Becker Private Equity & Business Podcast
Will a Reduction in Government Spending Lead to Higher Unemployment? 3-11-25
Tue, 11 Mar 2025
In this episode, Scott Becker answers a listener’s question about whether cutting government spending will lead to higher unemployment.
Chapter 1: Will a reduction in government spending lead to higher unemployment?
This is Scott Becker with the Becker Private Equity and Business Podcast. Today, we're going to respond to a reader question. One of the reader's questions we got this weekend was, will a reduction in government spending lead to higher unemployment? And the answer to this is almost certainly yes.
Chapter 2: What are the effects of government hiring on unemployment?
We've already got with the slowdown in government hiring and just starting to hit the down switch on government hiring, a slight increase in unemployment. I expect that if we the government was hiring 30,000 people a month, if that number goes down to zero or below zero, you're absolutely going to have some increase in unemployment.
Chapter 3: How might government spending cuts lead to a recession?
Chapter 4: What role does the Federal Reserve play in unemployment rates?
Now, this is a fascinating thing because this will lead to for a period of time, almost inevitably some sort of recession. And at the same time, it's also going to lead Chairman Powell sooner or later to reduce unemployment. federal funds rates to a lower number, which at some point will have an evening out effect as money gets cheaper again.
But yes, you're almost certainly going to see some sort of unemployment increase as the government stops spending deficit spending. Currently, the government's about $2 trillion a year in deficit spending.
cutting that number some and again we kept ourselves out of a recession with that deficit spending but probably spent too much to do so by trying to avoid the natural economic cycles uh and and trying to use debt to pretend we have growth so when you go ahead and actually reduce government spending and reduce government payrolls we're going to have employment pop up no question about it let's just hope it can be done so in a rational way without throwing us into horrendous depression
Thank you for listening to the Becker Private Equity and Business Podcast. Thank you very much.