The Federal Workforce Cuts Are Real — Here’s Which Cities Will Feel the Pain Most

Almost everything about the federal economy can be learned from the lunchtime traffic on a section of Connecticut Avenue in northwest Washington. The soft-shouldered, ID-badge-on-lanyard uniform of federal service, which includes GS-13s from Agriculture, contractors from Commerce, and auditors from Treasury, fills the cafes at noon on Tuesdays. That scene was altered in the spring of 2025. A few of those badges vanished. A few returned. Some remain in legal limbo. The same quiet erosion is now occurring in slow motion outside the Beltway in places that the majority of Americans do not consider to be government towns at all.

The headline figure—roughly 200,000 federal layoffs are anticipated in 2025, according to Oxford Economics—tells you the scope. It doesn’t tell you how unevenly that pain is distributed. It is evident in Washington itself: approximately 18,900 jobs, or 2.5% of the city’s workforce, and a cascading effect that will manifest in everything from commercial rents in Rosslyn to lunchtime receipts on K Street. However, it’s not always the metro areas that should be sweating right now. Baltimore. Missouri, Kansas City. San Antonio. Ogden, Utah. Memphis. Each of these cities has a disproportionately high concentration of federal employees compared to their overall employment base, and as the Trump administration’s reduction-in-force orders have become a reality, each has been quietly accumulating economic risk.

It’s Ogden who usually surprises people. At 1160 W 1200 S, the IRS Western Service Center is a large campus that supports one of Utah’s more stable middle-class economies and employs thousands of people. In addition to removing paychecks from circulation, a reduction in that workforce affects mortgage demand, school enrollment, and even the lunchtime trade at the neighborhood Maddox Ranch House. Much of the regional apparatus of the Department of Veterans Affairs is located in Memphis. Major USDA, IRS, and GSA operations are located in Kansas City. The 2.5% Washington figure was the upper limit rather than the norm when Oxford Economics analysts modeled these exposures city by city. These smaller metropolises lack the depth of the private sector necessary to withstand the shock.

Additionally, no one outside of Washington’s policy circles appears to have fully internalized the agency-specific wrinkles. Cuts at the Veterans Administration would be particularly severe in Tampa, San Antonio, Killeen, Texas; Fayetteville, North Carolina; and Virginia Beach, where VA medical facilities are frequently the biggest employer in the area. The CDC is present in Atlanta. Denver to the EPA, Houston to NASA. These are not abstract dependencies; in certain situations, they are the cause of the existence of a specific neighborhood. The assumption that those agency payrolls would continue to flow served as the foundation for entire school districts and real estate submarkets.

Many of these “cuts” haven’t actually been cuts, which complicates the picture. After the operational damage became apparent, Elaine Kamarck of Brookings has tracked over 25,000 federal employees who were fired and then rehired, frequently within days. The National Nuclear Security Administration, which is in charge of the U.S. nuclear arsenal, famously fired 350 employees in February 2025 and hurried to rehire them within 24 hours after realizing that the organization couldn’t operate without them. Food safety reviewers were rehired by the FDA. 300 revenue officers and 400 revenue agents who had postponed resignations were called back by the IRS. Following pressure from tribal leaders, the Indian Health Service reversed the layoffs of 950 clinicians. As this develops, it appears that the administration’s downsizing rhetoric is outpacing what the government can truly do without.

The instability itself hurts workers. The past 12 months have been “fired in March, rehired in April, furloughed during the shutdown, and still afraid to look at an email at 5 p.m. on a Friday,” according to a friend of mine whose spouse works at a Treasury field office in suburban Maryland. According to Oxford, only roughly 35% of the 200,000 people who are eventually displaced will find employment in the private sector, 15% will join state or local government, and 10% will retire. In a block where three families on the same street work at the same facility, the remaining 40% are likely to cause the national unemployment rate to rise by roughly 0.04 percentage points.

Politics will eventually have an impact on the ripple effects. Lower federal worker spending is already evident in retail, leisure, and hospitality receipts throughout the D.C. metro, according to Barbara Denham of Oxford Economics. The mid-range eateries and mall anchors in Ogden and Kansas City are the first to notice. Due to a slowdown in civilian VA hiring rather than Pentagon cuts, military-adjacent real estate in San Antonio has begun to cool. Companies that rely on federal work but are not included in federal employment statistics, known as private contractors, are also subtly reducing their payrolls. The nightly news doesn’t mention any of this. It is not required to. Eventually, it will appear in school budget meetings, housing markets, and local elections. A local economy is rarely destroyed by a single news cycle. It’s the gradual accumulation of all the tales that no one has written about.