President Trump’s move to freeze federal hires drew immediate condemnation from unions and trade groups that represent federal workers and contractors. But those watching the D.C. area’s economy say the move should do little to diminish the Washington region’s economic health unless more extensive measures are to follow.
“There’s no sense in the short-run that this will have any effect on the economy here,” said Stephen S. Fuller, an economist at George Mason University who studies the D.C.-area economy. “Either they relent and the federal workforce grows again, as it did in the Obama administration, or they outsource more [to private businesses], both of which helps our economy.”
The order follows through on a list of six commitments President Trump made on the campaign trail intended to “clean up the corruption and special interest collusion in Washington, D.C.” The military was notably exempt from the order’s constraints, contributing to further optimism among the Washington area’s extensive community of businesses that sell weapons and services to the Pentagon.
Such hiring freezes have been used by previous administrations seeking to align the federal workforce with new spending priorities. In several cases, new administrations have phased out past presidents’ spending programs only to increase the size of the government in other areas.
President Jimmy Carter froze hiring multiple times during his four-year term even though the federal workforce added about 17,000 workers in the D.C. area during his administration, according to government data analyzed by the Stephen S. Fuller Institute at George Mason University. A report from the Government Accountability Office concluded that the federal workforce actually grew during two of those hiring freezes.
Presidents Ronald Reagan and George W. Bush froze federal hiring at various points only to hire more workers during subsequent military buildups.
[Trump has a plan for government workers. They’re not going to like it.]
Still, groups representing federal contractors say a hiring freeze could hurt government contractors if it persists, especially if a diminished workforce leads to work getting done more slowly, or creates a skills shortage, such as a lack of people with security clearances who can oversee sensitive projects.
“Arbitrary freezes, if they last for a long time, can have a really detrimental effect on federal agencies’ ability to execute missions and the ability of contractors to support those missions,” said Alan Chvotkin, executive vice president and counsel of the Professional Services Council, a trade group for businesses that contract with the government.
Investors on Wall Street are betting on the idea that working for the government will continue to be a profitable enterprise. Stocks of some key federal contractors were up slightly Monday afternoon after the hiring freeze was announced.
But the industry could take a hit if the hiring freezes are followed by more substantial changes.
“If the president decides that he also wants to limit the amount of contract activity in which agencies can engage, the impact on the Washington-area economy could be massive,” said Anirban Basu, an economist with Baltimore-based Sage Policy Group.
“This is not a good day for the Washington area economy, but we knew this was coming,” he said. “The issue is how much more is coming?”