Beneath the encouraging headline of Friday's jobs report sits a quieter, longer-running story: the federal government's payroll has been steadily shrinking for more than a year.
According to an analysis from the Economic Policy Institute, net federal jobs are down 336,000 since January 2025. That decline has continued even as the broader labor market found its footing in August, with 162,000 jobs added economy-wide. The federal workforce reductions reflect a sustained effort over the past year and a half to restructure and shrink parts of the federal government, a process that has touched numerous agencies.
Economists tracking the data note that the share of prime working-age Americans, meaning people generally between 25 and 54, who hold a job stood at 80.4 percent in August, a figure that has held up reasonably well even as federal employment has contracted. That suggests workers leaving federal payrolls have, for the most part, been absorbed elsewhere in the economy, though the transition has not been uniform across regions or occupations.
The federal job losses add an important layer of context to the otherwise strong August report. A national jobs number can look healthy in aggregate while masking very different experiences at the sector level, and the federal workforce is a clear example: even as restaurants, local school systems, and manufacturers added workers last month, the federal government itself continued to trim its ranks.
Economists will be watching whether federal employment stabilizes in the coming months or continues its year-and-a-half decline, and how that trend feeds into regional labor markets around Washington and other government-heavy metro areas.
Is the federal job decline part of the August jobs report?
Yes, it is captured within the same Bureau of Labor Statistics data, but it is a longer running trend dating back to January 2025 rather than a one-month event.