Economics professor warns DOGE layoffs will weaken consumer confidence, impact tourism

Rupert Pinder, assistant professor of economics at the University of The Bahamas (UB), is warning that the mass layoffs in the US federal government brought on by the Department of Government Efficiency (DOGE) will negatively impact the labor market, consumer confidence, and consumer spending, which will impact the tourism sector.

Pinder, speaking to Guardian Business after reading Central Bank Governor John Rolle’s comments on the likelihood of a tourism slowdown as a result of US President Donald Trump’s trade war, said that it is not the trade war that will have the biggest effect on the global economy, but the fact that DOGE has been firing public sector employees and has created fear in the minds of US consumers.

Pinder said: “I would liken what we see happening now as equivalent to what we saw during the pandemic if we are not careful. The difference with the pandemic is that you still had some demand in terms of the injections like the stimulus grants, but certainly from the supply side of things there were major disruptions, and what you are going to see happen is supply shock creating inflationary pressure.

“I agree that this trade war will impact tourism, and there are a couple of things that are going on at the same time. You have the tariff war that will obviously create an inflationary impact, which is also creating a dampening demand on economic growth. And so the markets are responding, and to the extent to which the markets are responding that is impacting overall person’s savings, and also in terms of consumer confidence. And there are several markets that are at play, because while we talk about the product market in terms of the supply side shocks, there’s also the financial markets, and you see what’s happening there with respect to the financial markets, but there is a third market that nobody’s paying attention to, and that is in terms of the labor markets. The labor markets are being impacted by DOGE.”

Approximately 280,000 active body employees have been shown the door in the first month of President Donald Trump’s administration.

Pinder further noted: “Nobody is really commenting on the effect DOGE is having on the labor market, but if you read into what’s happening in the US, this is creating some uncertainty, which is having a knock-on effect not only in terms of the labor market, but also as well on the product market. Because people are not confident about their jobs, that affects overall spending in the economy.”

He continued: “You can’t fire everybody, but if for example, to the extent to which there is some job cuts and people feel that they will be impacted because of the sheer uncertainty, one of the things that you’ll find happening is that people would obviously be very conservative about their overall spending.”