Elon Musk-led effort to cut federal workforce risks stifling labour market

Good morning and welcome to White House Watch. Today we’re covering:

• How Elon Musk could upend the US labour market

• A potential Pentagon nominee swap

• The Arkansas billionaire Trump is sending to London

Elon Musk wants to take an axe to the federal workforce as the leader of Donald Trump’s “department of government efficiency” (aka Doge), but it could spell trouble for the labour market. [Free to read]

The federal government is a huge engine of white-collar job creation and the threat of cutting even a fraction of its 3mn civilian employees — think law enforcement officers, medical providers and postal workers — has put economists on alert.

“We’re getting closer to where we are not creating as many jobs as we need to keep up with the population,” said Cory Stahle, an economist at jobs site Indeed. With fewer federal openings, “we start entering a territory where [the labour market] starts to get a little bit sketchier”, he added.

Musk and Doge co-head Vivek Ramaswamy are seeking $500bn in annual savings by reducing the size of the federal government, a central pillar of Trump’s campaign platform. They’ve promised “mass headcount reductions” to get there. Plus, they’ll have help from Marc Andreessen, one of the world’s most powerful venture capitalists, in building the Doge team.

Experts are sceptical that Doge will be able to pull off lay-offs on this scale, but it hasn’t stopped job seekers from moving towards the private sector.

Lesley Mitler, a career coach who specialises in college students, said:

If people come to me and say they want to work in Washington, DC, I would say, ‘Why don’t we see how things evolve, before making that kind of commitment?’

There’s also the chance that Musk and Ramaswamy’s efforts to cut jobs becomes an expensive endeavour. The government spends more than double US payroll costs on contractors, which union leaders say will rise after mass lay-offs.

Team 47: who’s made the cut

Trump has nominated crypto enthusiast Paul Atkins to lead the US Securities and Exchange Commission.

Big Tech can expect a crackdown after Gail Slater, JD Vance’s top aide, was called on to head up antitrust at the Department of Justice.

The president-elect chose loyalist Peter Navarro, who was imprisoned for contempt of Congress, as senior White House economic adviser.

Michael Faulkender has been picked as deputy Treasury secretary. 

Transitional times: the latest headlines

• Bitcoin surged above $100,000 for the first time, as investors bet on greater political and regulatory support from the president-elect.

• Federal Reserve chair Jay Powell has said he is “not concerned” that Trump’s administration will damage the Fed’s independence. [Free to read]

• Trump has discussed replacing his Pentagon nominee Pete Hegseth with candidates including his one-time primary competitor Ron DeSantis.

• As bank stocks rise, the president-elect appears likely to oversee a period of renewed lender consolidation.

• Sadiq Khan, London’s mayor, said that he planned to “speak up” about Trump’s behaviour and warned others against becoming “sycophantic”.

What we’re hearing

Trump’s pick for ambassador to the UK, Warren Stephens, hails from Arkansas, but he’s no stranger to London.

After he successfully steered his family’s investment bank, Stephens Inc, through the 2008 financial crisis, he expanded his horizons across the pond.

The bank has operated a London office since 2014 and advised on the sale of the local Hawksmoor restaurant chain. The 67-year-old billionaire banker also holds British bonafides as a longtime Tottenham Hotspur FC fan and history buff.

“One of the things he loves the most is reading and studying world war two history,” said Arkansas lawmaker French Hill, who has known Stephens for decades. “So if the Senate confirms his appointment, he’ll come to London with a deep appreciation of the transatlantic partnership.”

Working with Trump and UK Prime Minister Keir Starmer, Stephens will be positioned between two starkly different world leaders at a time when London’s status as a global financial centre is being put to the test. The allies will also need to contend with wars in Ukraine and the Middle East, and trade disputes and tensions with China.

Politically, Stephens is no Maga loyalist. He has supported more traditional Republicans including senator Mitch McConnell, and this year he donated to Nikki Haley’s presidential bid (although he gave $3mn to Trump’s campaign when Haley dropped out). In 1992, his family bankrolled the presidential campaign of fellow Arkansan Bill Clinton, a Democrat.

Viewpoints

• The American republic depends on Democrats adhering to basic norms, writes columnist Janan Ganesh. The US political system won’t survive two parties going feral.

• A contrarian idea is taking shape that the Trump presidency will be good for US-China relations.

• The conventional markets narrative is that the dollar will continue to strengthen when Trump enters office. But a turning point is coming, says economics professor Barry Eichengreen.

• Tariffs are a clumsy and often ineffective way of asserting American power, writes senior trade writer Alan Beattie.