Connect with us

Personal Finance

How Trump, DOGE job cuts may affect the U.S. economy

Published

on

Protestors in New York City demonstrate against the push by President Donald Trump and Elon Musk, who leads the so-called Department of Government Efficiency, to gut federal services and impose mass layoffs, Feb. 19, 2025.

Michael Nigro/Pacific Press/LightRocket via Getty Images

The Trump administration’s purge of federal workers may ultimately amount to the biggest job cut in U.S. history, which is likely to have ramifications for the economy, especially at the local level, according to economists.

The White House, with the help of Elon Musk’s so-called Department of Government Efficiency, has fired or offered buyouts to workers across the federal government, the nation’s largest employer.

While the precise scale of the job cuts is as yet unclear, evidence suggests it’s at least in the tens of thousands so far, economists said.

The Trump administration directed federal agencies to dismiss “probationary” employees. Probationary workers are more-recent hires who have been with the federal government for only a year or two and who do not yet have full civil service protections.

There were about 220,000 federal employees with less than a year of tenure as of May 2024, according to the most recent data from the U.S. Office of Personnel Management.

Additionally, more than 75,000 federal workers have accepted a buyout offer, according to a Trump administration official. They agreed to resign but get paid through September.

Fed Chair Powell: We've had no contact with DOGE

The total of these two groups — nearly 300,000 workers — would make these actions amount to the “largest job cut in American history (by a mile),” Callie Cox, chief market strategist at Ritholtz Wealth Management, wrote Tuesday.

That sum doesn’t include others who may be on the chopping block, such as contractors who work at the U.S. Agency for International Development. Career civil servants who got promotions in the past year are also at risk of losing their jobs, since they’re technically on probation in their new role, Jesse Rothstein, a public policy and economics professor at University of California, Berkeley, said in a podcast Thursday.

Job cuts have come from across the government, at agencies including the Internal Revenue Service, National Park Service, Consumer Financial Protection Bureau, and the departments of Agriculture, Education, Energy, Health and Human Services, Homeland Security, and Veterans Affairs, according to the Associated Press.

“We may soon find out the hard way that people drive the U.S. economy,” Cox wrote.

Assessing the scale of federal job cuts

Arlene Rusch, former Internal Revenue Service worker, shows an email notifying her that she has been laid off, as she leaves her office in downtown Denver, Colorado, Feb. 20, 2025. The IRS began laying off roughly 6,000 employees in the middle of tax season as the Trump administration slashes the federal workforce.

Hyoung Chang | Denver Post | Getty Images

The ultimate number of cuts isn’t likely to be as high as 300,000, economists said.

For example, there may be some crossover: Probationary workers who would have been fired may have accepted a buyout. Also, in some cases, the Trump administration tried hiring back workers who’d been terminated.

Public disclosures show more than 26,000 federal workers have already been fired, excluding buyouts, according to a research note Wednesday from investment bank Piper Sandler.

That’s about the same number of workers who lost their jobs when Lehman Brothers collapsed during the 2008 financial crisis, for example.

More from Personal Finance:
Sen. Elizabeth Warren: DOGE’s FDIC firings put banking system at risk
Top-rated charities in jeopardy amid White House, DOGE cuts to foreign aid
A potential winner from Trump tariffs: Tourists traveling abroad

But Thomas Ryan, a North America economist at Capital Economics, estimates that between 100,000 and 200,000 federal staffers have probably already been let go.

That would handily beat IBM’s 1993 purge of 60,000 workers, thought to be the largest corporate layoff in U.S. history. Among other notable corporate cuts, Citigroup and Sears, Roebuck & Co. each slashed about 50,000 jobs, in 2008 and 1993, respectively.

“Certainly if all 200,000-plus probationary workers are fired [without replacement] that would be historic,” Susan Houseman, senior economist at the nonpartisan W.E. Upjohn Institute for Employment Research, wrote in an e-mail.

Even among prior federal layoffs, the scale of potential cuts appears unprecedented, experts said.

The U.S. Army, for example, eliminated 50,000 jobs in September 2011 as former President Barack Obama withdrew troops from Afghanistan and Iraq, according to outplacement firm Challenger, Gray & Christmas. The U.S. Air Force announced plans in 2005 to reduce head count by 40,000, the firm said.

We may soon find out the hard way that people drive the U.S. economy.

Callie Cox

chief market strategist at Ritholtz Wealth Management

The Bureau of Labor Statistics tracked data on federal mass layoffs from 1995 to 2003. During that period, mass layoffs affected anywhere from roughly 9,000 federal workers per year to 23,000 a year, the data show.

If the current federal job cuts “are not historic yet, it feels like we’re headed in that direction pretty quickly,” said Mark Zandi, chief economist at Moody’s.

The White House didn’t comment on the specific scale of cuts.  

“President Trump and his administration are delivering on the American people’s mandate to eliminate wasteful spending and make federal agencies more efficient, which includes removing probationary employees who are not mission critical,” Anna Kelly, a White House spokesperson, said in a written statement. “This is part of President Trump’s sweeping effort to save taxpayer dollars, cut wasteful spending, and restore our broken economy.”

Potential economic impact

Job loss can be painful for household finances.

Affected workers who can’t quickly find new jobs may be forced to make ends meet without regular income. Unemployment benefits may offer a temporary stopgap to eligible workers, but they replace only about a third of prior wages, on average, according to Labor Department data.

The majority of workers who suffer job loss are affected long term, as they have trouble finding new full-time jobs and subsequently earn less money, according to a 2016 research paper by Henry Farber, professor emeritus of economics at Princeton University, who studied data from 1981 to 2015.

Musk defends DOGE efforts

“There are economic impacts to [laid-off workers], their families, to the businesses they would have bought goods and services from,” said Erica Groshen, a senior economics advisor at Cornell University and former commissioner of the U.S. Bureau of Labor Statistics.

“The economic consequences of layoffs are like a domino effect that spread across local economies to businesses that seem to have no connection whatsoever to the federal government,” said Ernie Tedeschi, director of economics at the Yale University Budget Lab.

Laid-off workers may spend less at businesses such as local coffee shops, restaurants and day care facilities, he said.

There’s a psychological factor to mass layoffs, too, economists said. Other federal workers, fearful for their jobs, may pull back on spending and delay big-ticket purchases. Businesses with ties to the federal government or the federal workforce may stop hiring and investing due to uncertainty.

Washington, D.C., for example, is expected to suffer a “meaningful” increase in unemployment that would push the capital into a “mild recession,” Adam Kamins and Justin Begley, economists at Moody’s, wrote in a note Tuesday.

Close to 100,000 federal government positions will be eliminated or moved from Washington in the next couple of years, Kamins and Begley estimate. A “flood” of job applicants will limit the private sector’s ability to absorb them into the labor pool, they said.

The economies of Maryland and Virginia won’t suffer to the same degree but will be “materially” hurt due to their exposure to government employment, Kamins and Begley wrote.

Layoffs aren’t likely to show up in federal data for another month, and not until September for those who take the severance deal, according to Piper Sandler. Unemployment claims in Washington, D.C., for the week ended Feb. 8 were up 36% from the prior week.

‘Not recessionary’ on its own

Economists don’t expect the job cuts will have a huge impact on the overall U.S. economy, however.

If about 200,000 probationary workers were to lose their jobs, it would shave roughly one-tenth of a percentage point from annual U.S. gross domestic product, said Tedeschi, who served as chief economist at the White House Council of Economic Advisers during the Biden administration.

“This, on its own, is not recessionary,” he said.

Elon Musk, second from the left, walks along the colonnade at the White House on Feb. 19, 2025.

Win Mcnamee | Getty Images News | Getty Images

Ryan, of Capital Economics, said the scope of federal layoffs is relatively small when considered in the context of the U.S. labor market, which added roughly 1.5 million jobs in 2024. He said he expects most displaced federal workers to be rehired quickly since the economy is near full employment, “making any pain short-lived.”

Capital Economics hasn’t downgraded its economic growth forecasts due to the federal layoffs, Ryan said. That assessment includes potential ripple effects felt indirectly through the economy.

Top Social Security official exits after refusing DOGE access to sensitive data

“Even adding the knock-on effects, it’s not going to plunge the U.S. into a recession,” Tedeschi said. “Let’s be realistic here.”

But mass layoffs add to the pressure already being placed on the economy by other Trump administration policies, such as tariffs and mass deportations, economists said.

“This was a healthy economy coming into 2025,” Tedeschi said. “And suddenly we have a number of serious potential headwinds that are stacking up. And this is one of them.”

Continue Reading

Personal Finance

Summer Fridays are increasingly rare as hybrid schedules gain steam

Published

on

People enjoy an unusually warm day in New York City as temperatures reach the low 80s on June 4, 2025 in New York City.

Spencer Platt | Getty Images

Summer Fridays may be considered the most desirable perk of the season, but fewer employers are on board with the shortened workweek.

Companies have steadily phased out summer Fridays — a policy that allows workers to take Friday afternoon off over the summer months — as work-from-home Fridays became more common, experts say.

“Pre-pandemic, summer Fridays were thing, but hybrid overall has taken over,” said Bill Driscoll, technology workplace trends expert at staffing and consulting firm Robert Half.

As more commuters settle into flexible working arrangements, fewer workers are making Friday trips at all compared to mid-week traffic patterns, according to the 2024 Global Traffic Scorecard released in January by INRIX Inc., a traffic-data analysis firm.

More from Personal Finance:
Job market is ‘trash’ right now, career coach says
Millions would lose health insurance under GOP megabill
Average 401(k) balances drop 3% due to market volatility

Among employees, however, summer Fridays are the most valued summer benefit, followed by summer hours and flextime, according to a new survey by job site Monster, which polled more than 400 U.S. workers in June. 

“Summer Fridays are highly valued among workers because, for many, they represent more than just a few extra hours off,” said Scott Blumsack, Monster’s chief strategy and marketing officer. This perk “can go a long way in showing employees they’re valued, which can help prevent burnout, boost morale, and improve retention during a season when disengagement can run high.”

Still, 84% of workers are not offered any summer-specific benefits, even though 55% also said those benefits improve productivity, Monster found.

JPMorgan CEO Jamie Dimon blasts call for hybrid work, tells employees not to waste time on petition

Instead, hybrid — and to a lesser extent fully remote — job postings have increased in the last year as employers compete for talented job seekers who prioritize flexibility, according to research by Robert Half.

“Hybrid is a highly desirable situation right now and one that all levels of employees are looking for,” said Robert Half’s Driscoll.

More than five years after the pandemic, 72% of organizations also have return-to-office mandates, according to a separate hybrid work study by Cisco.

But, even with the mandates, employees are less likely to work in the office on Fridays, and much more likely to commute Monday to Thursday, Cisco found.

Employees value flexibility

As employee burnout and disengagement grows amid the wave of in-office mandates, work-life balance and flexible hours have become increasingly important, other studies show.

Corporate wellness company Exos, which works with large organizations such as JetBlue and Adobe, says burnout has gone down significantly among employees at firms that have made Fridays more flexible. Exos also tested out “You Do You Fridays” — and found significant benefits.

The more adaptable the schedule, the more positively employees view their company’s policies, the Cisco report also found.

With hybrid arrangements now common, workers put a high value on that flexibility — and 63% of all workers would even accept a pay cut for the option to work remotely more often, according to Cisco’s global survey of more than 21,500 employers and employees working full-time.

Subscribe to CNBC on YouTube.

Continue Reading

Personal Finance

How House Republicans’ ‘big beautiful’ bill may affect children

Published

on

Speaker of the House Mike Johnson, R-La., pictured at a press conference after the House narrowly passed a bill forwarding President Donald Trump’s agenda on May 22 in Washington, DC.

Kevin Dietsch | Getty Images

House reconciliation legislation, also known as the One, Big, Beautiful Bill, includes changes aimed at helping to boost family’s finances.

Those proposals — including $1,000 investment “Trump Accounts” for newborns and an enhanced maximum $2,500 child tax credit — would help support eligible parents.

Proposed tax cuts in the bill may also provide up to $13,300 more in take-home pay for the average family with two children, House Republicans estimate.

“What we’re trying to do is help hardworking Americans who are trying to provide for their families and make ends meet,” House Speaker Mike Johnson, R-La., said during a June 8 interview with ABC News’ “This Week.”

Yet the proposed changes, which emphasize work requirements, may reduce aid for children in low-income families when it comes to certain tax credits, health coverage and food assistance.

Households in the lowest decile of the income distribution would lose about $1,600 per year, or about 3.9% of their income, from 2026 through 2034, according to a June 12 letter from the Congressional Budget Office. That loss is mainly due to “reductions in in-kind transfers,” it notes — particularly Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps.

20 million children won’t get full $2,500 child tax credit

A member of MomsRising holds a sign on Capitol Hill to urge lawmakers to reject tax breaks for billionaires and protest cuts to Medicaid and child care on Capitol Hill on May 8 in Washington, D.C.

Brian Stukes | Getty Images Entertainment | Getty Images

House Republicans have proposed increasing the maximum child tax credit to $2,500 per child, up from $2,000, a change that would go into effect starting with tax year 2025 and expire after 2028.

The change would increase the number of low-income children who are locked out of the child tax credit because their parents’ income is too low, according to Adam Ruben, director of advocacy organization Economic Security Project Action. The tax credit is not refundable, meaning filers can’t claim it if they don’t have a tax obligation.

Today, there are 17 million children who either receive no credit or a partial credit because their family’s income is too low, Ruben said. Under the House Republicans’ plan, that would increase by 3 million children. Consequently, 20 million children would be left out of the full child tax credit because their families earn too little, he said.

“It is raising the credit for wealthier families while excluding those vulnerable families from the credit,” Ruben said. “And that’s not a pro-family policy.”

Expect the reconciliation bill to be done 'at some point this summer': Punchbowl's Jake Sherman

A single parent with two children would have to earn at least $40,000 per year to access the full child tax credit under the Republicans’ plan, he said. For families earning the minimum wage, it may be difficult to meet that threshold, according to Ruben.

In contrast, an enhanced child tax credit put in place under President Joe Biden made it fully refundable, which means very low-income families were eligible for the maximum benefit, according to Elaine Maag, senior fellow at the Urban-Brookings Tax Policy Center.

In 2021, the maximum child tax credit was $3,600 for children under six and $3,000 for children ages 6 to 17. That enhanced credit cut child poverty in half, Maag said. However, immediately following the expiration, child poverty increased, she said.

The current House proposal would also make about 4.5 million children who are citizens ineligible for the child tax credit because they have at least one undocumented parent who files taxes with an individual tax identification number, Ruben said. Those children are currently eligible for the child tax credit based on 2017 tax legislation but would be excluded based on the new proposal, he said.

New red tape for a low-income tax credit

House Republicans also want to change the earned income tax credit, or EITC, which targets low- to middle-income individuals and families, to require precertification to qualify.

When a similar requirement was tried about 20 years ago, it resulted in some eligible families not getting the benefit, Maag said. The new prospective administrative barrier may have the same result, she said.

More than 2 million children’s food assistance at risk

Momo Productions | Digitalvision | Getty Images

House Republican lawmakers’ plan includes almost $300 billion in proposed cuts to the Supplemental Nutrition Assistance Program, or SNAP, through 2034.

SNAP currently helps more than 42 million people in low-income families afford groceries, according to Katie Bergh, senior policy analyst at the Center on Budget and Policy Priorities. Children represent roughly 40% of SNAP participants, she said.

More than 7 million people may see their food assistance either substantially reduced or ended entirely due to the proposed cuts in the House reconciliation bill, estimates CBPP. Notably, that total includes more than 2 million children.

“We’re talking about the deepest cut to food assistance ever, potentially, if this bill becomes law,” Bergh said.

More from Personal Finance:
Experts weigh pros and cons of $1,000 Trump baby bonus
How Trump spending bill may curb low-income tax credit
Why millions would lose health insurance under House spending bill

Under the House proposal, work requirements would apply to households with children for the first time, Bergh said. Parents with children over the age of 6 would be subject to those rules, which limit people to receiving food assistance for just three months in a three-year period unless they work a minimum 20 hours per week.

Additionally, the House plan calls for states to fund 5% to 25% of SNAP food benefits — a departure from the 100% federal funding for those benefits for the first time in the program’s history, Bergh said.

States, which already pay to help administer SNAP, may face tough choices in the face of those higher costs. That may include cutting food assistance or other state benefits or even doing away with SNAP altogether, Bergh said.

While the bill does not directly propose cuts to school meal programs, it does put children’s eligibility for them at risk, according to Bergh. Children who are eligible for SNAP typically automatically qualify for free or reduced school meals. If a family loses SNAP benefits, their children may also miss out on those benefits, Bergh said.

Health coverage losses would adversely impact families

A protestor holds a sign on May 7, 2025 in Washington, D.C.

Leigh Vogel | Getty Images Entertainment | Getty Images

Families with children may face higher health care costs and reduced access to health care depending on how states react to federal spending cuts proposed by House Republicans, according to the Center on Budget and Policy Priorities.

The House Republican bill seeks to slash approximately $1 trillion in spending from Medicaid, the Children’s Health Insurance Program and Affordable Care Act marketplaces.

Medicaid work requirements may make low-income individuals vulnerable to losing health coverage if they are part of the expansion group and are unable to document they meet the requirements or qualify for an exemption, according to CBPP. Parents and pregnant women, who are on the list of exemptions, could be susceptible to losing coverage without proper documentation, according to the non-partisan research and policy institute.

Eligible children may face barriers to access Medicaid and CHIP coverage if the legislation blocks a rule that simplifies enrollment in those programs, according to CBPP.

In addition, an estimated 4.2 million individuals may be uninsured in 2034 if enhanced premium tax credits that help individuals and families afford health insurance are not extended, according to CBO estimates. Meanwhile, those who are covered by marketplace plans would have to pay higher premiums, according to CBPP. Without the premium tax credits, a family of four with $65,000 in income would pay $2,400 more per year for marketplace coverage.

Continue Reading

Personal Finance

‘White collar’ jobs are down — but don’t blame AI yet, economists say

Published

on

Artificial intelligence makes people more valuable, according to PwC’s 2025 Global AI Jobs Barometer report.

Pixdeluxe | E+ | Getty Images

While there hasn’t been much hiring for so-called “white collar” jobs, the contraction is not because of artificial intelligence, economists say. At least, not yet.

Professional and business services, the industry that represents white-collar roles and middle and upper-class, educated workers, hasn’t experienced much hiring activity over the past two years.

In May, job growth in professional and business services declined to -0.4%, slightly down from -0.2% in April, according to the Bureau of Labor Statistics. In other words, the sector has been losing job opportunities, according to Cory Stahle, an economist at job search site Indeed.

Meanwhile, industries like health care, construction and manufacturing have seen more job creation. In May, nearly half of the job growth came from health care, which added 62,000 jobs, the bureau found.

More from Personal Finance:
Here’s what’s happening with unemployed Americans — in five charts
The pros and cons of a $1,000 baby bonus in ‘Trump Accounts’
Social Security cost-of-living adjustment may be 2.5% in 2026

However, economists have said that the decline in white-collar job openings is more driven by structural issues in the economy rather than artificial intelligence technology taking people’s jobs. 

“We know for a fact that it’s not AI,” said Alí Bustamante, an economist and director at the Roosevelt Institute, a liberal think tank.

Indeed’s Stahle agreed: “This is more of an economic story and less of an AI disruption story, at least so far.”

Artificial intelligence is still in early stages

There are a few reasons AI is not behind the declining job creation in white-collar sectors, according to economists.

For one, the decline in job creation has been happening for years, Bustamante said. In that timeframe, AI technology “was pretty awful,” he said.

What’s more, the technology is even now still in early stages, to the point where the software cannot execute key skills without human intervention, said Stahle.

Amazon's big bet on 'physical AI'

A 2024 report by Indeed researchers found that of the more than 2,800 unique work skills identified, none are “very likely” to be replaced by generative artificial intelligence. GenAI creates content like text or images based on existing data.

Across five scenarios — “very unlikely,” “unlikely,” “possible,” “likely” and “very likely” — about 68.7% of skills were either “very unlikely” or “unlikely” to be replaced by GenAI technology, the site found. 

“We might get to a point where they do, but right now, that’s not necessarily looking like it’s a big factor,” Stahle said. 

‘Jobs are going to transform’

A separate report by the World Economic Forum in January forecasts that by 2030, the new technology will create 170 million new jobs, or 14% of the current total employment.

However, that growth could be offset by the decline in existing roles. The report cites that about 92 million jobs, or 8% of the current total employment, could be displaced by AI technology.

For knowledge-based workers whose skills may overlap with AI, consider investing in developing skills on how to use AI technology to stay ahead, Stahle said.

Continue Reading

Trending