What US federal government employment cuts will mean

The risks around the forecast for federal government employment are skewed to the downside because of the limited scope for stronger federal hiring and the potential for more aggressive efforts by a second Donald Trump presidency to reduce payroll.

What you will learn:

• To gauge the potential risks to the forecast, we created four scenarios around federal government employment. The scenarios show weaker GDP growth and a higher unemployment rate, relative to the baseline, but only under the more extreme assumptions.
• Though the macroeconomic implications are modest, the cuts in federal government employment would hurt some regional economies more than others. Those metro areas with the highest number of federal jobs per capita are those that would be the most vulnerable.
• We will incorporate a federal hiring freeze into the December baseline forecast, but this won’t be enough to change our expectations for the overall stance of fiscal policy, which will remain loose in the coming years.