DOGE Government Layoffs Begin to Cast Shadow Over U.S. Labor Market

Washington, D.C.: With the June jobs report due for release Thursday, analysts are warning that federal layoffs under the Department of Government Efficiency (DOGE) may begin to impact broader labor market data after months of limited effect.

The program, spearheaded by the Trump administration and led by Elon Musk, has cut more than 280,000 federal positions this year, according to data from Challenger, Gray & Christmas. While previous monthly payroll reports showed resilience, economists now point to a shift as job openings decline and applications from federal workers spike.

“There are still a lot of questions about how this is going to trickle into the labor market,” said Cory Stahle, Senior Economist at Indeed Hiring Lab. “The big question is whether or not these workers can find jobs, especially given weaker demand for white-collar roles.”

White-Collar Job Market Under Pressure

Applications from federal agency workers have increased by 150% since the start of the year, particularly in areas like data analytics, marketing, and software development, according to Indeed.

From January through April, the number of U.S. job openings fell by 5%, while the hiring rate hovered at levels not seen since 2014, based on data from the Bureau of Labor Statistics (BLS).

Even as some layoffs have been reversed and job postings remain open at the federal level, demand from private employers for white-collar roles remains subdued. Stahle notes that while in-person skilled jobs have remained relatively stable, knowledge-based positions have become harder to land.

“Employer demand has pulled back much more for these jobs than for skilled labor,” he added. “That’s a real challenge for anyone trying to reenter the workforce now.”

June Jobs Report in Focus

The BLS will release the June nonfarm payroll report Thursday, with economists surveyed by Dow Jones expecting 110,000 new jobs. If accurate, that would mark the sixth consecutive month of sub-150,000 gains, making the first half of 2025 the weakest start to a year since the 2008 financial crisis, excluding the pandemic in 2020.

The unemployment rate is projected to rise slightly to 4.3%.

These figures follow a disappointing private payroll report from ADP, which recorded a 33,000 job loss in June, well below expectations for 100,000 gains.

“The job market may still look solid from a distance, but it’s increasingly being held up by fewer and fewer sectors,” Stahle said.

Broader Economic Factors Weigh In

Beyond the DOGE layoffs, elevated interest rates are putting pressure on tech-sector hiring. Many startups and tech companies rely on borrowed capital to grow, and persistently high rates have discouraged expansion.

President Donald Trump has demanded the Federal Reserve lower interest rates, but Fed Chair Jerome Powell has held firm, citing the need to assess economic data further. Trump’s recent public statements included a call for Powell’s resignation.

“Startups went on a hiring spree post-Covid,” Stahle said. “They brought in a lot of talent early and now don’t necessarily need to keep expanding, especially when capital is expensive.”