A leading Wall Street analyst says the wave of government layoffs driven by Elon Musk’s DOGE initiative—the so-called Department of Government Efficiency—marked the end of a three-year rolling recession in the U.S. Michael Wilson, Chief U.S. Equity Strategist at Morgan Stanley and one of the market’s most respected voices, shared this view in the firm’s latest US Equity Strategy note, published September 15.
According to Wilson’s analysis, the so-called Liberation Day price lows in April 2025 capped a “rolling recession,” his phrase for a recession that didn’t register in GDP data but rather rolled sequentially through different sectors of the economy, which he believes likely started in 2022. This was characterized by persistent sector-by-sector earnings weakness, widespread negative job growth, and periodic surges in announced layoffs. You weren’t crazy to think that the last three years felt like a recession, Wilson has been consistently arguing. The “rolling” nature of this recession meant different sectors hit their troughs at different times, but Wilson argues that the government sector was the last domino to fall—with DOGE’s mass layoffs acting as a clear inflection point.
In Morgan Stanley’s outlook for 2025, Wilson notes, the bank highlighted that DOGE might lead to a “government labor cycle” and against that backdrop, “we believe the DOGE layoffs marked the end of the rolling recession that likely began 3 years prior.” He cited the bank’s projects that job cuts over the period lasting from 2022-2025 were roughly 30% higher on average than during the last economic expansion that lasted from 2010 to 2019.
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