‘It devastates a town’: This analyst says DC’s local economy could take a 40% hit from federal layoffs — here’s the 1 sign he says to look for to show things have gotten ‘really bad’

"We’re very similar to what you used to think of as company towns," Clower told 7News. "Say in the industrial Midwest in the early 1970s, a big steel mill shuts down. It’s not the only business in town, but it devastates a town."

'Ripple effect of fed layoffs could be far-reaching'

While official figures on the number of federal employees who lost their jobs remain unclear, estimates suggest at least 16,000 have been laid off, in addition to the 75,000 federal workers who reportedly took the buyouts offered by the Trump administration.

Clower also warned that the impact could extend beyond federal employees to include contractors who rely on government work and businesses that serve them. Other areas that might be impacted include tax revenue and real estate.

"When you do this, and you think about those households that have less money to spend, maybe they shifted jobs and don’t pay as well, well that affects sales taxes. At some point, it might impact the housing market," Clower said.

Early economic indicators suggest the layoffs may already be having an impact on the D.C. area economy. During the week of Feb. 22, new real estate listings in D.C. increased by 20%. By end of March, area home listings surged 45% (that's 19% higher from March of the year prior) (https://wtop.com/business-finance/2025/04/dc-area-home-listings-surged-45-in-march/) — a potential sign of financial strain — but some economists caution against jumping to conclusions.

“I would urge caution,” said Lisa Sturtevant, chief economist at Bright MLS. “One week’s worth of data does not tell us something dramatic is coming in the housing market, but it is illustrative that there might be changes on the way with more inventory.”

The one warning sign to watch out for — and what to do

While job losses and economic shifts are concerning, Clower points to one specific indicator that would signal a dire situation: affordability in the housing market.

"I hope we do not get to the place where the D.C. region is considered a really affordable place to live because that means that things will have gotten really bad," Clower said. "There hasn’t been any time in modern economic history where there has been a direct threat to the base structure of the D.C. region's economy."

D.C. has long been a high-cost metro area, and a steep drop in home prices would suggest a significant outflow of workers and weakened demand for housing. Lower property values could also indicate struggling local businesses, reduced tax revenues, and a shrinking middle class.

While individuals may have limited control over large-scale economic shifts, there are steps both individuals and policymakers can take to reduce the impact:

• Diversify income sources: If your income is reliant on federal funding, consider freelancing, teaching, gig work, or remote jobs that aren't tied to government funding.

• Consider investing in an asset like gold, which, historically, has shown less volatility than stocks, and as such has been a popular hedge against inflation among professional investors.

• Build an emergency fund that covers 3-6 months of expenses.

• Expand your network outside of the federal job market to help expand your career opportunities. Consulting in the private sector may be an option.

• Support local businesses that rely on federal worker spending and that may be struggling. Shop local when possible.

• Advocate for policy changes, such as job transition programs, local economic stimulus measures, and affordable housing.

For now, analysts and residents alike are watching closely to see what happens next and whether D.C.'s economy weathers the storm — or sinks into crisis.