The Federal Reserve announced plans to reduce its workforce by 10% over the next couple of years, including offering a voluntary deferred resignation program to some older employees, according to a memo from Federal Reserve Chair Jerome Powell. The move is part of an ongoing effort to streamline operations and adjust to changing priorities.
Reason for Workforce Reduction
In the memo, Powell explained that it is healthy for any organization to periodically reassess its staffing needs. He emphasized that the Federal Reserve has undergone such assessments before, adjusting to changes in its work, priorities, and external environment. He noted that consolidating functions and modernizing business practices would be key elements in the staffing reductions.
Deferred Resignation Program
To help reduce headcount, the Fed will offer a voluntary deferred resignation program for employees of the Federal Reserve Board who are eligible to retire by the end of 2027. This program is designed to allow for a natural reduction in staffing without forced layoffs, with the central bank aiming to meet its statutory mission while being right-sized for its needs.
Impact on Staff Numbers
According to the Federal Reserve’s 2023 annual report, the organization employed just under 24,000 people. A 10% reduction would bring the total number of employees below 22,000. The staff cuts are part of a broader initiative to improve efficiency while maintaining the Fed’s ability to carry out its essential functions.
External Influence and Context
The memo also comes amid pressure from the Trump administration, which has pushed for cost reductions across various civil service agencies. Elon Musk, heading the Department of Government Efficiency (DOGE), has previously criticized the Federal Reserve as being “absurdly overstaffed.” However, Powell’s memo did not reference Musk or the DOGE as factors in the decision to reduce staff.
