- The markets have not yet taken into account the impact of mass cuts In public spending, said the investor “Le Grand Court”, Danny Moses. He said Fortune The cuts from the Government Ministry of Efficiency have compromised private entrepreneurs, small businesses and the labor market. “It’s not as simple as just”, we think there is fraud, cut the waste, reduce expenses, “he said.
Investor Danny Moses, better known for his oracular bet against debt backed by mortgages before the 2008 stock market crash, warns another economic red flag.
The founder of Moses Ventures made famous by the film that has become the book “The Big Short” has warned the market has not yet taken into account the negative economic impact of mass cups with government jobs carried out by the Ministry of Elon Musk’s glaze.
“I think we underestimate the impact on the economy of the cuts that we make in the federal government, and what it could mean [for] training effects in the economy, ”said Moses CNBC “Power Lunch” interview THURSDAY. “We build the side of the income from the equation.”
“I think we are too optimistic [as to] How will it be played, “he added.
President Donald Trump’s administration has drawn more than 24,000 federal workers, according to Documentsmany of which expect difficulties in finding jobs in the private sector due to the specificity of their expertise. A supplement 75,000 employees Took an opportunity to resign delayed, which enabled them to receive wages and services until September. The Doge receipt wall claims to have eliminated $ 115 billion In public spending, although the veracity of its alleged economies is under the fire of the experts.
The administration whip on prices has sowed another uncertainty on the markets, leading companies to reassess their plans. Meanwhile, the president of the federal reserve Jerome Powell left intact interest rates while the policy takes place.
An “unpaid cycle”
Moses argued that investors are already starting to see disruption of consumer confidence – who saw last month the steep drop In four years, and will continue to hear similar trends in calls for future results. These slowdowns have not yet been assessed on the market, he said.
“It’s not as simple as just,” we think there is fraud, cut the waste, reduce expenses “,” said Moses Fortune. “And it is not only a question of federal workers, and it is not only the expenses of these programs. These are contracts with the private sector.”
The revealing signs of the economy weaken in small businesses and “private entrepreneurs who make legitimate work services which are now obliged to make decisions about their business,” said Moses.
The government spent about $ 759 billion On contracts during fiscal 2023, an increase of approximately $ 33 billion compared to the previous year, with approximately 171.5 billion dollars Going to small businesses, according to the US Government Accountability Office. Musk’s own companies receive at least $ 20 billion in government contracts.
Doge’s mass cuts have already started to endanger major contracts. The Director General of Accenture Julie Spellman Sweet Tell to investors Thursday, its federal service activities, representing 8% of world income, lost government contracts as part of the DOGE exam. The Council share price dropped 7.3% after the announcement.
The elimination of federal jobs and contracts creates what Moses has called an “undisputed cycle”. While more and more federal workers looking for private sector jobs, they can find fewer opportunities due to the reduction of income sources in government contracts.
Chance of federal workers on the job market
Indeed, beyond the purgatory of government contracts, the economy will also have to face tens of thousands of federal workers who will return to the labor market. Many of these former government employees will meet a stable environment, but which has extremely different prospects based on the skills of these unemployed unemployed, Cory Stahle, economist for the free hiring laboratory, said Fortune.
“Can the labor market absorb these workers?” Said Stahle. “We don’t really know if that can.”
Health jobs are currently abundant – good news for 16% of the federal workforce In health related fields, according to the Pew Research Center, but many other white collar jobs, especially in technology and data science, are rare. Given that many licensed federal employees are educated, they can seek traditional knowledge of knowledge workers who do not exist at the moment, said Stahle.
One of the reasons why the markets have not yet been taken into account in the impact of layoffs is the gap of the government’s data. While the Bureau of Labor Statistics said About 10,000 Fewer jobs of the federal government in February, the period of investigation for the report Probably finished Before many layoffs were made.
“Employers seem really frozen, by uncertainty around what will happen around prices, which will happen with the supply of labor, immigration, then obviously, which will happen with these federal workers,” said Stahle. “There is a lot of uncertainty that now plays that we are not fully able to quantify.”
If a substantial number of federal workers do not find new jobs, expenses will probably slow down, a non -insignificant blow for an American economy Almost 70% Consumer expenses, Callie Cox, chief market strategist at Ritholtz Wealth Management, wrote in February blog.
“The economy is undoubtedly made up of people and their portfolios,” she said. “Disrupt our expenses and growth will spray, it doesn’t matter how much you think the cause of the disturbance is.”
This story was initially presented on Fortune.com
