The Federal Reserve (Fed) plans to reduce its workforce by about 10% in the coming years primarily through natural attrition and voluntary departures. This move is not only aimed at adjusting the Fed’s manpower structure but also seen as part of the Trump administration’s efforts to reshape federal government efficiency.
Fed Chair Jerome Powell issued a notice to internal staff on Friday, emphasizing the implementation of this action under the principles of “maintaining high quality, political neutrality, and mission orientation.”
According to public data, the Federal Reserve System had 23,950 employees in 2023, with the budgeted number increasing to 24,553 in 2024, a growth of about 2.5%. A 10% reduction would mean a decrease of around 2,500 employees, bringing the workforce scale back to levels from a decade ago.
Internal memos obtained by Bloomberg, Financial Times, and other media outlets reveal that Powell outlined a “voluntary deferred resignation program” for Fed Board employees in Washington, encouraging eligible individuals to voluntarily retire by the end of 2027. Such programs allow institutions to proactively identify future positions that can be eliminated, consolidate employee functions, and streamline departmental manpower.
Powell stated that this move is similar to a program implemented by the Fed in 1997.
The memo emphasizes that this program will be implemented “incrementally” across departments, without involving forced layoffs or dismissals. Powell expressed that these steps can consolidate functions, modernize business processes, and ensure that organizational size aligns with statutory responsibilities.
The Fed’s downsizing plan is seen by outsiders as a response to the Trump administration’s efforts to streamline government agencies.
Currently, Trump is pushing for a comprehensive restructuring of federal agency structures through the Department of Government Efficiency (DOGE), led by Trump’s senior advisor and tech billionaire Elon Musk.
Musk has previously criticized the Fed for “overstaffing” and “excessive renovation expenses,” particularly highlighting a sharp rise in the budget costs of the Fed headquarters renovation project since 2021, reaching $2.5 billion by 2022.
The Fed explained that the cost increases were primarily due to rising prices of building materials and labor.
Powell denied accusations of overstaffing and said during congressional testimony, “We may have too much work, but that does not mean we have excess personnel. Every colleague at the Fed is working very hard.”
However, a report released earlier this year, by Dartmouth College economics professor and former special Fed advisor Andrew Levin, pointed out a significant increase in Fed staffing numbers since 2010, contrasting sharply with a trend of 10% workforce reductions in other large federal agencies.
Over the years, the Fed has consistently generated more revenue than expenses, regularly transferring surplus to the US Treasury to help reduce the federal budget deficit. However, with rising interest rates pushing up expenses, the Fed incurred operating losses in 2023 and 2024, leading to the suspension of payments to the Treasury.