The Economic Legacy of DOGE

The deck:

DOGE is the Largest Peacetime Cut to the Federal Workforce in Modern US History, But it Failed its Supposed Budget-Cutting Goals & Broke Important Agencies

After a chaotic six months, DOGE itself was functionally shuttered, and Elon was out as part of a then-acrimonious breakup over his opposition to the increased deficit spending in the “One Big Beautiful Bill.” Yet it took until today before we could finally examine the macroeconomic impacts of DOGE, as all the federal employees on deferred resignation programs were only formally laid off near the end of 2025.

DOGE’s legacy is officially the single-largest annual decline in the federal workforce in 75 years—with total federal employment down by roughly 277k, or more than 9%, since Trump’s inauguration. That’s as large as the drop in employment seen at the end of the Korean war or during the post-Cold War “Peace Dividend,” except concentrated over a period of less than a year and focused more heavily on civilian instead of military employment. It’s also a stark contrast from Trump’s first term, which saw total federal employment rise by 70k. The share of the US workforce employed by the federal government, already hovering near historical lows before DOGE, was knocked down to the lowest level in modern history.

Yet even though DOGE was wholly unable to reduce the federal deficit, it still had important lasting effects throughout the economy. Washington, DC, is now in a localized recession, with the city losing 4.2% of all its jobs over the last year—the district’s fastest pace of decline in 75 years outside of the early pandemic. In nearby Maryland and Virginia, which also have significant federal presences, employment is down 0.5% and up a meagre 0.2%, respectively. Yet federal jobs were lost in every single US state and territory, with 80% of the drop in federal employment occurring outside of the broader DC area, boosting overall unemployment across the country. Many of the government’s most important science and health agencies saw severe employment losses that it will be difficult to recover from—and of course, the heavy cuts to the extremely small share of the budget spent on effective international aid programs will harm long-run global economic growth.

By and large, federal workers can be split into four categories. First, there are the 1.5M bureaucrats, administrators, lawyers, analysts, social workers, researchers, and support staff for civilian agencies. Second, there are the 600k delivery, sorting, and management workers of the US Postal Service, America’s largest state-owned enterprise. Third, there are the 560k defence employees at the Pentagon and other US military installations (though active-duty soldiers are not counted as employees). Finally, there are the 370k doctors and nurses at government-run hospitals for the Department of Veterans Affairs and the Indian Health Service. In the months since DOGE began its work, about 12.4% of nondefense civil servants were out of a job, an identical 12.4% of military employees, about 3.7% of federal hospital employees, and 1.8% of USPS employees. That means the majority of job losses, 182k of the 277k total, occurred at civilian bureaucratic agencies.

Handy chart:

The only major agency that added jobs was Immigration & Customs Enforcement (ICE), which hired roughly 6k new workers over the last year amidst Trump’s mass deportations push, while the Department of Homeland Security is the only major department that added jobs. ICE claims hiring has accelerated further in recent months and that the agency has actually added another 6k jobs since November, the last month for which official data is available. In total, this means that while DOGE did not have macroeconomically significant budget impacts, it did have important effects on the US job market.

Of the net 277k federal employees who lost their jobs over the last year, roughly 40% still remain out of work amidst America’s weakening job market, pushing the unemployment rate for former feds to the highest level since early COVID. Given how many employees simply moved into retirement rather than look for other jobs, it’s plausible that an outright majority of working-age former feds are still unemployed. This is large enough to be a measurable driver of rising aggregate unemployment—total unemployment levels rose by roughly 660k over the last year, of which the rise in former federal unemployment contributed roughly 110k.