This story is part of WTOP’s series “Five stories that defined the DC-area in 2025.” You can hear it on air all this week and read it online.
When President Donald Trump first took office in January, he announced an aggressive campaign to cut the size of federal government. He enlisted billionaire Elon Musk to lead what was called the Department of Government Efficiency, or DOGE, with the stated goal of cutting fraud, waste and abuse.
There followed rolling announcements of mass firings across federal agencies. And while Musk’s formal role ended in May, the impact of DOGE is still being assessed in D.C., Maryland and Virginia, where federal jobs and the contracting work the federal presence generated, have historically served as a sort of bulwark against economic headwinds.
Tracy Hadden Loh, fellow at the Brookings Institution, has been keeping tabs on the impact of DOGE through the DMV Monitor, a collaboration between Brookings and the Metropolitan Washington Council of Governments. According to Loh, federal jobs are down 4.5%, compared with 2.1% nationally.
Loh said “there’s been a huge drop in federal employment in the region,” but she added, “I think it’s still too soon to say that we’re in a recession.”
“In 2025, we have lost about 26,000 federal jobs and of course that does not include the fork in the road separations that became effective Oct. 1,” Terry Clower, director for regional analysis at George Mason University, told WTOP.
Job losses instead of the usual gains
The number of jobs in professional business services, “which includes most of the sectors where we count our federal contractors, is down about 16,000 jobs.”
Outside areas that have mostly “held their own,” such as construction and the hospitality industry, Clower said overall the D.C. metro area is down about 33,000 jobs in 2025.
Normally, the D.C. region would be adding 25,000 to 50,000 jobs a year, Clower said.
“So we know we’re nowhere near that, and we know that there are increasing indications of stress, and of course, that stress is not evenly distributed across the workforce or industries,” Clower said.
“A lot of the private sector activity in this region is still dependent on federal government spending, whether that’s because the federal government is directly the customer or because proximity to the federal government is part of the value proposition,” Loh said, adding that the value is the proximity that federal agencies provide.
“There’s a lot of incredibly innovative private sector work that happens in the region, in AI and in biotech, but a lot of that is indirectly driven by defense and National Institutes of Health spending.”
Both Loh and Clower said DOGE’s effect on the labor market in the region — and what kind of lasting impact it could have — will likely become clearer when, according to the Bureau of Labor Statistics website, November’s metropolitan area employment and unemployment figures are released in mid-January.
When federal jobs were slashed at the start of the year, there were dire predictions about what would happen to the housing market.
Loh said the listings for home sales, which usually spike in the months following a new presidential administration, have skyrocketed. Part of that is the long-awaited cut to interest rates.
“Home sales are up nationwide, almost 30%, but you know what’s really notable is that in the DMV, home sales are up over twice as much. They’re up 64%,” Loh said.
When the regional economy falters, it’s not unusual to see homes sit on the market. Loh said currently, there doesn’t seem to be any lag in home sales.
“I do think that there is a lot of pent-up demand,” she said.
“What we have seen is a little bit more softness in housing markets, particularly the more distant suburbs, like you think of Spotsylvania, the southern part of Stafford County,” Clower said.
Softness is likely attributable to the push to have workers back in the office five days a week, Clower said, adding that during the pandemic, when working from home became the norm, an hourlong commute was no longer a deal-breaker in a home sale.
But when it comes to long-distance commutes, such as from Spotsylvania to the Pentagon, Clower said that commute “is not that fun any day of the week.”
DC region benefits from federal employment
Because the D.C. region is home to the federal government and many of its agencies are scattered across D.C., Maryland and Virginia, the region has attracted top talent: highly educated professionals whose work often generated opportunities for private business.
Loh said while the loss of federal jobs has hit hard in many ways, the region has strong fundamentals that remain despite all the changes made by the Trump administration.
“Our unemployment rate is still lower than most metro areas in the country,” Loh said.
As federal workers look for jobs outside government, Clower said there’s a challenge for the regional economy: how to hang on to those workers with high-level qualifications. Clower said those career-changers could be drawn to an area that is growing faster and “less government focused.” Some examples highlighted include Charlotte, Nashville, Dallas and Orlando.
Those areas are the “usual suspects that we’ve talked about for a while as being key competitors.”
Loh agreed, saying that the workforce in the D.C. region is “devoted to, oriented to a mission” and that federal workers have tended to seek “a job with a purpose.”
That drive is considered very patriotic and uniquely concentrated in the D.C. region, she said.
The federal government will remain a big part of our regional economy in the future, Clower said, but it may not loom so large as an employer.
In the past, according to Clower, federal workers and government procurement spending accounted for about 40% of the region’s economy. It’s possible, Clower said, that it would shrink to 25% in the future.
“Now, that still means that, by many measures, we’re still a company town, but the company is not as big a part of what we’re doing, and that’s actually healthy,” Clower said. “It still gives us that underpinning that this region is used to having against, you know, say broader economic downturns.”
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