There are a couple of things that this potentially misses. First, the Trump administration has created _tremendous_ uncertainty with the bull-in-a-china-shop actions. I would think that this would make it extremely unlikely that hiring will take place for all but the most desperate employers. Second, government jobs aren't all the layoffs -- those are easy to count. Contracts are getting canceled for private entities and that may well lead to more layoffs (some have been reported). Third, most of these jobs are largely white-collar jobs for educated people and a replacement may take longer to find than, say, a layoff in one factory in a town that has several factories, even if there are companies hiring.
Also take note of the notable rise in delinquency rates on auto/credit cards and the worse-than-expected January retail sales data. And the uncertainty isn't just in employers, it may well be that it's a factor for consumers as well.
It's not looking very positive, but I'd love for you to disabuse me of my pessimism.
I think this is a dicey time for the economy, absolutely. All that you mention and more, like borrowing rates for the private sector and public borrowing is poised to go up. I didn't even mention what deportation could do once scaled up.
And it's worth saying, the other thing to keep in mind about recessions is that one is ALWAYS coming. We have a cyclical economy, we are always going to have another recession.
So I tend to think less about whether one is happening soon and more: are we ready, who is vulnerable, what are the potential accelerants, what would we learn. If we do slip into a recession in the next 6 months, it would arguably the first in the US caused by an administration. So you can read that as "for all the worry, the economy is pretty tough in the face of terrible policy" or "maybe there's just a silver lining that the egregious policy and management is exposed for what it is."
I'm retired from 27 years federal service with DoD. I was RIF'd once in that time and I went through a number of drawdowns with the BRAC actions in the SF Bay Area. After the RIF, I worked overseas for DoD for fifteen years. Hiring actions were always delayed, at least at branch offices, for 6 months minimum to improve the top line. The fastest a position can be filled is three months by regular selection although you can cut that short if you have an eligible name. Normally it took over a year to fill replacements for our US positions overseas. Remainers have to make it work in the meantime and there's a lot of pressure. That is the situation going into Doge. It took me 18 months to get my last security clearance and an FBI agent flew out to Japan to interview me. The administration can still quickly backfill the essential positions by name selecting out of the Project 25 web database of people who passed the loyalty exam, or by declaring an emergency and sole source transitioning duties to private contractors. Before they can do the latter, they'd have to master the procurement system. Currently procurement officers have qualifications that take a while to get. The government is like a big ball of tangled string, and a lot of the work is straightening out the confusion, which is best done by patient and tolerant human beings. I can't say how DOGE will affect the interface between business and government, but I do believe there are quite a few businesses that do not wish to just be left alone by the Government, and there may be some overconfidence in the conceit that such businesses can uniformly be served without interuption after this in a manner sufficient to grow profits as they have been doing thus far in this frothy market. Any financial hiccup is likely to go off now about as well as an auto backfire outside a turkey farm. This is dangerous for the Heritage 'patriots' and their congressional enablers, and it's unlikely to further Elon's raison d'être of colonizing Mars, although the poor guy seems to be enjoying himself.
If layoffs reduce spending which reduces economic activity which could lead to a recession, then could an increase in spending lead to an economic boom? What should the Trump administration do if they wanted to layoff a bunch of government workers but also create a booming economy? Stimulus checks? Or for a more lasting effect, maybe raise the minimum wage?
The size of the US economy is very well predicted by the number of people working in it. If you want strong, stable growth, you want workers. Related, about 65% of the economy is made up of the spending of households, fueled largely by their earned income. The use of stimulus checks is to spur household spending when it is otherwise falling. It has no effect when the economy is strong.
If we want a booming economy we'd be pursuing labor supply policy to draw more people into the labor force, like child care and better workplace standards and rights.
There are a couple of things that this potentially misses. First, the Trump administration has created _tremendous_ uncertainty with the bull-in-a-china-shop actions. I would think that this would make it extremely unlikely that hiring will take place for all but the most desperate employers. Second, government jobs aren't all the layoffs -- those are easy to count. Contracts are getting canceled for private entities and that may well lead to more layoffs (some have been reported). Third, most of these jobs are largely white-collar jobs for educated people and a replacement may take longer to find than, say, a layoff in one factory in a town that has several factories, even if there are companies hiring.
Also take note of the notable rise in delinquency rates on auto/credit cards and the worse-than-expected January retail sales data. And the uncertainty isn't just in employers, it may well be that it's a factor for consumers as well.
It's not looking very positive, but I'd love for you to disabuse me of my pessimism.
I think this is a dicey time for the economy, absolutely. All that you mention and more, like borrowing rates for the private sector and public borrowing is poised to go up. I didn't even mention what deportation could do once scaled up.
And it's worth saying, the other thing to keep in mind about recessions is that one is ALWAYS coming. We have a cyclical economy, we are always going to have another recession.
So I tend to think less about whether one is happening soon and more: are we ready, who is vulnerable, what are the potential accelerants, what would we learn. If we do slip into a recession in the next 6 months, it would arguably the first in the US caused by an administration. So you can read that as "for all the worry, the economy is pretty tough in the face of terrible policy" or "maybe there's just a silver lining that the egregious policy and management is exposed for what it is."
I'm retired from 27 years federal service with DoD. I was RIF'd once in that time and I went through a number of drawdowns with the BRAC actions in the SF Bay Area. After the RIF, I worked overseas for DoD for fifteen years. Hiring actions were always delayed, at least at branch offices, for 6 months minimum to improve the top line. The fastest a position can be filled is three months by regular selection although you can cut that short if you have an eligible name. Normally it took over a year to fill replacements for our US positions overseas. Remainers have to make it work in the meantime and there's a lot of pressure. That is the situation going into Doge. It took me 18 months to get my last security clearance and an FBI agent flew out to Japan to interview me. The administration can still quickly backfill the essential positions by name selecting out of the Project 25 web database of people who passed the loyalty exam, or by declaring an emergency and sole source transitioning duties to private contractors. Before they can do the latter, they'd have to master the procurement system. Currently procurement officers have qualifications that take a while to get. The government is like a big ball of tangled string, and a lot of the work is straightening out the confusion, which is best done by patient and tolerant human beings. I can't say how DOGE will affect the interface between business and government, but I do believe there are quite a few businesses that do not wish to just be left alone by the Government, and there may be some overconfidence in the conceit that such businesses can uniformly be served without interuption after this in a manner sufficient to grow profits as they have been doing thus far in this frothy market. Any financial hiccup is likely to go off now about as well as an auto backfire outside a turkey farm. This is dangerous for the Heritage 'patriots' and their congressional enablers, and it's unlikely to further Elon's raison d'être of colonizing Mars, although the poor guy seems to be enjoying himself.
Thank you.
If layoffs reduce spending which reduces economic activity which could lead to a recession, then could an increase in spending lead to an economic boom? What should the Trump administration do if they wanted to layoff a bunch of government workers but also create a booming economy? Stimulus checks? Or for a more lasting effect, maybe raise the minimum wage?
The size of the US economy is very well predicted by the number of people working in it. If you want strong, stable growth, you want workers. Related, about 65% of the economy is made up of the spending of households, fueled largely by their earned income. The use of stimulus checks is to spur household spending when it is otherwise falling. It has no effect when the economy is strong.
If we want a booming economy we'd be pursuing labor supply policy to draw more people into the labor force, like child care and better workplace standards and rights.