Labor Market Wobbles Amid Federal Layoffs

Job growth slows as government efficiency initiatives impact white-collar sector.

A noticeable deceleration in the labor market is coinciding with significant layoffs in the federal government, creating challenges for those seeking new employment.

Hiring Slowdown

The reduction in hiring and available job openings arrives as hundreds of thousands of federal employees seek work after layoffs initiated by the Department of Government Efficiency (DOGE), championed by Elon Musk.

Private sector hiring unexpectedly declined by 33,000 jobs in June, according to payrolls processor ADP. Economists had anticipated an increase of 100,000.

Data from the Indeed Hiring Lab suggests the impact from the DOGE layoffs is poised to intensify.

Diminished Demand for White-Collar Roles

“There are still a lot of questions about how that’s all going to trickle into the labor market. A lot of people are out there looking for work from the federal government,” said Indeed senior economist Cory Stahle.

He added, “The big question is whether or not they’re going to be able to find them given the weaker demand for the higher education, white-collar jobs now.”

Bureau of Labor Statistics data indicates that job openings decreased by 5% from January to April. The hiring rate has remained stagnant around levels last observed in 2014.

According to Indeed, applications from former federal workers have surged by 150%, particularly in knowledge-based sectors like data analytics, marketing, and software development. While May saw a slight 4% decrease in applications, the DOGE initiatives continue to exert pressure on the overall labor market.

“Demand coming from employers has really pulled back a lot more for these white-collar jobs than it has for many of other kind of in-person skilled labor roles,” Stahle explained. “So that’s a real big challenge for anybody entering the labor market right now.”

Economic Context

As of June 2025, 6.3 million Americans are unemployed, a figure that highlights the ongoing challenges in the labor market (U.S. Bureau of Labor Statistics).

Policymakers are closely monitoring these trends, considering the impact of the DOGE factor on the previously robust labor market recovery following the Covid pandemic.

The BLS is scheduled to release the June nonfarm payrolls figures. Dow Jones economists predict an increase of just 115,000 jobs.

If this projection proves accurate, each month of the first half of the year will have generated fewer than 150,000 new jobs. This would mark the slowest start to a year since the financial crisis, excluding the pandemic year of 2020.

The unemployment rate is anticipated to rise slightly to 4.3%.

Challenger, Gray & Christmas estimates that DOGE efforts have eliminated over 280,000 federal positions this year.

While assessing the precise impact on overall job numbers remains challenging, many displaced workers have secured alternative employment, and some initial layoffs have been reversed. Federal job openings remain relatively stable this year, though whether these positions will be filled is uncertain.

Stahle emphasized that factors beyond the Trump administration’s efforts to reduce federal workforce size are affecting job seekers.

The Federal Reserve’s elevated interest rates are also impacting the availability of tech jobs, despite persistent calls from President Donald Trump to ease monetary policy.

Higher interest rates deter tech companies from borrowing, thereby limiting expansion and hiring.

“A lot of the tech startups and other companies rely on borrowing to grow and hire, and if the cost of borrowing goes up, it can naturally restrict things,” Stahle stated.

He added, “They went on a hiring spree [after the Covid pandemic]. They brought in a lot of people and haven’t necessarily needed to hire as a result.”