DOGE cuts help boost layoff figures
The US labor market and housing sector are experiencing simultaneous pressures, with rising job cuts and an increase in FHA mortgage delinquencies pointing to growing financial strain for certain segments of the economy. However, broader economic indicators suggest resilience, with hiring in some sectors and stability in conventional mortgage markets.
February saw a sharp increase in job cuts across multiple sectors, with US employers announcing 172,017 layoffs—marking a staggering 245% increase from January and the highest February total since 2009, according to outplacement firm Challenger, Gray & Christmas.
A significant portion of these layoffs—62,242 positions—stemmed from federal workforce reductions led by the Department of Government Efficiency (DOGE), a government restructuring initiative spearheaded by Elon Musk under President Donald Trump’s directive. The move, aimed at reducing government spending and improving efficiency, has resulted in layoffs across 17 federal agencies.
“With the impact of the Department of Government Efficiency actions, as well as canceled government contracts, fear of trade wars, and bankruptcies, job cuts soared in February,” said Andrew Challenger, a workplace expert at Challenger, Gray & Christmas.
Beyond the public sector, the retail industry faced 38,956 layoffs in February, nearly six times higher than the same period last year. Major companies like Macy’s and Forever 21 announced large-scale staff reductions, reflecting ongoing shifts in consumer spending habits. The tech sector, while still experiencing job losses, saw a smaller reduction compared to previous years, with 14,554 layoffs.
Rising FHA loan delinquencies add to economic concerns
As layoffs mount, financial strain is also becoming evident in the housing market, particularly among FHA borrowers. The Federal Housing Administration (FHA) reported an increase in its loan delinquency rate, which has now climbed to 11.3%—a significant jump from previous quarters.
FHA loans, which primarily serve first-time homebuyers and lower-income borrowers, have historically shown higher delinquency rates than conventional mortgages. While the broader mortgage market remains stable—single-family residential mortgage delinquencies across commercial banks stood at just 1.77% in Q4 2024—the rise in FHA loan defaults raises concerns about the financial well-being of more vulnerable homeowners.
A mixed economic outlook
Despite the spike in layoffs and FHA loan delinquencies, some labor market indicators suggest resilience. Employers announced plans to hire 34,580 new workers in February, a 159% increase year-over-year. Initial unemployment claims remain relatively low, and the national unemployment rate stands at 4.0%.
However, economists warn that the cumulative effects of federal job cuts, coupled with broader economic policies such as tariffs and spending reductions, could contribute to a slowdown in hiring and increased financial uncertainty.
“The increase in FHA delinquencies may signal financial challenges among borrowers with lower credit scores or those who made smaller down payments,” analysts noted. “But the stability in the wider mortgage market suggests that systemic risks remain contained.”
The US economy remains in a complex position, with job cuts at their highest level in years and FHA loan delinquencies on the rise. While these trends indicate financial strain for certain groups, overall mortgage market stability and continued hiring in some sectors suggest that the broader economy is holding steady.
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