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Do Federal Layoffs Have Ripple Effects on Local Economies?, No. 25-36

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Do Federal Layoffs Have Ripple Effects on Local Economies?, No. 25-36

DATE: September 2025

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Recent federal workforce reductions raise questions about potential broader labor market implications. Federal employees — which total about 3 million workers nationwide — represent a relatively small fraction of total U.S. employment (1.8 percent of the total U.S. workforce). Because of this, government layoffs are unlikely to generate significant macroeconomic effects. However, they may create substantial regional labor market disruptions in areas with high concentrations of government workers. Understanding these localized impacts requires examining the spillover effects that occur when changes in one sector ripple through the broader regional economy.

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Borovičková, Katarína and Macaluso, Claudia. "Do Federal Layoffs Have Ripple Effects on Local Economies?, No. 25-36," Economic Brief (September 2025). https://fraser.stlouisfed.org/title/6034/item/705455, accessed on December 14, 2025.

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