Trump's war on the federal bureaucracy may already be hurting DC's economy

The White House, located in Washington DC. Photo / 123RF

A little more than a month into the Trump administration's hiring freeze, the federal government's footprint in Washington, DC, is already starting to shrink.

The region lost 2,700 federal jobs between January and February, according to data released Friday by the Bureau of Labor Statistics, in what could be the first real impact of President Trump's policies on the health of the local economy.

Most of the losses came in the District proper, as opposed to the suburban periphery that has a larger presence of federal contractors.

Such monthly fluctuations can reverse themselves quickly and are often attributable to measurement error. But some prominent local economists say the dip in the numbers could be a result of the hiring freeze the president announced in late January.

"In certain agencies morale is pretty low, and some people are deciding that they've had enough," said Anirban Basu, a regional economist with Sage Policy Group. "At the same time there is little inflow with respect to hiring because the freeze is in place."

The reduction in federal employment hits as the local economy is coming off one of its best years in recent memory. The DC metropolitan area added 62,400 jobs in the one-year period ending in February, according to the new government data.

Unemployment rates held steady in Maryland and the District at 4.2 per cent and 5.7 per cent, respectively, and dropped to 3.9 per cent in Virginia, despite a healthy influx of new job-seekers.

Beyond the immediate hiring freeze, Trump is proposing big reductions to federal agencies such as the State Department and the Environmental Protection Agency, cuts that probably would have an outsize impact on the DC area.

Office of Management and Budget Director Mick Mulvaney has said the agency cuts would probably mean layoffs, and the budget cuts Trump is seeking could hurt federal contractors.

A preliminary analysis by the Stephen S. Fuller Institute at George Mason University predicts that the president's budget in its current form would cause the region to lose at least 20,000 federal jobs and take at least $2.3 billion in federal salaries out of the economy. The same analysis predicted that the budget would eliminate up to 12,000 private-sector contractor jobs here by decreasing procurement spending.

"I think this underscores our vulnerability to future federal cutbacks," said the institute's namesake, economist Stephen S. Fuller. "There is already a dampening of growth being experienced in the Washington area because of the uncertainty of the new administration."