Federal Worker Layoffs And Political Conflict Create An Uncertain Future: February 2025 Race, Jobs And The Economy Update

In this edition of our Race, Jobs and the Economy series decoding each month’s Bureau of Labor Statistics (BLS) monthly jobs report, we will give an overview of the current state of the labor market, recent actions by the Trump administration and the major economic and political trends of the day.

Analysis of Topline Figures in the January BLS Report

This month’s report included the annual benchmark revision for 2024. The jobs report consists of two underlying surveys: the household survey and the establishment survey. Annually, the surveys are calibrated using more reliable population data, such as state unemployment insurance tax records. 

In January, the economy added 143,000 jobs while the unemployment rate receded a tenth of a percentage point to 4.0%. The private sector added 111,000 jobs in January, all in the service sector. Gains from November and December were made upward by 100,000 jobs. When it comes to the household survey, the BLS updates the population estimates with new data from the Census Bureau. The civilian non-institutional population was revised up by more than 2.9 million, which was most likely due to net immigration rates. 

There were significant revisions to the establishment data. The year-over-year change in total non-farm employment for March 2024 trended down from 2,900,000 to 2,346,000. Such a massive reduction suggests hiring has been overstated for the year. However, this does not change the overall assessment of a strong labor market.

The Trump Administration vs. the Administrative State

The first weeks of the new Trump administration have been anything but uneventful. In a flurry of executive orders, President Trump has sought to do everything from end birthright citizenship to freezing trillions of dollars in federal spending, both of which were blocked by federal courts. One of those executive orders will likely have a particularly destabilizing effect: The administration’s new Department of Government Efficiency (DOGE) – which is not a government agency but an externally contracted advisory body – is designed to “slash excess regulation [and] cut wasteful expenditures.” That team of contractors immediately began to lay off a large swathe of the federal workforce and restructure federal agencies with no oversight from Congress.

One such example was the January 28th buyout or termination notice sent to millions of federal employees. The possibility of a large exodus of federal employees in the coming months is quite noteworthy due to the importance of the federal government sector to employment gains. While private sector job creation has slowed, the government sector has emerged as a kind of backstop of the US labor market. A slowdown in job creation and a subsequent negative jobs report could dampen business outlook and lead to lower levels of investment based on the assumption that the labor market is weakening. Additionally, a looser labor market provides more leverage to employers regarding pay and hiring, potentially lowering the earnings potential of prospective hires.

The protest resignation of Fiscal Assistant Secretary of the Treasury David Lebryk, the highest-ranking position a civilian can reach in the agency, has sent shockwaves throughout the agencies that provide the public services we all rely upon. Lebryk had refused to give the DOGE team operational access to the Treasury’s payment system. Managed by the Bureau of the Fiscal Service, a fifth of the US economy flows through its system. The ability of DOGE, and by extension the President, to directly block payments already authorized by Congress could disrupt vital funds for low-and moderate-income communities.

A Strong Economy with an Uncertain Future

With low unemployment, layoffs and resignations stabilizing and moderate inflation taking place, it might sound paradoxical to say the economy is resilient yet precarious. However, the first month of the Trump administration’s chaotic actions have sent market participants into a state of anxiety. Although an 11th-hour deal was reached with Mexico and Canada to avoid 20% tariffs on their exports to the United States, China still faces an additional 10% levy on its exports to the United States. On February 10, the President imposed a flat 25% tariff on steel and aluminum imports “without exceptions or exemptions,” in an effort to boost domestic production. The move increases worries of a trade war, especially with Canada, which supplies 40% of aluminum imports.

Inflation expectations for consumers jumped dramatically as the threats of a trade war and tariffs increased. Most Americans believe that the costs of a hypothetical 20% across-the-board tariff would be passed on to consumers, running contrary of the Trump administration. Four out of 10 respondents from a recent survey said they were more likely to purchase and stockpile goods before the proposed tariffs take effect. Similar to consumers, businesses are also concerned about the anticipated effects of tariffs. Ample evidence suggests they are stockpiling supplies in anticipation of future increases in prices. Small businesses will be particularly affected with 30% anticipating revenue losses from the proposed tariffs. 

Several economic analyses of the proposed tariffs predict far-reaching and potentially devastating impacts. The Tax Foundation estimates the loss of full-time jobs at 330,000 with increases in taxes by $1.1 trillion, or $800 per household. The overwhelming body of evidence suggests that tariffs will negatively impact consumers, businesses and the US economy as a whole. 

The ability of the government sector to supply the economy with a steady flow of job gains may be ending soon. The federal hiring freeze will certainly dampen the sector’s job growth. Additionally, most of the government sector’s job gains come from local governments, which has led to detrimental effects on state and local organizations, raising the prospect of a slowdown in job creation below the federal level. 

There might not be an immediate jump in the unemployment rate, as a large number of the laid off federal workers have technically been put on administrative leave. But the number of people filing for unemployment insurance jumped in the Washington, DC metro this week.

The tariffs coupled with the ongoing deportations have the potential to slow down affordable housing projects. People from racial and ethnic groups currently targeted by the administration’s deportation project are also overrepresented in the building trades. And threats of tariffs on Canadian lumber would spike the cost of building supplies – potentially leaving developers with both a worker shortage and untenable supply costs. Evidence suggests this has already occurred with videos on social media showing empty stores and factories and reports of workers being too scared to show up for work. 

While the long-lasting economic effects of tariffs, deportations and the dismantling of the federal government are yet to be determined, the social and political impacts are becoming clear.  We are already seeing organized resistance to these actions. US cities with large immigrant populations have seen massive demonstrations with businesses, workers and students joining in on the political actions. ICE raids have also been hampered by not only state officials but through highly coordinated community organizing efforts by everyday citizens. 

Federal workers and DC citizens have staged daily protests in front of various government buildings to stop the dismantling and seizure of federal agencies and properties by DOGE. The US federal court system has become a major tool of accountability as a coalition of organizations continues to bring various legal injunctions toward blocking the most worrisome of the Trump administration’s initiatives. Additionally, data stalwarts and concerned researchers are busy downloading government datasets before websites go dark.

It is too early to know if these resistance actions will yield substantive change from the Trump administration. Likewise, whether either Congress or the judicial branch will put limits on the President has yet to be seen. These factors only intensify the uncertainty described above, and further blur economic forecasts.

While domestic resistance spreads, international opposition to the Trump administration grows. After Trump called Canada the “51st state” and threatened them with substantial tariffs, anti-American and anti-Trump sentiments exploded, including calls for a boycott of US products. Chrystia Freeland, Canada’s former finance minister, called for an international summit of countries targeted by the US president. The list included Denmark, from whom Trump threatened to take Greenland, and Panama, which has dealt with threats from the current US administration to take the Panama Canal away from the Central American country – and which the New York Times reports is now home to a jungle detention camp of “fenced cages” for immigrants deported earlier this year. 

The European Union, a long-time target of Trump and his most ardent allies, already has a plan for resistance in place. South Africa has also recently come under economic sanctions for its new land expropriation bill designed to redress apartheid-era land grabs by White settlers. As the list of countries threatened by the Trump Administration grows, so too do the chances of a global anti-Trump coalition developing.

President Trump’s efforts to implement his agenda are facing significant legal, social and geopolitical opposition. There are also contradictions inherent in his plans. For example, deportations and tariffs could raise prices on a variety of everyday goods for consumers and lower housing affordability, which is the opposite of what Trump promised on the campaign trail. Additionally, there is a multi-front war brewing with multiple factions, including federal government employees and non-profits at risk of funding losses, taking the fight against the Trump administration to the streets and inside the courtroom. 

Joseph Dean is NCRC’s Racial Economic Junior Research Specialist.

Photo from Getty Images.