taken off the payrolls today, the unemployment rate would rise from 4.1% to just 4.16%, not even a decimal place difference,” said Jack Salmon, an economist at George Mason University’s free-market Mercatus Center.
Mr. Salmon said it’s unlikely that all or even many bureaucrats will stay unemployed if Mr. Trump overcomes various legal injunctions that federal district courts have issued against the layoffs.
He pointed to data showing that the U.S. unemployment rate fell from 7.3% to 5.3% during former President Bill Clinton’s first term as he eliminated more than 300,000 federal jobs, the biggest cut to the federal workforce on record.
Overall, roughly 2.3 million people work directly for the federal government nationwide.
Hans Dau, founder of the Mitchell Madison Group business consulting firm, said firing even 20% of them could raise last month’s national unemployment rate of 4.1% by less than two-tenths of 1% at most.
He said federal downsizing is just one part of the president’s broader plan to “re-privatize the US economy using reductions in force for federal workers, budget cuts, tariffs, deregulation and tax reform.”
“Combine that with the sharp reduction in illegal immigration and ramped-up deportations, and the effect is a significant restructuring of the U.S. labor market,” Mr. Dau said. “Clearly a laid-off federal bureaucrat will not take over the job of a deported California Central Valley farm worker, but he may take a job in a TSMC chip factory in Arizona.”
So far, confirmed unemployment claims for federal workers have come in a trickle. Recent data from Virginia showed an uptick of 4,036 first-time unemployment claims in early March, including 566 claims from federal employees.
“While this suggests some impact from reduced federal spending, it’s important to note that overall unemployment rates remain low, and the broader labor market continues to show resilience,” said Michael Austin, an economist with the National Center for Public Policy Research’s Project 21.
Mr. Austin, a former economic adviser to two Kansas governors, said DOGE layoffs reflect the reality that perpetual growth in the federal workforce has become financially unsustainable.
“When jobs depend on government contracts or grants instead of serving customers or charitable missions, workers are left vulnerable to political shifts rather than market demand,” he said. “A stronger economy rooted in private enterprise ensures job stability and long-term prosperity without relying on taxpayer-funded employment programs.”
