The local workforce is still reeling from the effects of federal government cuts and job loss, which have devastated the capital since the start of President Donald Trump’s second term.
A new report from the D.C. Policy Center, commissioned by the D.C. Chamber of Commerce, paints a picture of a struggling city trying to claw its way back from devastating layoffs made in the name of government efficiency. In a region with the highest concentration of federal workers in the country, high unemployment rates are seeping into many aspects of the local economy, making it worse for wear.
“For more than two decades, the city benefited from a growth model driven by federal expansion, population growth, rising commercial real estate values, and an influx of highly educated workers,” the report said. “That growth model is now under pressure.”
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Substantial reductions within the federal sector have compounded the already struggling job market. The number of total jobs in the city is lower now than before the COVID-19 pandemic, with 86,900 less jobs in May 2026 than in February 2020. The number of unemployed D.C. residents increased by 8% in that same time frame, according to the 2026 State of Business report released Thursday.
Federal government employment within the District is down 14.6% as of May 2026 compared to January 2025. That number only accounts for civil servants — not federal contractors, intelligence agency employees or non-active-duty military — so the real impact is likely larger. That’s a big hit for a city where federal jobs make up a quarter of the workforce. In that same time period, the District’s overall unemployment rate increased by 4.4%.
Metrics that predict the future don’t look promising, either. The number of job openings is declining, as is the number of people leaving jobs voluntarily, which suggests less confidence that better opportunities are open in the District. Even though there are plenty of people looking for work, the job opportunities are not meeting the demand.
There are glimmers of hope for D.C.’s economic future, as a report released last week by real estate firm CBRE found that the U.S. government had added 1,400 jobs to the D.C. region between May and July, likely an indicator that the government originally made too many rollbacks. While that number is moving in the right direction, it does little to offset the estimated 50,000 federal jobs cut since early 2025.
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