The District is struggling to attract new workers for the first time in 30 years after the Trump administration’s mass layoffs of federal workers, a new report shows.
Yesim Sayin, executive director of the nonpartisan D.C. Policy Center, said the D.C. labor market hasn’t been this bleak since the city weathered the 1991-1992 recession and slid toward bankruptcy in 1996.
She pointed out that more young people are leaving than arriving because of the growing scarcity of government jobs — and that Trump immigration restrictions have cut off a yearslong flow of international college students.
“The District didn’t have any Fortune 500 companies; they had the federal government functioning like one,” Ms. Sayin said in an interview. “Now those jobs are gone, and federal contractors aren’t hiring.”
The nonprofit think tank’s report noted this month that the District shed more than 46,000 government and private contractor jobs last year. That’s 57% of a net loss of 79,800 jobs since January 2020, the last month before the COVID-19 public health emergency.
The remaining 33,800 jobs lost between January 2020 and December 2024 resulted from a contraction of hospitality and service employment during pandemic-related restrictions and teleworking.
The report warns that the past year’s shrinkage of professional services poses a greater risk to the District’s “superstar city” economy by hurting its ability to attract an “educated, well-paid and engaged workforce.”
“A weak job market today can have lasting consequences for young workers entering their careers and, over time, make it harder for the District to retain and attract the talent that has driven its economic success,” Ms. Sayin said.
According to the Bureau of Labor Statistics, nonfarm employment in the District dropped from about 805,000 jobs in January 2020 to roughly 725,000 at the start of this year.
The policy center reported that rising living costs — including high housing and childcare expenses — have made it harder to attract workers than six years ago.
Ms. Sayin urged city officials to “rebuild its competitiveness” by embracing the report’s three recommendations for private-sector growth: Expanded apprenticeships for students in fields such as social work, new tax incentives for export-oriented industries and zoning changes to allow new housing.
“The challenge is creating the conditions for job growth to return,” she said. “Young people are still moving into the city, but we are not able to retain them as they form households and families.”
White House spokesman Kush Desai said the report underlines the need for the District to rely less on government spending.
“Federal largesse that’s subsidized by taxpayers is not a substitute for real and sustainable economic growth led by the private sector,” Mr. Desai said in an email.
“The Trump administration remains focused on cutting taxes and slashing red tape to let private businesses, big and small, accelerate economic growth for D.C. and the rest of the country,” he said.
The Washington Times reached out to members of the D.C. Council and Mayor Muriel Bowser, who leaves office at the end of the year.
Researchers at the DMV Monitor, a website sponsored by the left-leaning Brookings Institution and the Metropolitan Washington Council of Governments, endorsed the report’s findings and recommendations.
“The report accurately identifies that this will harm both the young people in question and the region itself,” said Tracy Loh, a Brookings fellow.
Recent DMV Monitor analyses found softening demand for rental housing in the city and a 5.3% drop in D.C. internship postings from April 2024 to April 2026.
D.C. job losses also have hurt Maryland and Northern Virginia, where the DMV Monitor found unemployment increases in well-off suburbs led the region last year.
Northern Virginia and Southern Maryland have recovered faster than other parts of the region, thanks to private defense and technology job growth outpacing government layoffs.
Brookings estimated last month that the Trump administration cut 29,200 federal jobs between January 2025 and April 2026 in Maryland alone, “upending the state’s economic foundation.”
Montgomery and Prince George’s counties have since experienced a net loss of private-sector jobs, as private contractors downsized following cuts to federal healthcare and humanitarian aid grants.
In contrast, Virginia’s Fairfax, Loudoun and Prince William counties have seen private-sector job growth from expansion of data centers, cloud computing, healthcare and artificial intelligence services.
Defense and technology expansions also have driven private-sector job growth in Charles County, Maryland.
‘From bad to deceptive’
Meanwhile, the District’s negative financial outlook has become an outlier in the nation’s broader recovery from the pandemic.
The D.C. unemployment rate hit 6% in June, compared with 4.2% nationally.
That’s an improvement from 6.7% in January and closer to the 5.3% recorded in 2024 before Mr. Trump took office. But economists say that’s because people have stopped seeing the District as an attractive job market, not because more people are working.
“When residents stop looking for work or leave town, they vanish from the unemployment rate,” said Siri Terjesen, an associate business dean at Florida Atlantic University. “That’s not recovery, it’s evaporation. Washington’s job market has gone from bad to deceptive.”
She stressed that other large cities have recovered jobs more quickly.
The District’s 6.1% unemployment rate in May was higher than every state in the nation, reflecting a labor force that continued to shrink. It was also higher than the 4% rate in Dallas-Fort Worth, which added tens of thousands of professional services jobs over the past year, and the 5.4% rate in New York City.
“New York has finance, tech and healthcare all hiring at once,” Ms. Terjesen said. “D.C. built its economy around one dominant employer. This is the cost of being a company town when the company stops hiring.”
She added that New York, Los Angeles and Chicago have all had “flat or improving” unemployment rates since 2024, making the District “the highest-unemployment [rate of any] large diversified-economy city in the country.”
“The key issue is that Washington, D.C.’s private sector has not absorbed the displaced federal workforce,” said Peter C. Earle, senior director of research at the free-market American Institute for Economic Research.
He estimated that D.C. has 7.3% fewer jobs than in May 2016, compared with increases of 12.8% in New York, 19.6% in the Miami metro area and 24.3% in Dallas-Fort Worth.
Chief Financial Officer Glen Lee wrote in a June 30 letter to the mayor and council that the District experienced a 6.2% year-over-year loss of 47,000 total jobs in May, driven largely by a 15% decline of 28,000 federal jobs since January 2025.
The District lost 17,100 jobs in January alone — and its labor force has continued shrinking in recent months.
“While the nation sees steady growth, the District’s real GDP and total resident wages have both trended downward during the past year,” Mr. Lee wrote.
“What is also remarkable is how broad-based the losses have been, with job losses in nearly every sector by major job categories,” Fitzroy Lee, the District’s deputy CFO and chief economist, said in an emailed statement.
Path forward
Analysts are divided on how the District — and the suburban Maryland counties dependent on federal spending — can move forward.
One bright spot for the District has been tourism. Destination DC estimates that the city received 27.2 million visitors in 2025, up 20,000 from the previous year. Visitors spent a record $11.9 billion, up 4% from 2024.
The city’s tourism bureau expects another bump this year from a higher-than-usual volume of events related to America 250 celebrations.
LaToya Nkongolo, a former official for Maryland’s Anne Arundel County who is now a Maryland state delegate, said the trends call on the region to embrace new ways of making money.
“D.C., Maryland and Northern Virginia need a stronger, more diversified economy driven by entrepreneurship and innovation, not permanent dependence on taxpayer-funded jobs,” said Ms. Nkongolo, an analyst at the conservative National Center for Public Policy Research’s Project 21.
Ms. Bowser has introduced several initiatives to stimulate private investment and hiring, but their effect is not clear.
“They’ve set aside money for business attractions, worked to reduce crime, and found tax credits for some businesses, but it’s very hard for a city to change market forces,” Ms. Sayin said. “We still need more housing and a friendlier business environment.”
D.C. Council member Janeese Lewis George, an avowed democratic socialist, became the deep-blue city’s presumptive mayor last month after winning the Democratic primary. Her campaign did not respond to an email seeking comment.
Ms. Lewis George has proposed several ideas to bring jobs back to the city — including union partnerships, the creation of a Federal Workforce Transition Center, subsidies for small businesses in underserved neighborhoods and five-year tax incentives for employers to relocate to the District and hire at least 25 city residents.
Michael New, a social research professor at the Catholic University of America in Northwest Washington, notes that she also voted to raise wages for tipped restaurant staff to equal the hourly minimum for all workers.
“Some of the recent minimum wage increases have played a role in closures of some bars and restaurants,” Mr. New said, noting how they raise payroll costs. “The minimum wage hike is likely contributing to unemployment in the hospitality industry.”
The minimum for tipped D.C. restaurant workers jumped from $10 to $10.30 on July 1, following a law that doubled it from $5.35 in 2022 to $10 in 2023. It is scheduled to keep rising until it reaches 75% of the minimum for non-tipped workers — which increased to $18.40 this month — in July 2034.
D.C. law now requires employers to ensure the base tipped wage plus tips at least equals the full standard minimum wage, and to make up the difference if it does not.
Conservatives insist that such government interventions in the labor market are unlikely to overcome federal downsizing and the city’s long-term affordability problems.
They argue that private employment would increase only if the District eases restrictive land-use regulations, changes zoning policies, shortens permit processes and lifts other regulatory burdens on businesses.
“Government primarily reallocates resources created by the productive private sector through taxation and public expenditure,” said Allen Mendenhall, an economist at the conservative Heritage Foundation. “An economy characterized by a growing private sector is more conducive to sustained wealth creation and innovation.”
Contact the author
Please read our comment policy before commenting.