I’ve been worried about Trump causing a recession. First, he firing federal workers willy nilly, and even if we accepted the idea that these people aren’t doing anything useful, they spend their salaries on groceries, household goods, haircuts, restaurant meals, home improvement, etc. Second, he is cutting federal contracts suddenly. A chunk of the private sector and certainly the research sector relies on federal contracts in one form or another, so this uncertainty will tamp down hiring and lead to layoffs. Then there is all the money that flows from the federal government to state and local governments and economies. That won’t just get magically replaced by state and local programs overnight, if ever. Then you have the tariffs and reduction of trade on top of all that. It sounds like a recipe for a recessionary shock to me.

I’m not an economist, but Claudia Sahm is. Here’s what she has to say, backed up by some facts and figures.

Civilian federal employment (including the Post Office) is currently 3 million or less than 2% of the labor force… About 100,000 workers have either taken deferred resignation or been laid off so far. Even if the total reduction doubles by the end of the year, it would still fall far short of a recessionary shock.

In fiscal year 2023, there were about three times as many federal contractors and grant employees as civilian federal employees (including the Post Office). DOGE canceling or modifying federal contracts and grants put that employment at risk. Elon Musk has set a goal of $1 trillion in savings this year, which most budget experts consider unrealistic. Still, these efforts will lead to a reduction in employment in the private and nonprofit sectors.

But even if DOGE reduces federal employment by 200,000 and canceling contracts reduces contact and grant employment (by a proportional) 600,000, the total is below (though close to) a recessionary shock. Moreover, the reality of the net employment reductions from DOGE this year is likely to be considerably smaller.