Elon Musk’s DOGE may have completed much of its work in the federal bureaucracy, but the trickle-down effect from Musk’s chain saw contributed to the downward employment revisions that drew President Trump’s ire and led to the now-infamous firing of the labor statistics commissioner.
DOGE’s cuts to government jobs are contributing to downward employment revisions because the government typically reports its payrolls to the Bureau of Labor Statistics (BLS) late, and increasingly later reports often lead to bigger revisions, Mark Zandi, chief economist at Moody’s Analytics, told Fortune. He noted that the government does not report in time for the initial employment estimate provided by the BLS.
“This didn’t matter much when government employment was stable, but now that government jobs are declining, the cuts are being picked up in the revisions,” Zandi said. He added that DOGE’s impact also extends to the statistical agencies themselves, including the BLS, where staff reductions slow the processing of employment records and lead to larger subsequent revisions.
According to the BLS, July’s employment report (released Aug. 1) showed a modest addition of 73,000 jobs. More strikingly, job gains from May and June were sharply revised downward by a combined 258,000. With employment rising by only 19,000 in May and 14,000 in June, the three-month average payroll growth dropped to just 35,000—down from 123,000 a year earlier.
Amid intensifying scrutiny over deteriorating employment figures, President Trump on Aug. 1 ordered the firing of Erika McEntarfer, the commissioner of the BLS.
Regarding the economy, Pantheon Macroeconomics found that DOGE cuts knocked approximately 0.3 percentage points from U.S. GDP growth in Q2, primarily due to an 11.2% drop in federal nondefense spending—a direct result of DOGE (Department of Government Efficiency) reductions. Analysts believe government spending will remain roughly flat in Q3, as small gains in state, local, and defense spending are offset by a further 5%-to-10% drop in the federal nondefense component.
Zandi believes sustained DOGE cuts increase the odds of a recession. “The DOGE cuts likely act more like a corrosive on the economy than a cliff event, resulting in recession,” he said. Meanwhile, policies like higher tariffs or restrictive immigration rules would likely have a much more sudden and damaging impact on the economy, potentially causing a recession directly, Zandi said.
Beyond the numbers, Zandi flagged deeper risks stemming from DOGE’s workforce reductions. He warned that slashing jobs at statistical agencies is already degrading the quality of federal data—a symptom of wider unintended consequences for government services.
“Government workers have important jobs that are critical to providing important services to taxpayers,” Zandi said. “If jobs are cut and those services aren’t provided or aren’t provided in a timely and competent way, there can be significant negative fallout.”
He cited examples ranging from weather reporting vital to disaster response to food-safety inspections that safeguard the national food supply.