Washington is struggling with a sharp increase in unemployment after DOGE cuts in the government administration. “This threatens the key economic engine of the US capital, which is consumer spending,” CNN News analysts warn.
In the US, about 2.4 million people are employed by the US federal government (excluding the military and postal service). As many as 17 percent of them live in the capital. So far, as a result of the budget cuts by Trump and his associates, 103 thousand employees have been dismissed throughout the United States. This is visible, among other things, in the increase in the number of initial applications for unemployment benefits.
However, analysts believe this is just the tip of the iceberg. Oxford Economists predict that 33,700 federal workers in the capital alone will lose their jobs. The local labor market cannot absorb everyone. These reductions mean $4.9 billion in lost wages and an equal amount less consumer spending.
According to Moody's, Washington could fall into recession this year. The data shows that the first thing laid-off workers do is cut their expenses while looking for new jobs. They cook at home, avoid going to the theater, and in the long run of unemployment, they consider moving to “cheaper” states.
– The cuts will first be felt by consumer industries, such as retail and hospitality – says Adam Kamins, regional economics director at Moody's. – Ultimately, however, it could generate a ripple effect that will sweep through the economy – he adds. And explains:
The recession in Washington will be noticeable in the second half of this year, but I wouldn't be surprised if it actually started in March.
Already, cafe owners in the US capital are seeing a drop in traffic of around 25-30% compared to January. As they mention on CNN News, although they survived the pandemic, they may not survive Trump 2.0 . The housing market is similar – the number of houses for sale began to grow at the end of January and was over 56% higher than during the same period last year. Prices are also slightly lower.
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