In the month since Donald Trump took office, he has wasted no time taking drastic measures to reduce the size of the federal workforce.
The president issued an executive order shortly after his inauguration demanding all federal employees return to the office five days a week. Then came the deferred resignation offers, also referred to as a “buyout,” which around 75,000 federal workers accepted. His administration also began the process of firing probationary federal employees across the country—recent hires to the agency or long-serving employees who were recently moved or promoted into a new position. Around 220,000 federal employees in total had less than a year of service completed as of March 2024, according to government data.
Before Trump took office, there were approximately 2.4 million federal workers in the country, making up around 1.87% of the entire civilian workforce, according to data from Pew Research Center. But those workers are not distributed evenly across the U.S. An estimated 20% live in the greater Washington D.C. area, according to Partnership for Civil Service, a nonprofit and nonpartisan organization. And federal workers make up around 43.26% of the district’s workforce, according to OPM data gathered by USA Facts, a nonprofit. That number is 4.6% in Maryland, and 3.27% in Virginia, although the concentration in towns close to D.C. is likely much higher.
Cities and towns with a high number of federal workers have been able to better weather previous economic and labor market downturns in the past, economists tell Fortune. But what was once an asset has now become a liability, and the federal worker cullings could have devastating effects on those local economies.
“You take a baseball bat to the United States government, and the things that are broken are going to ripple throughout the entire economy,” Max Stier, president and CEO of the Partnership for Public Service, tells Fortune.
Fewer jobs, less spending
A sudden surge of unemployed federal workers means tougher search for private sector roles.
Although some laid-off workers will be eligible for unemployment, they will be bringing in less than they made in their full time roles, and that assistance is only temporary. As workers prepare for a long job hunt, they will be spending less, which impacts the businesses around them. In a place like Washington D.C., the consumption habits of federal workers affect things like local restaurants, food trucks, and other small businesses.
“All those people will have to cut back on groceries, and miss car payments, and all the things that people have to do when they're unemployed,” says Jesse Rothstein, a labor economics professor at U.C. Berkeley. “That's going to have spillover effects on other businesses.”
The surge of unemployed people with specialized skills could also force those workers to move away as they look for jobs elsewhere because of “geographic mismatches,” according to Rothstein. “The private sector may have jobs, but they're not in Washington,” he says.
That’s assuming that the private sector will be hiring at all. The overall labor market remains strong, but white collar workers have been more and more vocal about how hard the job search is right now. Other Trump policies, like his decision to impose tariffs on major trading partners like Mexico and Canada, have also led to widespread jitters over the economy.
“When there's higher uncertainty, businesses are more cautious in their hiring and in their investment,” says Erica Groshen, a senior economics advisor at the Cornell School of Industrial and Labor Relations.
It’s still too early to tell how exactly these smaller economies will be impacted, and the reality for federal workers seems to change by the day. Although some previous layoffs have been reversed, there are almost certainly more to come.
“We know that there are these spillover effects,” Harry Holzer, professor of public policy at Georgetown, tells Fortune, referring to local economies with a high percentage of federal workers. “I would predict sort of noticeable declines, perhaps slow downs in some areas.”
Rothstein, however, takes a darker view. “If you were trying to destroy the American economy, I don't think you could do much better than what they've done in the last month,” he says.
