How Trump is triggering much wider private-sector job losses

The new Trump administration’s plan to freeze federal spending and cut the federal workforce might end up causing massive job losses in the private sector in the US and the world. The policy shift, designed to save taxpayers money, is already leading to lay-offs, budget freezes, and increased fears of economic instability and humanitarian assistance. Though US President Donald Trump and the Elon Musk-headed Department of Government Efficiency (DOGE) are looking to cut costs by firing government employees, there’s a ripple effect, and it is causing a massive ripple effect in the private sector, according to a report in the Washington Post.

The fear of job losses and hiring freezes comes amid a grim economic outlook for 2025.

The Chief Economists Outlook of the World Economic Forum (WEF) said several regions around the globe, including Europe, were expected to face challenges in 2025, while the US and India were projected to grow.

However, uncertain political conditions do not help boost economic growth. President Trump has brought uncertainties with his radical ideas.

The Washington Post report says that “several thousand private-sector jobs [have been] lost in the past two weeks since federal funding cuts and freezes took hold”.

MILLIONS OF JOBS DIRECTLY, INDIRECTLY DEPEND ON FEDERAL GOVT

It quotes a Brookings Institution study to say that the jobs of over 7.5 million Americans are directly connected to the federal government.

“There are millions more who work in positions indirectly connected to federal funding delays,” said the Post.

The US Agency for International Development (USAID) is significantly reducing its workforce.

It is retaining only 294 employees out of its current 10,000 global workforce. This restructuring, spearheaded by Tesla boss, Elon Musk—a close personal friend of President Trump—seeks to consolidate USAID with the State Department. This has been met with criticism.

USAID has also been asked to shut down its headquarters in Washington.

“It became apparent that it’s not an apple with a worm,” said Elon Musk about Trump’s nod to the closed headquarters on X. “What we have is just a ball of worms. You’ve got to basically get rid of the whole thing. It’s beyond repair.”

MASS LAY-OFFS TO HIT SOCIAL SERVICES, HIT CRITICAL PROGRAMMES

The economic effects of the spending cuts are starting to show.

In New York City, a new report from the Comptroller’s office shows how the federal freeze will impact human and social services, like domestic violence centres and senior centres. Nonprofit leaders warn that suddenly losing grants could lead to mass lay-offs and program closures.

Former USAID Administrator J Brian Atwood cautioned that the mass lay-offs would destroy the agency and hurt critical humanitarian programmes across the globe.

Labour unions have reacted by suing the administration, saying the mass dismissals and suspension of foreign aid are beyond the president’s powers.

US JOB CUTS EFFECT START SHOWING IN PRIVATE SECTOR

“So far, the fallout includes rescinded contracting jobs in Fayetteville, North Carolina, and Austin; layoffs at an independent-living facility in West Virginia that relies on federal funding to pay staffers; and furloughs at after-school programmes in Maine and community health centers in Virginia facing federal funding delays,” the Washington Post reported.

The full impact of the domino-effect on the private sector will take weeks to show, believe experts.

Economists warn that with the overall job market solid for now — unemployment is at 4.1% and there are more job openings than jobseekers — the effects of the job losses won’t show up in national job data for weeks or months.

The Post reports government contractors were “scrapping projects and announcing lay-offs”.

Chemonics International furloughed more than 600 American workers and cut work hours for 300 other employees. Maryland-based DAI Global furloughed 400 staffers, almost 70% of its US workforce.

Chemonics International’s crisis is linked to the USAID cutbacks.

The Trump administration has acted fast to reduce the public sector workforce, putting close to 10,000 USAID employees on leave and offering voluntary buyouts to millions of federal workers.

Through Wednesday evening, around 40,000 workers had accepted buyout deals, but a federal judge suspended the program deadline until a hearing next Monday.

The impact is being felt globally too.

One of the initial effects of the cuts in funding has been experienced in the Western Balkans, where US foreign aid has been a lifeline for non-governmental organisations (NGOs) that serve marginalised groups. In Kosovo, the sudden cut of approximately $162 million jeopardizes critical programmes for public institutions and women’s advocacy organisations. The sudden cut of aid alarmed experts about the rising instability and unrest in the region.

Domestically, in the US, non-profits that provide critical services, such as shelters for survivors of domestic violence, are in crisis. Many of these organisations rely heavily on federal funding, and the budget freeze has led to budget crises, layoffs, and cancellation of critical services to vulnerable populations.

So, as Trump goes on to cut back on federal spending, there are unintentional job losses in the private sector too, which might not bode well for the American economy.