Industrial: The rebound in American manufacturing employment, with limited impact from layoffs.

After the Trump administration took office in early 2025, the large-scale layoff policy promoted by Musk-led "Department of Government Efficiency" (DOGE) began to be implemented. This article combines market dynamics and economic background to discuss the direct and indirect impact of this policy on non-farm employment. We combine the current progress and long-term plans of DOGE to predict the overall impact between 350,000 and 1 million people. Considering that layoffs may be difficult to achieve all at once, this scale may be spread out between January 20, 2025, and July 4, 2026 (the dissolution date of the temporary organization of DOGE), with an average monthly decrease in employment between 20,000 and 55,000 people. However, the final impact may be pulsating and not completely levelled out. In February, there were 151,000 new non-farm jobs, slightly below the market expectations of 160,000 jobs, and the January value was revised down to 125,000. The unemployment rate was 4.1%, higher than the market expectations and the previous value of 4%. Hourly wage growth was 0.3% on a month-on-month basis, in line with market expectations; the year-on-year growth rate was 4%, lower than the market expectations of 4.1%. The labor force participation rate was 62.4%, lower than the market expectations of 62.6%. The DOGE layoff plan has had some impact, reducing federal government employment by 10,000 people. Government Layoffs Impact on Non-Farm Employment After the Trump administration took office in early 2025, the large-scale layoff policy promoted by Musk-led "Department of Government Efficiency" (DOGE) began to be implemented. This article combines market dynamics and economic background to discuss the direct and indirect impact of this policy on non-farm employment. In terms of current government employment distribution, due to the proposal of Congressman Jamie Whitten (D-MS) in 1950 that the maximum number of federal government employees should not exceed 2 million, after 1950, the total number of federal government employees in the United States has been fluctuating around 2 million. However, the number of employees in state and local governments has been increasing continuously, with the highest proportion currently being local government employees. Currently, Musk and the Trump administration plan to significantly reduce federal government spending and the number of federal employees through DOGE. The initial target was to cut $2 trillion in federal spending, but the recent target has been reduced to around $1 trillion. The layoffs currently mainly target federal employees. The layoffs started on January 20, 2025, when Trump took office, with the first wave of layoffs concentrated in February and the plan to continue until July 4, 2026 (the dissolution date of the temporary organization of DOGE). The implementation methods include voluntary resignation plans, layoffs of probationary employees, and dismantling of institutions. 1) Voluntary resignation plan: In January 2025, DOGE offered federal employees a "deferred resignation" plan, promising to pay salaries until September to encourage voluntary resignations. 2) For probationary employees: Priority will be given to laying off new employees within the probationary period (usually 1-2 years). According to last year's data, the federal government added over 200,000 new employees in the first half of the year. 3) Institutional dismantling: Plans to "remove entire agencies," such as the Department of Education, the Consumer Financial Protection Bureau (CFPB), and others. Currently, according to multiple media reports, about 77,000 federal employees have accepted buyout offers, accounting for 3% of the total number of federal employees. The layoff plan is currently facing several lawsuits that have partially halted some of the layoffs, but have not completely stopped progress. DOGE currently plans to rapidly expand layoffs to 300,000. The direct impact is mainly reflected in non-farm employment data, which includes government employment (federal, state, and local). Laying off federal employees will directly reduce this sub-item number. For example, if 77,000 layoffs have already occurred and are reflected in the February data, the non-farm report released on March 7 (covering the week of February 12) may show a decline in government employment. However, a significant portion of the layoffs are being implemented through buyouts or deferred resignations (such as the plan on January 28 that allows employees to receive salaries until September), meaning that wages are still being paid, and this impact is not expected to be immediately reflected in the establishment survey - non-farm employment, but may have a certain impact on the household survey - unemployment rate. Considering that employees under this plan do not leave immediately, the "deferred resignation" also smooths the impact of the layoffs. Additionally, as non-farm employment references single-week situations, sampling factors may also slow down data statistics. If subsequent layoffs accelerate to 300,000 and are concentrated in specific months, non-farm government employment may show consecutive negative growth, with government employment averaging nearly 40,000 in 2024, supporting overall non-farm employment growth throughout 2024. The layoffs will reverse this trend and drag down overall non-farm employment growth. In terms of indirect impacts, firstly, the federal government employs a large number of private contractors for its work. According to estimates from the Brookings Institution, the number of private contractors working for the federal government is more than twice the number of federal employees. Layoffs may directly lead to changes in contracts for some private contractors. However, there may also be an outsourcing effect in the private sector, where Musk's DOGE plan may outsource some government functions to private companies, leading to short-term increases in private sector employment, offsetting job losses. Secondly, there are cascading effects on local economies. Federal employees are concentrated in Washington, D.C., Maryland, and other areas, and layoffs may lead to a decrease in consumer spending in these areas, affecting service sector employment (such as retail and food services). For example, the Urban Institute estimates that the unemployment rate in Washington, D.C., could rise from 2.8% to 9.6%, indirectly reducing private sector jobs and amplifying the negative effects on non-farm employment. Taking into account various scenarios, if we take a pessimistic assumption that a reduction of one federal employee corresponds to a reduction of two private contractor positions, the total negative impact of laying off 300,000 federal employees on employment may be close to 1 million people. If we take an optimistic assumption that the employees and department functions being cut will transfer to the private sector, the demand for employment has not disappeared but has shifted between sectors. The ultimate negative impact depends on overall demand changes, that is, whether there will be a substantial reduction in fiscal spending. DOGE currently claims a reduction in fiscal spending of around $1 trillion, but publicly verified total reductions are currently far below this figure. If we refer to 2024, based on statistics from the Congressional Budget Office, excluding interest payments, total fiscal expenditures for the year amounted to $5.85 trillion, with an increase of approximately 2 million non-farm jobs for the year. Assuming that DOGE ultimately achieves its target of a $1 trillion reduction, and using this proportion, the reduction in non-farm employment is estimated to be around 350,000.People are affected. Combining pessimistic and optimistic assumptions, the overall impact is estimated to be between 350,000 to 1 million people. Considering that layoffs may not happen all at once, this scale of impact may spread out until January 20, 2025, to July 4, 2026 (the dissolution date of DOGE temporary service organization), with an average monthly decrease in employment of between 20,000 to 55,000 people. However, the final impact may be more like a pulse and not completely smooth.Manufacturing employment rebounds In February, non-farm employment increased by 151,000, slightly lower than the market's expectation of 160,000, with the January figure revised down to 125,000. The unemployment rate is 4.1%, higher than the market expectation and the previous value of 4%. Average hourly earnings increased by 0.3% month-on-month, in line with market expectations, with a year-on-year growth rate of 4%, lower than the market's expectation of 4.1%. The labor force participation rate is 62.4%, lower than the market's expectation of 62.6%. Overall, while the employment data this time fell short of expectations, demand rebounded relative to the previous month, supply clearly fell, but the unemployment rate rebounded, showing some internal discrepancies in the data, possibly related to the government's layoffs plan in February. In February, the DOGE department led by Musk initiated a large-scale federal government layoffs plan, with nearly 80,000 federal employees accepting a "delayed resignation" scheme. This impact was reflected in the non-farm data, with federal government employment (seasonally adjusted) declining by 10,000. Since employees accepting this plan still receive salaries until September, the short-term impact has been delayed and smoothed out, currently lower than the average monthly level of 20,000-55,000 we predicted in the column, but it cannot be ruled out that it will be concentrated in several months in subsequent data. After the non-farm data was announced, US bond yields and the US dollar index quickly rose and then fell rapidly, with repeated fluctuations in the short term, while London gold quickly rose, then fell rapidly, and then rose again. Federal Reserve Chairman Powell then made a speech, stating that there is no rush to adjust interest rates, and policies will be flexibly adjusted based on changes in economic data, focusing on changes in Trump's policies. After his remarks, US stocks rose, US bond yields rebounded, the US dollar's decline narrowed, and gold's decline widened. In addition, Fed Board of Governors member Bowman pointed out that the neutral interest rate may have been on the rise since the start of the COVID-19 pandemic. US President Trump expressed his intention to implement massive sanctions against Russia, urging Russia and Ukraine to sit down at the negotiating table, but so far the Russian side has not responded. At the close, London gold fell by 0.06%, the US dollar index fell by 0.3%, 2-year and 10-year US bond yields rose by 3.2 basis points and 2.3 basis points. After the release of the non-farm data, CME's "Fed Watch" showed a decline in market expectations of a rate cut before June. Analysis of non-farm employment data Looking at the new employment data, the private sector as a whole added 140,000 jobs in February. The service sector added 106,000 jobs, the production sector added 34,000 jobs, and manufacturing added 10,000 jobs. The government sector added 11,000 jobs. Breaking it down by industry, the biggest contributor was the education and healthcare sectors in the service industry, adding 73,000 jobs. The industry with the largest decline was the leisure and hospitality industry, losing 16,000 jobs. In terms of hourly wage growth, the manufacturing sector saw the highest non-durable goods hourly wage growth at 0.7%. The utility sector had the lowest monthly wage growth, decreasing by 0.1%. It is noteworthy that the leisure and hospitality industry has seen consecutive negative growth, consistent with the previous decline in the US service sector sentiment, and future changes need to be closely monitored. Looking at the reasons for unemployment, non-temporary unemployment and re-entry into the labor market have driven the rebound in the unemployment rate. Historically, a year-on-year change in non-temporary unemployment of over 0 typically corresponds to a short-term bottoming and rise in the unemployment rate, and a year-on-year change in non-temporary unemployment will lead the unemployment rate by 2-10 months. Following the latest non-farm report, this year-on-year change has fallen, continuing to consolidate on the platform period. The labor force participation rate fell to 62.4% in February, with the labor force participation rate of the population aged 55 and over falling to 38.1%. The labor force participation rate for the 25-54 age group rebounded to 83.5%, immigrant labor force participation rebounded to 66.4%, and local labor force participation fell to 61.4%, with overall supply declining. Job vacancy figures for January have not been released. Weekly data shows ongoing claims for unemployment benefits rebounding, while initial claims for unemployment benefits have fallen again. Possibly impacted by the DOGE layoff plan, the number of federal employees applying for unemployment benefits has recently shown a significant rebound. This article is sourced from the macroeconomic research report published by Industrial, edited by GMTEight: Wenwen.