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| | Elon Musk’s Department of Government Efficiency is taking a buzzsaw to government contracts and workforces at politically sensitive federal agencies. Those efforts will soon be visible in the U.S. labor market. The outplacement firm Challenger, Gray & Christmas reported that the feds announced the elimination of 62,242 positions across 17 agencies last month — and the losses weren’t limited to government jobs. Total reductions reported by U.S. employers swelled to more than 172,000 — the largest number since 2009 — as businesses reckoned with how President Donald Trump’s aggressive agenda could reshape the economy. “Private companies announced plans to shed thousands of jobs last month, particularly in Retail and Technology. With the impact of the Department of Government Efficiency [DOGE] actions, as well as canceled Government contracts, fear of trade wars, and bankruptcies, job cuts soared in February,” Andrew Challenger, a senior vice president and workplace expert for the company, said in a statement. Nela Richardson, the chief economist at ADP, cited policy uncertainty when the payroll processing firm’s monthly report on private sector hiring disappointed earlier this week. Trump’s deployment of Musk to slash away at government waste and abuse is being cheered by many Republicans as a long-overdue remedy for a bloated federal bureaucracy. But the releases from private data providers suggest that DOGE’s activities could ripple well beyond Washington and into the broader economy — potentially disrupting businesses that depend on federal contracts. Probationary employees across the government have been let go (some have been brought back — for now). Contracts have been canceled and funds have been frozen (some have been unfrozen — for now). Some Wall Street analysts now estimate that workforce cuts could climb into the hundreds of thousands over the course of 2025, Bloomberg reported. Still, economists expect the Labor Department to report on Friday that the U.S. economy added a solid 170,000 jobs last month while unemployment held steady at 4 percent. But the surveys used to construct the monthly jobs report ask employers and households about the pay period that covers an earlier period of the month — before many DOGE-related workforce cuts began in earnest — and it may take some time before the actual effects are fully visible in the data. “It’s going to take time for things to flow through. This is happening very fast – and it feels very fast — so people are expecting things to show up in the data as fast as things are happening in the news, and that’s just not how it works,” said Martha Gimbel, a former Biden administration economist who is now the executive director and co-founder of the Budget Lab at Yale. Unemployment insurance claims in the District of Columbia have been inching higher in recent weeks, Gimbel and Ernie Tedeschi wrote in a research note, which suggests that the workforce reductions may soon affect unemployment. And Bank of America researchers on Thursday reported that card spending growth in the Washington metro area had fallen 0.3 percent compared to last year, “likely due to DOGE job cuts.” Omair Sharif, president of Inflation Insights, told MM that the “prospects are there” for DOGE-related cuts to eventually impact the private sector more broadly, particularly in sectors like professional business services that rely on government contracts. He cautioned that the losses reported by Challenger in January and February are actually smaller than what the company reported during the same periods in 2023 and 2024. That means DOGE is “likely more of a March or April story,” he said. Still, Trump on Thursday told his Cabinet that staffing and policy decisions are ultimately their purview — not Musk’s — and that Musk’s role would remain limited to making recommendations, Dasha Burns and Kyle Cheney scooped. The president is famously sensitive to market forces and if government reductions are dragging down private sector hiring, there may be political consequences. IT’S FRIDAY — And a big tip o’ the hat to labor policy reporter Nick Niedzwiadek for talking me through this morning’s MM top. Send econ policy thoughts, Wall Street tips, personnel moves or general thoughts to me at ssutton@politico.com.
| | The Labor Department will release the February jobs report at 8:30 a.m. … New York Fed President John Williams and Fed Chair Jerome Powell speak at the annual U.S. Monetary Policy Conference in New York at 10:15 a.m. and noon, respectively … It’s a mad, mad, mad tariff day — Trump’s tariff war with Canada and Mexico will now exclude a significant portion of Mexican and Canadian goods until next month, Ari Hawkins, Doug Palmer and Daniel Desrochers report. The president’s retreat exempts critical imports like potash — which is used for fertilizer — along with 38 percent of imports from Canada and 50 percent of those from Mexico. — Trump’s arrival at the White House likely prompted U.S. companies to stock up on imports in anticipation of future levies. Doug reports that the trade deficit surged by 27 percent in January compared to the previous month, the highest month-to-month increase since March 1993, the Commerce Department said in its monthly report. — Traders are now ‘risk off,’ write Bloomberg’s Ryan Vlastelica and Jess Menton: “Wall Street Goes From Hope to Panic as Nasdaq 100 Nears a Correction” Don’t sweat it — Treasury Secretary Scott Bessent delivered a provocative speech at the Economic Club of New York on Thursday, brushing aside concerns about how tariffs may affect prices. “Access to cheap goods is not the essence of the American Dream,” he said. “The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility, and economic security. For too long, the designers of multilateral trade deals have lost sight of this. International economic relations that do not work for the American people must be reexamined.” — Bessent also said he’d utilize his power as the head of the Financial Stability Oversight Council to better coordinate federal regulation. He said the Trump administration was focused on “responsibly deregulating the financial sector.” — And in major news for big banks, Bessent called for a review of “backward-looking” regulatory policies put in place in response to the 2008 global financial crisis, Michael Stratford reports. He singled out the enhanced supplementary leverage standard as an area regulators should review and suggested he would support easing that capital requirement on banks. The nation’s largest banks have been asking regulators to stop counting Treasuries in the calculation, which they say punishes banks from holding those low-risk assets. Bessent said he wasn’t endorsing a specific policy but embraced the arguments from big banks that the current standards “risk becoming a binding constraint instead of a backstop.”
| | The crypto reserve – Trump on Thursday signed an executive order creating a strategic reserve for crypto, tasking federal law enforcement agencies with sending seized bitcoin assets to a “digital Fort Knox,” while other seized digital assets will be sent to “U.S. Digital Asset Stockpile,” the administration’s crypto and artificial intelligence czar David Sacks announced on X. As Jasper Goodman reports, “the order is part of a broad shift in Washington toward policies aimed at benefiting the crypto industry.” Top crypto executives will convene later today for a first-ever industry summit at the White House. It’s not exactly what Satoshi Nakamoto, the pseudonymous creator of bitcoin, envisioned for the industry, our Declan Harty reports, and the market’s initial reaction to Trump’s executive order suggests it fell far short of what many industry heavyweights wanted. Bitcoin prices fell after Sacks announced the formation of the reserve, though they later pared back those losses. Nakamoto created bitcoin to become a decentralized means of transferring money, one that existed outside the control of financial giants and central banks. Yet, in the years since, the industry has expanded in once unthinkable ways. (See: NFTs, Fartcoin and the tokenization of stocks.) And now, crypto executives are heading to the epicenter of American politics — a jarring sight to some. “The whole point of it was that it was apolitical; it empowered the individual over the state, and there’s just been a complete reversal on this and a total lack of ideological consistency, especially among the bitcoin community,” Castle Island Ventures’ Nic Carter told our Jasper Goodman this week. “So I’m really disappointed that people are prioritizing their wallets over the norms that they’ve embraced.” The reality, of course, is that crypto could only go so far outside the federal government’s oversight. And Trump is laying the groundwork for a friendly regulatory environment that has executives and lobbyists giddy. As for what the summit will yield, all bets are off. Coinbase is hosting a reception after the summit for both attendees and members of the administration, a spokesperson told Jasper. A student debt switch-up? — Trump said Thursday he’s considering options to transfer management of the federal government’s $1.6 trillion portfolio of student debt to the Treasury Department, Small Business Administration or Commerce Department, our Michael Stratford reports. The reorganization, which would require congressional approval, is part of Trump’s broader effort to shut down the Education Department, which currently manages student loans. — Trump said SBA chief Kelly Loeffler “really liked” the idea of moving student loans to her agency and “really would like to do so.”
| | Major decision — Kyle Cheney and Nick Niedzwiadek report U.S. District Judge Beryl Howell reinstated Gwynne Wilcox to the National Labor Relations Board on Thursday, a major blow to Trump’s attempt to challenge a federal law that bars presidents from removing board members at independent agencies absent “neglect of duty or malfeasance in office.” Big day for the econ team — The Senate Banking Committee on Thursday advanced Trump’s nomination of Jonathan McKernan to lead the Consumer Financial Protection Bureau, overcoming the opposition of Democrats who have raised alarms at the Trump administration’s attempt to stop work at the consumer watchdog, Katy O’Donnell reports. — Stephen Miran, Trump’s pick to lead the Council of Economic Advisers, was also advanced to the full Senate by a 13-11 party line vote. A policy framework crafted by Miran shortly after Trump’s election to a second term has been widely cited by Wall Street as a guidebook for how the new administration may approach trade, currency and foreign policy. — Bill Pulte, Trump’s pick to be the next director of the Federal Housing Finance Agency, on a 15-9 vote, Katy reports. Treasury presses for DOGE — More from Stratford: “The Treasury Department plans to ask a federal judge to narrow an order blocking Musk’s Department of Government Efficiency team from accessing government financial systems, arguing the agency has put in place adequate vetting and training protocols to safeguard sensitive data.”
| | First in MM: Kim, Warren press ChexSystems on “debanking” — Sen. Andy Kim of New Jersey and Elizabeth Warren of Massachusetts on Thursday pressed ChexSystems CEO Ronald Whyte for answers on how the consumer reporting system — which gauges customers for banks and financial services companies — assesses customers for risk. “Every American who wants a checking account should be able to have one, and debanking represents a threat to millions of Americans financial well-being. It is critical that Congress determine the reasons for this debanking – including determining the role of middlemen like ChexSystems,” they wrote, according to a copy shared with MM. Whyte did not immediately respond to a request for comment. Scott’s moves on “debanking” – Senate Banking Chair Tim Scott (R-S.C.) introduced legislation Thursday to combat debanking by barring regulators from using “reputational risk” as a criteria for supervising financial institutions, Katherine Hapgood reports.
| | Max Castroparedes has launched Pax American Strategies LLC, an advisory firm that will specialize in providing political intelligence and strategic advice to asset managers, merchant banks, political campaigns, and sovereign wealth funds. He served in the Department of Homeland Security in the first Trump administration and is also an alum of the Foundation for the Defense of Democracies. – Daniel Lippman | | | | Follow us on Twitter | | | | Follow us | | | |
