The current macroeconomic landscape presents a complex picture for workers across all sectors, but particularly for those in public service. With rising inflation, trade tensions, fluctuating consumer confidence, elevated interest rates, and the ongoing housing affordability crisis, we’re seeing a significant shift in employment patterns that merits closer examination.
Economic Pressures and Job Stability
Public sector employees are navigating particularly challenging economic waters in 2025. Inflation, while showing signs of moderation from its peak, continues to erode purchasing power. Meanwhile, the housing market remains prohibitively expensive in many regions, with interest rates making mortgages less affordable than they’ve been in years.
These economic pressures create a paradoxical effect on public sector employment: while they strain household budgets, they simultaneously enhance the appeal of stable government positions. The predictability of public sector employment—with defined benefit pension plans, regular cost-of-living adjustments, and stronger job security—offers a safe harbor during economic uncertainty.
Lower Turnover Expected Through 2026
Analysis of current trends suggests we’re likely to see significantly reduced turnover rates in public sector positions through 2025 and 2026. Several factors contribute to this anticipated stability:
- Economic uncertainty creates risk aversion – Employees are less willing to take employment risks during periods of economic volatility.
- Competitive compensation adjustments – Many government agencies have implemented inflation-adjusted compensation packages to retain talent.
- Benefit advantages – Public sector benefits, particularly healthcare and retirement programs, become more valuable during inflationary periods.
- Private sector hiring slowdowns – With many private companies implementing hiring freezes or downsizing, fewer opportunities exist for public employees to transition out.
- The Anchor of Low Interest Rate Mortgages – Approximately 25% of mortgages in America have an interest rate of less than 3%. The spread between that and current rates of at least 6.5% mean that employees are unlikely to move for a new position. In fact, employees moving for a job have reached the lowest level in history recently.
This reduced turnover represents both opportunities and challenges for government agencies. While institutional knowledge and operational continuity are preserved, agencies may face challenges in bringing in fresh perspectives and addressing staffing needs in growing departments.
The DOGE Effect on Public Sector Employment
The Federal Government’s newly established Department of Government Efficiency (DOGE) has had a significant impact on federal employment trends. This initiative, designed to streamline government operations and reduce bureaucratic inefficiencies, has created counterbalancing forces in the public employment landscape.
At the federal level, DOGE’s efficiency mandates have led to modest reductions in administrative positions through attrition and reorganization, as well as layoffs.
State and local governments have responded to DOGE’s federal example in varying ways. Some have embraced similar efficiency initiatives, leading to modest workforce reductions, particularly in administrative functions. Others have maintained or even expanded employment levels to address increasing service demands, particularly in education, public safety, and social services. A few are even marketing to recently laid-off Federal employees to apply their skills at the local government level.
Looking Ahead
The combination of macroeconomic pressures and organizational transformation suggests a public sector workforce that will be more stable but also more strained in the coming years. Agencies at all levels will need to focus on employee wellbeing, operational efficiency, and strategic workforce planning to navigate these challenges effectively.
For current and prospective government employees, this period may offer a time to develop new skills aligned with evolving government priorities while benefiting from the relative stability of public service during economic uncertainty.
As we move through 2025 and into 2026, the resilience of our public institutions will depend significantly on how well they support and manage their most valuable resource—their people.\
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