Mass layoffs are sweeping across Washington, D.C.’s largest employer, prompting fears of a recession for the region. The federal government, which has historically bolstered the local economy, is facing significant downsizing under the Trump administration’s policies, including the revocation of remote work flexibility. Over 75,000 federal employees have resigned, leading to increased competition for private sector jobs. Municipal leaders express anxiety over potential threats to D.C. self-governance, as recent Republican proposals target the city’s local authority. While D.C. aims to diversify its economy, including hosting major events like WorldPride, the outlook remains uncertain amid ongoing federal upheaval.
Mass layoffs are underway among the city’s largest employer, pushing economic predictions for the Washington, D.C. area closer to a recession. Real estate professionals are preparing for a potential downturn in the housing market. Furthermore, the very existence of the municipal government, which oversees the daily operations of a city that houses more residents than several U.S. states, is facing immediate jeopardy.
The tumultuous changes brought about by the Trump administration in Washington, which the president regards as the stronghold of the so-called deep state, will inevitably also impact the real Washington, home to millions of people who commute to work each day.
With over 300,000 federal government employees, the capital and its neighboring areas boast one of the most educated and high-paying workforces in the nation. The federal government has historically provided significant stability to the local economy, enabling the region to better endure economic downturns compared to much of the United States. However, the landscape is shifting.
“The federal government has long been a steadfast foundation for the District of Columbia,” stated Yesim Sayin, the executive director of the D.C. Policy Center, a research organization. “That no longer holds true.”
The Trump administration, alongside Elon Musk’s initiative called the Department of Government Efficiency, has severely compromised this foundation of stability. The president initiated this shift with an order on his first day that revoked federal employees’ flexibility to work remotely, and the situation has escalated with continuous rounds of layoffs. Nationwide, 75,000 federal employees have resigned following an incentive offer, and Mr. Musk’s announced plans, if implemented, could result in thousands more job losses.
Dan Binstock, a partner at Garrison, a Washington-based legal recruitment firm, mentioned that they have received approximately ten times the usual number of résumés from federal lawyers post-presidential transition. “The floodgates have opened,” he remarked. This mass exodus has resulted in a backlog in the private sector. “There’s a sense of helplessness due to the insufficient number of positions available to accommodate everyone.”
An economic downturn in the metropolitan area is almost inevitable in the near future, according to Terry Clower, director of the Center for Regional Analysis at George Mason University in Northern Virginia. Federal employees and many private businesses are likely to cut back on spending due to prevailing uncertainties. However, whether this economic slowdown escalates into a recession largely hinges on court rulings related to numerous lawsuits challenging the administration’s actions.
“If a significant portion of their plans is executed,” he commented, “it seems unavoidable that we could experience a recession this year.”
State and local officials are preparing for challenging times. The Virginia House of Delegates has established an emergency committee to address the repercussions of the Trump administration’s actions regarding federal employment, with House Speaker Don Scott declaring that the current plans “raise significant concerns for Virginia’s economy and the maintenance of essential services.”
In Maryland, Governor Wes Moore, a Democrat, cautioned during his annual State of the State address on February 5 about “the risks that new leadership in Washington might pose to our economy.” Despite a historically close relationship with the capital, which almost completely envelops it, Gov. Moore emphasized the need to reduce the state’s “distinct dependence on Washington.”
D.C. municipal leaders have thus far been more subdued. Mayor Muriel Bowser, a Democrat serving her third term, visited Mar-a-Lago prior to the inauguration to discuss potential collaboration with Mr. Trump, stating afterward that they “talked about areas where local and federal government could work together.”
Such diplomatic efforts are strategic, as the mayor noted, since the city remains “vulnerable to the whims of Congress and the president,” as she mentioned at a news conference on Thursday.
Since the passage of the D.C. Home Rule Act in 1973, Washington residents have gained some measure of control over their city’s governance, being able to elect a mayor and a local legislative body, the District of Columbia Council. However, Congress, which has no voting representative for D.C., retains the authority to veto local legislation — as it did in 2023 when it blocked a revision of the city’s criminal code — while the White House nominates local judges and appoints the chief prosecutor.
Right-leaning politicians have a long-standing tradition of criticizing Washington, frequently using it as a scapegoat for governmental issues, even though over 80% of federal employees reside and work outside the city. Nevertheless, their disdain for D.C. has rarely been as pronounced.
Republican lawmakers have introduced a series of bills targeting D.C., including one named after the current mayor, aimed at stripping the city—which has over 700,000 residents—of its already limited self-governance capabilities.
On Wednesday, Mr. Trump, who has referred to D.C. as a “filthy and crime-infested embarrassment to our nation,” appeared to echo similar sentiments. “I believe the federal government should assume control over D.C. governance,” he stated to reporters.
Mayor Bowser expressed concern regarding the president’s comments on Thursday, stating, “These comments create anxiety among our community members, induce anxiety among policymakers, and create unease for our businesses, which is simply an unnecessary distraction.”
If D.C. manages to retain its self-governance, Mr. Trump’s relentless campaign against symbolic Washington and its collateral impacts will make the city’s long-term vision for itself all the more critical.
Over the past ten years, Washington has sought to lessen its reliance on its major local employer. Long before the pandemic, a growing portion of office space downtown remained vacant. The onset of widespread telework due to Covid led to the decline of downtown, prompting the mayor to urge the Biden administration to either revoke telework for federal workers or sell off some of the unused federal properties. The leadership’s overarching goal was clear: to diversify the D.C. economy.
“We are no longer solely a hub for the federal government,” Nina Albert, the deputy mayor for planning and economic development, stated in a recent interview. “We are also a center for diverse businesses, cultural institutions, and emerging sectors like technology and others. Thus, we are increasingly focusing on that.”
Mr. Trump’s directive to discontinue telework will draw some federal employees back to downtown, and the administration’s proposal to divest some government real estate may result in the development of new mixed-use neighborhoods within the city. Though a failure in the real estate market might bolster housing affordability, all of this would come at a considerable price.
“While we aim for people to return to work, we’ve witnessed some resuming and, unfortunately, we’ve also seen significant job losses,” the mayor remarked on Thursday.
When asked how D.C. would navigate the impending economic uncertainty, Ms. Albert highlighted the city’s vibrant tourism sector. She noted that D.C. is set to host WorldPride, an international celebration of LGBTQ rights, in May and June, which officials project could attract between 2 to 3 million visitors. The festival’s lineup, announced on Tuesday, features performances by Jennifer Lopez and Grimes, a singer-songwriter with three children with Mr. Musk.
Nonetheless, very little within the city remains unaffected by its prominent new inhabitant. On February 6, Egale Canada, one of the largest LGBTQ rights organizations in the country, declared it would not participate in WorldPride due to concerns about Trump administration policies. Just days later, Booz Allen Hamilton, a major federal contractor and previous supporter of pride events in D.C., announced its withdrawal from sponsoring the festival.