Key Points

  • Apollo Global Management Chief Economist Torsten Sløk said that the Trump administration's Department of Government Efficiency (DOGE) is expected to cut about 300,000 federal employees,which could trigger broader unemploymentand slow economic growth.
  • Sløk noted that while the number of affected federal positions is not large compared with the current 7 million unemployed workers in the U.S., given that each federal employee corresponds to about two private-sector contractors, "the actual scale of layoffs could approach 1 million."
  • "Any increase in layoffs will push up unemployment claims in the coming weeks, and a rise in the unemployment rate is likely to have an impact on interest rates, stocks, and credit markets," Sløk said, while acknowledging that "recent economic data remains strong."

In-Depth Analysis

Last year, the U.S. economy unexpectedly avoided a recession, growing 2.5% for the year, largely thanks to surprisingly strong consumer spending. After softening in the summer, the job market stabilized in September, prompting the Federal Reserve to cut its benchmark interest rate by a full percentage point cumulatively by the end of the year.

Many economists expect only a modest slowdown in economic growth this year. The Conference Board forecasts that gross domestic product (GDP) in 2025will grow 2.3%, while Goldman Sachs predictsgrowth of 2.5%. The Atlanta Fed said Wednesday that GDP in the first quarter of 2025 couldexpand at an annual rate of 2.3%。

"Overall, the U.S. economy remains on a solid footing, with output growing at a steady pace,"Federal Reserve Governor Adriana Kuglersaid in a speech on Thursday.

Donald Trump's victory in November for a second presidential term had sparked optimism among investors and corporate executives. The S&P 500 hit a record high on Wednesday, and a Conference Board survey of CEOs conducted from January 27 to February 10 showed business confidence at its highest level in three years.

The Conference Board said the share of CEOs planning toincrease capital expendituresover the next 12 months rose by 8 percentage points to 33%. The survey was conducted jointly by the Conference Board and the Business Council from January 27 to February 10.

However, signs of weakness have recently emerged, with U.S. tariffs and other policy uncertainties erodingconsumerand purchasing managers' confidence.

"Economic policy uncertainty is rising sharply," Sløk said, noting that "near-term downside risks to the economy and markets are increasing." "The question is whether persistently high policy uncertainty will begin to negatively affect capital expenditure and hiring decisions," he added.

The Federal Reserve last month held its key interest rate in the range of 4.25% to 4.5%, citing a lack of clarity in federal regulatory, trade, immigration, and tax policies under the Trump administration.