Washington DC’s economy looks like 2008 – How bad will it get?

Washington DC’s current economic state resembles that of the 2008 financial crisis. Unemployment filings and job losses are at their worst. The surge follows a broader reduction in the federal workforce by the Trump administration, particularly through the Elon Musk-led Department of Government Efficiency (DOGE).

According to market analysts at the Kobeissi Letter, unemployment claims in Washington DC have increased by 55% in the past six weeks. From February 10-14, filings surged by 36%, three times the US capital’s average for 2024. 

The analysts also pointed out that over 4,000 ex-federal workers have filed first-time unemployment claims since Jan 20th. Weekly jobless claims sit at 1,780, nearly 15% higher than the peak seen during the 2008 global financial recession period.

Federal government layoffs continue

DOGE is shaking up the America we have known. With the help of Elon Musk, US President Donald Trump has been executing large-scale layoffs across multiple federal agencies. According to a February 15 report by the Washington Post, recently hired employees, especially those in the Internal Revenue Service (IRS), could be losing their jobs. 

Over 15,000 employees at the Treasury Department are at risk of getting fired. Sources familiar with the matter are saying the IRS will account for most of the cutoffs. Treasury officials are yet to confirm the exact number. However, the Kobeissi letter predicts the cuts could begin as soon as this week. 

In addition to the layoffs, the administration has offered a buyout program. This is aimed at encouraging federal employees to voluntarily resign. CNBC revealed that President Trump has proposed to buy out up to 2 million federal workers. To that end, around 75,000 employees have accepted the offer. 

Next, add in President Trump's offer to buyout 2 million federal workers to resign.

There are currently ~2.7 million people who work for the US government.

Estimates show 5%-10% of employees will take the offer.

They technically wouldn't be unemployed until September 2025. pic.twitter.com/aqw0BQiz2m

— The Kobeissi Letter (@KobeissiLetter) February 16, 2025

Economists are speculating the upcoming cuts to IRS staff will primarily affect tax collection personnel. This will potentially reduce the amount of revenue the agency brings in. Musk advocates for a reduced federal deficit to save $4 billion per day from the government’s expenditure. 

There are approximately 2.4 million federal workers in the United States. This is excluding postal employees. Nearly one-fifth of these workers are based in the District of Columbia area. The rest are spread across the country. 

Unemployment rates in Washington reach country-wide highs

As of December 2024, Washington DC had one of the highest unemployment rates in the country at 5.5%, behind only Nevada. Still, the metropolitan area encompassing Arlington and Alexandria, Virginia, had a significantly lower unemployment rate of just 2.7%. The national unemployment rate was 4.1% in December, dipping to 4% in January.

Per the Bureau of Labor Statistics’ recently published job report, job creation fell short of expectations in January. Nonfarm payrolls in the month stood at 143,000, a downtick from December 2024’s upwardly revised total of 307,000.

Healthcare had the largest job openings, adding 44,000 jobs, followed by retail with 34,000, and government employment, which rose by 32,000. Social assistance also saw an increase of 22,000 jobs, while mining-related industries lost about 8,000 positions.

The rise in unemployment filings coincides with a downturn in Washington DC’s housing market. The median home price in the region has dropped by $139,000, or 20%, since November 2024, with the number of homes for sale going up. 

In their Monday X thread, the Kobeissi Letter analysts mentioned home sale listings in the capital’s metro area rose by about 23% year-over-year, forecasting that over 10,000 homes will be listed for sale in the coming months.

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