First came the shutdown, next the layoffs

Summary

Marketplace Morning Report

Episode: First Came the Shutdown, Next the Layoffs
Date: October 2, 2025
Host: Sabri Benishore (in for David Brancaccio)

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Overview

This episode discusses the escalating economic fallout from the latest U.S. federal government shutdown—specifically, the transition from furloughs to permanent layoffs of federal workers. The conversation covers the potential economic damage, how the shutdown hinders access to crucial labor market data, and a shift in China’s immigration policy amidst its own domestic unemployment challenges. The episode also briefly touches on new U.S. aid for farmers affected by China’s tariff retaliation.

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Key Discussion Points and Insights

1. Federal Government Shutdown Escalates to Layoffs

• Federal layoffs imminent:

  • The Office of Management and Budget (OMB) has instructed agencies to fire workers in unfunded programs or projects inconsistent with the president’s priorities (01:29).
  • Past shutdowns resulted in furloughs (temporary unpaid leave), but this time, actual firings are authorized.

• Administration's justification:

  • Vice President J.D. Vance:

    “We’re going to have to triage some certain things. That means certain people are going to have to get laid off and we’re going to try to make sure that the American people suffer as little as possible from the shutdown.” (01:45)

• Process and timing:

  • HR is cleared to issue layoff notices during the shutdown.
  • White House Press Secretary Caroline Levitt says dismissals will begin "very soon."

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2. Economic Impact of Layoffs vs. Furloughs

Guest: Diane Swonk, Chief Economist, KPMG

• GDP implications:

  • For every week of shutdown, GDP drops by about 0.2%.
  • This year, 151,000 federal workers already took buyouts as part of earlier layoffs, with their jobs ending October 1.
  • Additional permanent layoffs, especially in local communities outside D.C., can exacerbate “collateral damage.”
  • Swonk notes:

    “If there are more permanent layoffs this time around, that will be another dent into the economy that's much larger than what we typically see with government shutdowns.” (03:31)

• Unique risk:

  • Most federal workers are not in Washington, D.C., but in states and communities nationwide (03:19).
  • The ripple effect extends to local economies, amplifying the broader economic consequences.

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3. Data Blackout: Impact on Labor Market Monitoring

• Traditional government reports (jobless claims, jobs reports, unemployment rate) halted due to the shutdown.

• Swonk's perspective:

  “There's a lot of private sector data... It does give us a sense of what's going on.” (04:01)

  • Current data suggests:
    • Unemployment rate likely steady at 4.3% through September.
    • ADP payrolls show a decline in employment; situation appears stagnant.
    • Labor market is “frozen”:

      “Those who have a job are frozen in place, and those who don’t have a job are frozen out of this labor market.” (04:41)

    • Private data confirms what national data had shown all summer.

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4. China's New Immigration Policy Amid Youth Unemployment

Reported by: Jennifer Pak, Shanghai

• Introduction of “K visa” for foreign science, math, and engineering graduates (06:28).

  • Contrasts with U.S. policy, which is clamping down on immigrant labor.

• Public backlash:

  • China faces record-high youth unemployment (19% in August 2025).
  • Local reactions include nationalistic and xenophobic statements—concerns about job competition and “foreigners stealing future wives” (07:16; 07:31).
  • Retired journalist Hu Xijin downplays fears, emphasizing visas will only go to “talent China truly needs” (07:47).

• Key local concern:

  “Where does that leave the 12 million Chinese students graduating this year?” (07:51)

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5. U.S. Farmer Aid Amid Trade Tensions

• No recent soybean sales to China due to U.S.-China trade dispute.

• Treasury Secretary Scott Besant (on CNBC):

  “You should expect some news on Tuesday on substantial support for our farmers, especially the soybean farmers. They've had President Trump's back and we've got their back.” (08:12)

• Historical context:

  • During the previous Trump administration, nearly all tariff revenue was spent on compensating farmers.
  • Tariff levels and the scope of retaliation are now higher.

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Notable Quotes & Memorable Moments

• Vice President J.D. Vance (01:45):

  “We’re going to have to triage some certain things. That means certain people are going to have to get laid off and we’re going to try to make sure that the American people suffer as little as possible from the shutdown.”

• Diane Swonk (03:31):

  “If there are more permanent layoffs this time around, that will be another dent into the economy that's much larger than what we typically see with government shutdowns.”

• Diane Swonk (04:41):

  “Those who have a job are frozen in place, and those who don’t have a job are frozen out of this labor market.”

• Jennifer Pak (07:51):

  “But where, people ask, does that leave the 12 million Chinese students graduating this year?”

• Scott Besant (08:12):

  “Substantial support for our farmers, especially the soybean farmers. They've had President Trump's back and we've got their back.”

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Timestamps for Key Segments

• 01:06 – Episode theme introduced; layoffs looming after shutdown
• 01:29–02:20 – Layoff policy announcement, White House and administration justifications
• 02:20–05:09 – Diane Swonk interview: Economic consequences, GDP outlook, labor market data challenges
• 06:28–08:01 – Jennifer Pak: China’s K visa policy, youth unemployment and domestic backlash
• 08:01–08:27 – U.S. aid for farmers announced after China’s new soybean bans

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Summary

This tightly packed episode delivers a sobering look at the economic stakes of a U.S. government shutdown progressing from temporary furloughs to actual federal layoffs. Expert commentary highlights the amplified consequences for GDP and local economies, especially outside Washington. Listeners learn how the data blackout complicates labor market assessment in real-time. On the global front, China’s new visa policy aimed at attracting skilled immigrants stirs resentment amidst soaring youth unemployment. Finally, ongoing trade tensions trigger renewed promises of farm aid in the U.S., underscoring the interconnectedness of policy, local livelihoods, and the global economy.

Transcript

[Jennifer Pak]

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[Sabri Benishore]

First came the shutdown. Next come the layoffs from Marketplace. I'm Sabri Benishore in for David Brancaccio. Layoffs of federal workers are near, according to Trump administration officials. Earlier this week, President Trump said he would use the government shutdown to target, quote, Democrat things. Marketplace's Nancy Marshall Genser has the latest on layoff plans.

[Nancy Marshall Genser]

The Office of Management and Budget told federal agencies to fire federal workers in programs that aren't funded during the shutdown or those who work on projects that aren't, quote, consistent with the president's priorities. Yesterday, Vice President J.D. vance gave reporters a different justification.

[Commercial Announcer]

We're going to have to make things work, and that means that we're going to have to triage some certain things. That means certain people are going to have to get laid off and we're going to try to make sure that the American people suffer as little as possible from the shutdown.

[Nancy Marshall Genser]

Vance did not explain his reasoning. Hundreds of thousands of federal workers were furloughed in past shutdowns, but not fired. Guidance from the Office of Management and Budget specifically allows HR employees to issue layoff notices during the shutdown. White House Press Secretary Caroline Levitt says the dismissals will start, quote, very soon. I'm Nancy Marshall Genzer for Marketplace.

[Sabri Benishore]

A shutdown with layoffs may have more serious economic consequences than your average shutdown. For more on on that, we turn to Diane Swonk, chief economist at audit, tax and advisory firm kpmg. Hi, Diane.

[Diane Swonk]

Good morning.

[Sabri Benishore]

Trump administration officials have said layoffs are imminent around this government shutdown. With that in mind, what are the economic consequences of a shutdown like this, if there are any?

[Diane Swonk]

We do tend to see initially the effect on gdp for every week of a shutdown, you tend to see 2/10 of a percent off of GDP. Matters this time around is the timing is crucial. We have 151,000 workers that took buyouts earlier in the year from the federal layoffs that we saw those workers come off Federal Payrolls on October 1st. You add on top of that any additional permanent layoffs and the spillover effects in the local communities, most of which are outside of Washington D.C. most federal workers actually work in states not in Washington D.C. and that can have a lot of collateral damage to those people who don't get paid in arrears. But also if there are more permanent layoffs this time around, that will be another dent into the economy that's much larger than what we typically see with government shutdowns.

[Sabri Benishore]

Now, another consequence of the shutdown is that we are not getting a bunch of very important data. We're not getting jobless claims, we're not getting the jobs report, the unemployment rate, all that. Is there some other way to get a sense of what is happening in the labor market right now?

[Diane Swonk]

Yes, there's a lot of private sector data that isn't as long looking and has as much detail as the government data. But it does give us a sense of what's going on. We see everything from stuff that the Chicago Fed has compiled, which suggests that the unemployment rate likely stayed at 4.3% in the month of September. And then we saw the ADP payrolls that showed a decline in employment in September, which frankly may or may not be consistent with 4.3%. But what's important about it is it's all showing us the same picture that we're seeing in the national data, and that is that we've got a very stagnant labor market where churn the turnover rates of people being able to find jobs. Those who have a job are frozen in place and those who don't have a job are frozen out of this labor market. That kind of sense is something we've been struggling with all summer. And the data we have that we do know of in the private sector sector reinforces that very strong narrative.

[Sabri Benishore]

Diane Swonk, chief economist at kpmg, thank you so much.

[Diane Swonk]

Thank you.

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[Sabri Benishore]

Here in the US the government has cracked down on the immigrant workforce, but China is signaling that it is moving in a different direction, at least symbolically. This week, the country opened a new type of visa, the K visa. The purpose is to attract more science, math and engineering graduates from abroad to come and work in China. But there is a backlash. Marketplace's China correspondent Jennifer Pak reports from Shanghai.

[Jennifer Pak]

Attracting more global talent to China is a good thing. It's just bad timing, says current affairs commentator Xiang Dongliang. China's youth unemployment in August was 19%, the highest since December 2023, when the government rejiggered the calculation method.

[Commercial Announcer]

So when public policy adds insult to injury, people react strongly.

[Jennifer Pak]

Like Some say the job hunt is brutal, as is, others spout xenophobic and racist rhetoric. After the US tightened its H1B visas and the Indian media highlighted opportunities in China.

[Commercial Announcer]

There'S concern there will be a large influx of Indians competing for Chinese jobs. And a small number of people are also worried about foreigners stealing their future wives.

[Jennifer Pak]

But fear not, says retired Chinese journalist Hu Xijin in an online video.

[Million Bazillion Host]

K.

[Commercial Announcer]

Visas will be issued to foreign talent that China truly needs.

[Jennifer Pak]

But where, people ask, does that leave the 12 million Chinese students graduating this year? In Shanghai, I'm Jennifer Paak for Marketplace.

[Sabri Benishore]

China has not been buying any soybeans from American farmers in retaliation for U.S. tariffs. But speaking on CNBC this morning, Treasury Secretary Scott Besant said help is on.

[Commercial Announcer]

The way, and you should expect some news on Tuesday on substantial report or substantial support for our farmers, especially the soybean farmers. They've had President Trump's back and we've got their back.

[Sabri Benishore]

In the first Trump administration, the government spent almost all the revenue it collected from tariffs on Chinese goods on aid to farmers hurt by China's retaliation. The tariffs this time around are, of course, much higher. Not many more countries. More to come next week. In New York, I'm Sabri Benishore with the Marketplace Morning Report from APM American Public Media.

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