Evelyn Reynolds

Government agencies that shrank in President-elect Trump’s first term have mostly bounced back, and some have become even larger.When it comes to the federal payroll, two seemingly contradictory things are true.One, the Biden administration went on a hiring spree that expanded the government work force at the fastest pace since the 1980s. And two, it remains near a record low as a share of overall employment.In the four years separating President-elect Donald J. Trump’s two terms, the federal civilian head count has risen by about 4.4 percent, according to the Labor Department, to just over three million, including the Postal Service.But that’s a much slower pace than private payrolls have grown over the past four years. And it leaves the federal government at 1.9 percent of total employment, down from more than 3 percent in the 1980s.The incoming administration promises to erase whole sections of the federal bureaucracy: Vivek Ramaswamy, co-chair of what Mr. Trump is calling the Department of Government Efficiency, has said 75 percent of the work force could go, in pursuit of $2 trillion in cuts. But it will be a challenge to find cuts without depleting services.“When we’re looking at the numbers of the federal work force, it’s still about the same size as it was in the 1960s,” said Max Stier, president of the Partnership for Public Service, a think tank. “The narrative out there is the federal government work force is growing topsy-turvy, and the reality is that it’s actually shrinking,”Compared with the overall work force, the federal employee base has been shrinking for decadesNot including the armed forces, federal government employees as a share of all nonfarm workers are near an all-time low.

Federal employment includes the Postal Service.Source: Bureau of Labor StatisticsBy The New York TimesHow Big Are Agencies, and Have They Grown or Shrunk? The number of people who work in the federal government’s largest departments, and how they’ve changed in size since 2020.

Note: Total work force numbers are as of March 2024.Source: Office of Personnel ManagementBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Federal employees and others in the capital have grown attached to work-from-home arrangements. But hybrid work may disappear in the second Trump era.When the Social Security Administration agreed to a five-year extension of work-from-home arrangements for tens of thousands of employees in early December, many at the agency expressed relief.But the reprieve may be short-lived. At a news conference two weeks later, President-elect Donald J. Trump railed against the deal and said he would go to court to undo it. “If people don’t come back to work, come back into the office,” he said, “they’re going to be dismissed.”The back-and-forth previewed what is likely to be one of the earliest points of contention of Mr. Trump’s second administration. Over the past few years, many federal workers have organized their lives around hybrid arrangements that help them juggle work and family responsibilities, and have gone so far as to demand that the Biden administration preserve the status quo. Some have rushed to join the roughly one-quarter to one-third of federal workers who are unionized, so that telework policies will be negotiable.But to the president-elect and his allies, the work-from-home arrangements are not only a glaring example of liberal permissiveness run amok — “a gift to a union,” Mr. Trump said — but also a tantalizing opportunity to clear the federal government of obstructionist workers and to vastly shrink its reach.In a Wall Street Journal column in November, Elon Musk and Vivek Ramaswamy, the businessmen tapped to lead Mr. Trump’s government efficiency commission, said they would welcome “a wave of voluntary terminations” triggered by forcing federal employees to work from an office five days a week.Many private-sector employers have recently announced such policies, arguing that in-person work improves communication, mentoring and collaboration.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Daniel Werfel, the commissioner of the Internal Revenue Service, told the agency’s employees that he would end his term early and step down on Monday as President-elect Donald J. Trump takes office.Mr. Trump has said he plans to nominate Billy Long, a former Republican congressman, to the role. Past presidents have treated the tax collector’s leader as a nonpartisan job that continues between administrations of different parties. President Biden chose Mr. Werfel, a former career civil servant and management consultant, to attempt a renaissance of the I.R.S., which Democrats have infused with billions in new funding that Republicans are now eager to cancel.In a message to employees, Mr. Werfel said he had decided to step down after he concluded that it was the best way to support the next administration. Douglas O’Donnell, a career civil servant at the I.R.S. who currently has the No. 2 job, will serve as the acting commissioner, Mr. Werfel said.“While leaving a job you love is never easy, I take comfort in knowing that the civil servant leaders and employees at the I.R.S. are the exact right team to effectively steward this organization forward until a new I.R.S. commissioner is confirmed,” he wrote.With more than 80,000 employees, the I.R.S. is a central part of the federal government, collecting nearly $5 trillion in tax revenue last fiscal year. With $60 billion in additional funding approved by Democrats, the agency has in recent years tried to beef up tax collection for wealthy Americans and update its antiquated technology systems.The I.R.S. has long been a villain to Republicans, who attack it as a political tool for Democrats. Mr. Long, Mr. Trump’s pick to lead the agency, has scant tax experience beyond promoting a pandemic-era tax credit for small businesses that the I.R.S. has tried to shut down because of abuse. Republicans have already canceled $20 billion of the $80 billion Democrats originally envisioned for the I.R.S., and they have frozen $20 billion more. More

Economic upheaval caused by the pandemic has clouded analysts’ ability to understand the effects of the 2017 tax law. Republicans call it a huge success and want to extend it anyway.Seven years ago, when Republicans passed the most significant overhaul of the tax code in a generation, they were sure the law would supercharge investment, raise wages and shift the American economy into a higher gear.So did it?The answer, at least for now, is largely lost to history.A pandemic and a surge in inflation convulsed the global economy not long after the law passed in 2017, scrambling the data that analysts would have typically relied on to draw conclusions about whether the tax cuts helped the economy grow the way Republicans had promised.As a result, policymakers in Washington are now relying on only a partial understanding of the law’s past as they weigh committing roughly $5 trillion toward continuing it.“Basically, from 2020 the data is kind of useless,” said Alan Auerbach, an economics professor at the University of California, Berkeley, who counts Kevin Hassett, a top economic adviser to President-elect Donald J. Trump, among his former students.Economists have focused on just two years before the coronavirus pandemic, 2018 and 2019, to measure the law’s consequences for the most important economy in the world. But that’s a limited window for trying to discern whether the tax cuts prompted a cycle of investment and growth that can take years to play out.“In terms of looking at longer-run effects, pretty much just forget about it,” Mr. Auerbach said. “There’s just no way to control for the effects of Covid.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Climate-related natural disasters are dramatically driving up insurance costs for homeowners in the most-affected regions, according to a Treasury Department report Thursday.
For consumers living in the 20% of zip codes with the highest expected annual losses, premiums averaged $2,321, or 82% more than those living in the 20% of lowest-risk zip codes from 2018-22.
“This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families,” said outgoing Treasury Secretary Janet Yellen.

Firefighters battle flames during the Eaton Fire in Pasadena, California, U.S., Jan. 7, 2025.
Mario Anzuoni | Reuters

Climate-related natural disasters are driving up insurance costs for homeowners in the most-affected regions, according to a Treasury Department report released Thursday.
In a voluminous study covering 2018-22 and including some data beyond that, the department found that there were 84 disasters costing $1 billion or more, excluding floods, and that they caused a combined $609 billion in damages. Floods are not covered under homeowner policies.

During the period, costs for policies across all categories rose 8.7% faster than the rate of inflation. However, the burden went largely to those living in areas most hit by climate-related events.
For consumers living in the 20% of zip codes with the highest expected annual losses, premiums averaged $2,321, or 82% more than those living in the 20% of lowest-risk zip codes.
“Homeowners insurance is becoming more costly and less accessible for consumers as the costs of climate-related events pose growing challenges to both homeowners and insurers alike,” said Nellie Liang, undersecretary of the Treasury for domestic finance.
The report comes as rescue workers continue to battle raging wildfires in the Los Angeles area. At least 25 people have been killed and 180,000 homeowners have been displaced.
Treasury Secretary Janet Yellen said the costs from the fires are still unknown, but noted that the report reflected an ongoing serious problem. During the period studied, there was nearly double the annual total of disasters declared for climate-related events as in the period of 1960-2010 combined.

“Moreover, this [wildfire disaster] does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage – from severe storms in the Great Plans to hurricanes in the Southeast,” Yellen said in a statement. “This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families.”
Both homeowners and insurers in the most-affected areas were paying in other ways as well.
Nonrenewal rates in the highest-risk areas were about 80% higher than those in less-risky areas, while insurers paid average claims of $24,000 in higher-risk areas compared to $19,000 in lowest-risk regions.
In the Southeast, which includes states such as Florida and Louisiana that frequently are slammed by hurricanes, the claim frequency was 20% higher than the national average.
In the Southwest, which includes California, wildfires tore through 3.3 million acres during the time period, with five events causing more than $100 million in damages. The average loss claim was nearly $27,000, or nearly 50% higher than the national average. Nonrenewal rates for insurance were 23.5% higher than the national average.
The Treasury Department released its findings with just three days left in the current administration. Treasury officials said they hope the administration under President-elect Donald Trump uses the report as a springboard for action.
“We certainly are hopeful that our successors stay focused on this issue and continue to produce important research on this issue and think about important and creative ways to address it,” an official said. More

The Labour government, Treasury and Bank of England were given something of a reprieve on Wednesday when the latest inflation data showed consumer price growth had cooled more than expected in the twelve months to December.
The consumer price index rose to a lower-than-expected 2.5% in December, with core price growth slowing further. The print came in below expectations with economists polled by Reuters expecting the inflation rate to remain unchanged from November’s 2.6% reading.

The Royal Exchange and the Bank of England.
SOPA Images / Contributor / Getty Images

The U.K. economy grew at a lackluster pace of 0.1% in November, data from the Office of National Statistics (ONS) showed Thursday, with the reading fueling expectations that the Bank of England will proceed with an interest rate cut next month.
The latest data print compares with the 0.2% month-on-month growth expected by economists polled by Reuters.

Monthly real gross domestic product (GDP) fell by 0.1% in October, following a decline of 0.1% in September and growth of 0.2% in August.
The ONS said the slight growth in economic output in November was largely due to growth in the services sector. While meager, the data is the first sign of life in the U.K.’s wider economy for three months.
British Chancellor Rachel Reeves said in a statement after the data Thursday that she was “determined to go further and faster to kickstart economic growth.”
“That means generating investment, driving reform and a relentless commitment to root out waste in public spending, and today I will be pressing regulators on what more they can do to deliver growth,” she said in emailed comments from the Treasury.
The ONS nevertheless said the real GDP is estimated to have shown no growth in the three months to November, compared with the three months to August.

“Services showed no growth over this three-month period, while production fell by 0.7% and construction grew by 0.2%,” the ONS said in the data release.
The British pound fell 0.2% against the dollar to trade at $1.2214 following the GDP print, which comes as the Bank of England considers whether to lower interest rates at its next meeting on Feb.6.
Economists say the latest data only fuels the case for a rate cut next month, although BOE policymakers will be factoring in inflationary pressures, such as resilient wage growth and uncertainty over Britain’s economic outlook. The central bank’s inflation target is 2%.
“Together with December’s softer-than-expected CPI inflation print, today’s release revealed that the economy continued to have little momentum towards the end of last year, leaving us content with our view that the Bank of England will cut interest rates from 4.75% to 4.50% in February,” Capital Economics’ UK Economist Ashley Webb said in an emailed note.

Labour under pressure

The Labour government and Treasury have been under pressure in recent weeks amid rising government borrowing costs and questions over their fiscal plans and higher tax burden on businesses.
Both were given something of a reprieve on Wednesday, however, when the latest inflation data showed consumer price growth had cooled more than expected to 2.5% in December, with core price growth slowing further.
The print came in below the expectations of economists polled by Reuters, who had anticipated the inflation rate would remain unchanged from the 2.6% reading of November.
Core inflation, which excludes more volatile food and energy prices, came in at 3.2% in the twelve months to December, down from 3.5% in November.
The U.K.’s inflation rate had hit a more than three-year low of 1.7% in September, but monthly prices had accelerated since then on the back of higher fuel costs and the price of services. In December, the annual services inflation rate stood at 4.4%, down from 5% in November.
The U.K. economy has found itself in a tight spot of late, with economists voicing concerns over the country’s sluggish growth prospects and worries over headwinds caused by both external factors, such as potential trade tariffs once President-elect Donald Trump takes office on Jan. 20, along with internal fiscal and economic challenges that have dogged the Labour government and Treasury since the October budget.
“The near stagnation of GDP in November has dampened the optimism sparked by yesterday’s unexpected drop in inflation. Meanwhile, the widening trade deficit highlights the persistent challenges faced by UK businesses as they contend with an increasingly complex global landscape,” Samuel Edwards, head of Dealing at global financial services firm Ebury, said in emailed comments Thursday.”The incoming U.S. administration brings both opportunities and challenges. While uncertainty around policy direction persists, there is optimism that closer trade ties could unlock significant potential in one of the UK’s largest markets,” he noted.
The government’s efforts to strengthen links with the EU and China, Edwards noted, “reflect a clear strategy to diversify export opportunities and enhance long-term economic resilience.”
Correction: This article’s headline has been updated to reflect the U.K. economy grew by 0.1% in November. A previous version had misstated the figure. More

The Consumer Price Index rose 2.9 percent from a year earlier, but a measure of underlying inflation was more encouraging.Consumer prices rose more quickly in December, the latest sign that the Federal Reserve’s fight against inflation may have stalled.The Consumer Price Index rose 0.4 percent from November, and was up 2.9 percent from a year earlier, the Labor Department said on Wednesday. It was the fastest one-month increase in overall prices since February, driven in part by another sharp rise in the price of eggs and other groceries.The “core” measure of inflation, which strips out volatile food and fuel prices to give a better sense of the underlying trend, was more encouraging: The index rose 3.2 percent from a year earlier after three straight months of 3.3 percent gains. Forecasters had not expected core inflation to slow.Inflation has cooled substantially since the middle of 2022, when it hit a four-decade high of more than 9 percent. More recently, however, progress has slowed, or even stopped outright: By some measures, inflation hardly improved in 2024.“When you step back and look at the overall state of inflation, we’re not really going anywhere,” said Sarah House, senior economist at Wells Fargo. “While there has been progress, the pace has been really disappointing.”Prices continued to rise in some of the categories that matter most to consumers. Grocery prices, which were relatively flat in late 2023 and early 2024, are rising again, led by the price of eggs, which is up by more than a third over the past year. Gas prices jumped 4.4 percent in December, although they were lower than a year ago.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The consumer price index increased a seasonally adjusted 0.4% on the month, putting the 12-month inflation rate at 2.9%. The annual number was in line with forecasts.
Core CPI annual rate was 3.2%, a notch down from the month before and slightly better than the 3.3% outlook.
Shelter prices, which comprise about one-third of the CPI weighting, rose by 0.3% but were up 4.6% from a year ago, the smallest one-year gain since January 2022.
Stock market futures surged following the release while Treasury yields tumbled.

Prices that consumers pay for a variety of goods and services rose again in December but closed out 2024 with some mildly better news on inflation, particularly on housing.
The consumer price index increased a seasonally adjusted 0.4% on the month, putting the 12-month inflation rate at 2.9%, the Bureau of Labor Statistics reported Wednesday. Economists surveyed by Dow Jones had been looking for respective readings of 0.3% and 2.9%.

However, excluding food and energy, the core CPI annual rate was 3.2%, a notch down from the month before and slightly better than the 3.3% forecast. The core measure rose 0.2% on a monthly basis, also 0.1 percentage point less than expected.
Much of the move higher in the CPI came from a 2.6% gain in energy prices for the month, pushed higher by a 4.4% surge in gasoline. That was responsible for about 40% of the index’s gain, according to the BLS. Food prices also rose, up 0.3% for the month.
On an annual basis, food climbed 2.5% in 2024 while energy nudged down by 0.5%.

Shelter prices, which comprise about one-third of the CPI weighting, rose by 0.3% but were up 4.6% from a year ago, the smallest one-year gain since January 2022. Services prices excluding rents rose 4% from a year ago, the slowest since February 2024.
Stock market futures surged following the release while Treasury yields tumbled.

Though the numbers compared favorably to forecasts, they still show that the Federal Reserve has work to do to reach its 2% inflation target. Headline inflation moved down from its 3.3% rate in 2023, while core was 3.9% a year ago.
“Today’s CPI may help the Fed feel a little more dovish. It won’t change expectations for a pause later this month, but it should curb some of the talk about the Fed potentially raising rates,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “And judging by the market’s initial response, investors appeared to feel a sense of relief after a few months of stickier inflation readings.”
The inflation readings this week – the BLS released its produce price index Tuesday – are expected to keep the Fed on hold when it convenes its policy meeting later this month.
While the market cheered the CPI release, the news was less positive for workers: Inflation-adjusted hourly earnings for the month fell by 0.2%, putting the year-over-year gain at just 1%, the BLS said in a separate release.
Details in the inflation report otherwise were mixed.
Used car and truck prices jumped 1.2% while new vehicle prices also moved higher by 0.5%. Transportation services surged 0.5% and were up 7.3% year over year, while egg prices jumped 3.2%, taking the annual gain to 36.8%. Auto insurance rose 0.4% and was up 11.3% annually.
“The inflation rate is currently grappling with a ‘last mile’ problem, where progress in reducing price pressures has slowed,” said Sung Won Sohn, a professor at Loyola Marymount University and chief economist at SS Economics. “Key drivers of inflation, including gas, food, vehicles, and shelter, remain persistent challenges. However, there are signs of hope that long-term inflationary pressures may continue to ease, aided by moderating trends in critical sectors such as shelter and labor costs.”
The report comes with markets skittish over the state of inflation and the Fed’s potential response. Tariffs and mass deportations that President-elect Donald Trump has promised have increased concerns over inflation.
Job growth in December was much stronger than economists had expected, with the gain of 256,000 further raising concerns that the Fed could stay on hold for an extended period and even contemplate interest rate increases should inflation prove stickier than expected.
The December CPI report, coupled with a relatively soft reading Tuesday on wholesale prices, shows that while inflation is not cooling dramatically, it also isn’t indicating signs of reaccelerating.
A separate report Wednesday from the New York Fed showed manufacturing activity softening but prices paid and received rising substantially.
Futures pricing continued to imply a near certainty that the Fed would stay on hold at its Jan. 28-29 meeting but tilted to nearly 50-50 chance of two rate cuts through the year, assuming quarter percentage point increments, according to CME Group figures. Markets expect the next cut likely will happen in May or June.
The Fed uses the Commerce Department’s personal consumption expenditures price index as its primary forecasting measure for inflation. However, the CPI and PPI measures figure into that calculation.
The two readings likely mean that the core PCE will rise just 0.2% in December, keeping the annual rate at 2.8%, according to Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

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