A Tale of Two Americas: D.C.’s Depression, America’s Revival

It’s the best of times and the worst of times.

Donald Trump’s return to the White House is being experienced by many in Washington, DC, as a calamitous upheaval, even a “bloodbath” by some.

That’s not how it looks across the country. Gallup’s economic confidence index is higher than it has been since August of 2021. The share of Americans saying the country is on the right track is up ten points to 35 percent, and the share who say they expect higher economic growth—53 percent—is the highest since 2005.

Sixty-one percent of Americans think the stock market will go up over the next six months, the highest in Gallup surveys going back to the turn of the century. The share expecting inflation to go up is the lowest it has been since 2003, while the share expecting lower interest rates is the highest since right after the 9/11 attacks in 2001.

Yet in the nation’s capital, misery reigns. Here’s how Peggy Noonan described the mood after a recent trip inside the Beltway:

Republican lawmakers, including those most supportive of the president, are beside themselves with anxiety. When you speak to them—off the record, between friendly acquaintances—and ask how it’s going, they shift, look off, shrug: You know how it’s going. A GOP senator who supports the president had a blanched look. “He doesn’t do anything to make it easy,” he shrugged.

What is the meaning of the averted eyes and anxious faces? It means Trump 2.0 isn’t better. It means for all the talk of the new professionalism in the Trump operation, they have to get used to the chaos again and ride it, tempting the gods of order and steadiness. After one week they concluded the first administration wasn’t a nervous breakdown and the second isn’t a recovery; instead, again they’re on a ship with a captain in an extended manic phase who never settles into soothing depression.

Americans Are Losing Jobs—if They Work for the Federal Government

One reason for the divergence is that while jobless claims are falling across the U.S.—they were down to 213,000 last week, below the average for the past two years—they are rising in Washington, DC. In fact, they were four times as high last week as they were a year earlier.

If you look around the capital, you also see initial jobless claims rising since election day. Claims are up sharply in Virginia and Maryland.

According to the Washington Post’s Heather Long, roughly 275,000 federal workers lost their jobs last week. Many will not show up in claims numbers for a while, however, because their jobs aren’t immediately ending. The buyouts, for example, continue to pay workers for months.

To the extent that there’s any larger economic impact from these reductions in the federal workforce, this should have a disinflationary effect. Those who find work in the private sector will be adding to the supply side of the economy. Those who cannot find gainful employment will subtract from the demand side.

It could also alleviate some of the tightness in the labor force, providing relief to employers who say they are having trouble finding skilled workers. However, that depends on the idea that the redundant federal workers have skills the private sector needs, which may not be true for many of them—especially as corporate America backs off from DEI and ESG programs. Many of these federal employees may find they need retraining before they can find work.