Executive Summary  

• In November 2024, the federal government employed over three million people, accounting for about 1.87 percent of the civilian workforce.   

• Since the new administration took office in January, over 30,000 federal workers have been notified of termination, indicating that nearly one percent of the federal workforce has been cut.  

• The proposed initiative to significantly reduce the civilian federal workforce could impact the federal government’s structure and functionality, leading to a rise in unemployment rates, particularly in smaller metro areas with military installations or bases.   

Introduction  

Since the beginning of 2025, sweeping layoffs across the federal government have resulted in the dismissal of over 30,000 employees. The primary sector of federal workers facing cuts are those in their probationary period. Civil servants remain on probation for one year after they are hired, promoted, or demoted. While on probation, a federal employee can be fired at will; however, the employee’s supervisor is required to demonstrate how the employee’s work performance failed during this probationary period. Probationary employees, who can be dismissed more easily than their permanent counterparts, often encounter more significant obstacles in securing unemployment benefits, making programs such as the Unemployment Compensation for Federal Employees (UCFE) a crucial yet complicated lifeline. The scale of these terminations has enacted legal challenges, with a federal judge ruling that civil servants at agencies such as the Department of Agriculture, Defense, Interior, Treasury, and Veteran Affairs must be reinstated- citing improper termination procedures on behalf of falsely reported performance issues. While critics warn of service disruption, proponents argue that reducing the number of federal workers could reduce government spending, shrink the deficit, and promote fiscal stability. As layoffs from major federal agencies continue, the economic and legal consequences are too premature to determine. However, organizations are conducting studies to analyze the long-term implications of mass federal layoffs on public service delivery, regional economies, and workforce stability.   

Cuts By Agency  

Data Source Cuts by Agency   

Potential Impact on the Economy and Unemployment  

The overall economy is not expected to be hurt because federal workers do not make as much as their private-sector affiliates; however, these layoffs have the potential to impact local economies negatively. The Urban Institute did a comprehensive study by calculating the unemployment rate in each metro area across the country and “fired” 75 percent of the civilian federal workforce. The analysis illustrated three clear implications. The most affected areas tend to be home to military installations or bases, with the smallest metro areas seeing substantial changes in their labor markets. Zapata, Texas, for instance, is projected to see its unemployment rate rise from 6.9 percent to 9.4 percent. Unemployment rates in large metro areas would increase by one percent. A 2020 Brookings Institution study estimated that for every federal employee, there are two contractors. Given that information, a chief economist at Apollo Global Management estimated that the total employment reduction could be close to one million with a “consensus” estimate of 300,000 DOGE-related federal cuts. Additional cuts in government spending may slow GDP growth, which is predicted to turn negative in Q1 2025.   

Effects on Public Service Delivery   

The terminations are expected to disrupt the delivery of essential government services due to reduced staff. Agencies may experience difficulty processing Social Security, Medicare, Medicaid, tax refunds, veteran’s benefits, and student loans. Experts caution that the government could fall short in response to emergencies such as infrastructure failures or disease outbreaks.  

Budget Cuts vs. Revenue Loss  

However, the mass federal layoffs have potential benefits, including reduced federal spending and budget deficit, projected savings, and administration efficiency. Mass layoffs could reduce the national deficit, which totaled $1.8 trillion in 2024. Some economists argue that lower government spending could improve the country’s financial resilience. A 10 percent reduction in the federal workforce could save the government $25 billion annually, but the long-term implications for revenue collection could surpass those savings. According to the Congressional Budget Office, a $35 billion rescission in IRS funding, comparable to the measure of the current cuts, could reduce federal revenues by $89 billion and increase the deficit by $54 billion over the next decade. Though the cuts were framed as critical to eliminate inefficiency and reduce what they perceived as an overgrown federal bureaucracy, experts warn that gutting enforcement capacity undermines the government’s ability to pursue tax evasion.  

Conclusion  

As the nation’s largest employer, the federal government plays a significant role in shaping regional labor markets and delivering essential services. While the immediate macroeconomic effects may be limited, data on the long-term implications of these cuts will be vital in determining the legitimate effects of these reductions. Only time can tell whether these reforms will result in greater efficiency or more profound systemic challenges for the federal government, workforce participation, and the economy in general.