Top economist: DOGE and Trump - the risks are increasing

He coined the term "no landing" and predicted that the economy in the USA would simply continue to run regardless of the actions of the central banks. But now Thorsten Slok, chief economist at Apollo, is becoming more cautious. Donald Trump's policies, combined with possible mass layoffs of civil servants in the USA, pose risks.

Over the weekend, Slok issued a note saying that many U.S. economic data "remain strong," but "we are beginning to worry about the downside risks to the economy and markets" from the impact of DOGE layoffs and political uncertainty. Analysts estimate that 300,000 federal employees could lose their jobs because of DOGE. The problem is that studies show that there are two contractors for every federal employee, Slok said, so the number of layoffs could be closer to a million.

"Any increase in layoffs will drive up unemployment claims in the coming weeks, and such a rise in the unemployment rate is likely to impact interest rates, stocks and credit," he says. Credit spreads - the extra yield investors demand for lending to businesses - tend to rise during times of economic policy uncertainty. But right now there is a clear discrepancy: uncertainty is rising, but yields are at historic lows. "The question is whether the continued high political uncertainty will negatively impact capital spending and hiring decisions," Slok says.