Federal layoffs raise questions and concerns.
Let’s take a closer look…
In the past week, the Department of Government Efficiency (DOGE) has garnered significant attention for its efforts to reduce the federal workforce.
- How might this impact the US employment picture? Many have raised concerns on the broader effect on US employment; however, it may not be as significant as it first appears. When evaluating the potential effects of these layoffs, it's important to consider the percentage of American workers impacted.
- How many people are we talking about? As of the end of January, there were approximately 161 million1 employed people in the US, of which 2.4 million were federal civilian employees.2 This means that federal employees account for just 1.5% of the US workforce. For context, state and local government employees represent a much larger share of the workforce (nearly 13%).3 Additionally, according to current economists' projections, the potential peak in federal job losses would account for less than 0.5% of current non-farm jobs in the US.4
- On Thursday, the Labor Department released its weekly report indicating a higher-than-expected increase in initial jobless claims.5 While not an immediate cause for concern, this is something we’ll be monitoring. Despite potential federal workforce reductions, we remain optimistic about economic growth, driven by strong corporate earnings and unemployment which is still very low.
- It’s important to remember that a diversified portfolio of stocks and bonds may help investors weather today's uncertain environment. Policy developments and their potential impacts are being closely watched.
Institutional Portfolio Manager, Strategic Advisers LLC
"Given the current news cycle, it's easy to get fixated on a single economic measure or data point. However, it's crucial to remember that our investment approach is shaped by a mosaic of factors, including corporate profitability, credit availability, and the job market, among others."
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For over 30 years, Strategic Advisers and its dedicated group of seasoned investment professionals have helped clients reach their financial goals. Our team of portfolio managers, with specialized areas of focus in asset allocation and specific asset classes, along with our deep quantitative and fundamental research, drive our investment selection and risk management decisions on behalf of our clients.