Huffpost Business
Alexander Eichler Headshot

Federal Government Layoffs Expected As Budget Cuts Loom

Posted: Updated:
FEDERAL GOVERNMENT LAYOFFS
Getty Images

Even as the nation's economy has limped along these past few years -- with millions of Americans unable to find jobs -- the federal government has kept hiring.

But now even that sector looks like it could be cutting back, adding further troubles to an economy struggling to find buoyancy.

Budget cuts threaten the workforce of every federal agency, according to a recent bulletin from outplacement company Challenger, Gray & Christmas, which noted that various offices of the federal government have already announced a combined 81,000 payroll cuts in 2011.

The imperative to rein in government spending -- typified by the 12-member super committee currently trying to find between $1.2 and $1.5 trillion in deficit savings -- has meant nearly every office in Washington, including the military and intelligence agencies, faces the possibility of having to downsize in the near future.

"The federal government really has yet to feel the heat, but it's coming," John Challenger, CEO of Challenger, Gray & Christmas, told The Huffington Post. "All of these situations that are now surfacing suggest that the federal government is going to see much heavier layoffs in the upcoming months."

Those situations include major proposed cuts to the intelligence budget -- recently described by James Clapper, the director of national intelligence, as being in the "double-digit" percentage range -- and to the Internal Revenue Service, which faces the possibility of losing $600 million in next year's federal budget.

The U.S. Postal Service, which operates largely on the revenue it brings in from mail services, has suggested a plan to trim expenses by $20 billion, in part by eliminating some 220,000 jobs. And looming over all these potential cuts is the possibility that the super committee will fail to reach an agreement by its November 23 deadline -- in which case $1.2 trillion in so-called trigger cuts would automatically kick in, affecting military and domestic programs in equal proportion.

While the final outcome of these various negotiations remains unclear, it's unlikely government payrolls will stay as big as they currently are.

Job insecurity is coming relatively late to federal employees, who have by and large escaped the worst of the cost-cutting measures that translated into lost jobs for many state, county and local government workers in the past three years.

Federal positions have traditionally been regarded as among the most stable in the public sector, with one recent analysis even showing that employees in certain agencies -- such as the Environmental Protection Agency and the Department of Housing and Urban Development -- are statistically more likely to die than to get laid off or fired.

But in the scramble to cut the federal deficit, a process set in motion over the summer, when President Obama reached an agreement with Congress to trim the government budget by year's end if an extension to the country's borrowing authority could be made, what once looked safe now seems uncertain.

To make matters worse, government layoffs are expected to reverberate into the private sector. Reduced federal payrolls would mean less business for industries that deal with the government -- from the defense and aerospace industry to the technology, agriculture and health-care sectors.

And federal downsizing is expected to offset the modest gains in job growth being made elsewhere in the economy.

"Each month, when the private sector does create jobs, the impact on the economy is diminished by what's happening in government," Challenger told HuffPost. "It's a stiff headwind that prevents the labor markets from improving."

Around the Web

Some federal workers more likely to die than lose jobs - USATODAY ...

Government layoffs slow U.S. cities' recoveries: report | The Raw Story

Government layoffs slow cities' recoveries | Reuters

Private Hiring and Government Layoffs - NYTimes.com

Wonkbook: Should we try everything? Or try nothing?