Shortly after he arrived in Washington, Treasury Secretary Scott Bessent discussed the need to "reprivatize the economy." The billionaire hedge fund manager moved from behind the desk to enact President Donald Trump's agenda of reducing government spending and strengthening growth in the private sector. While there is still plenty of time left before Trump's final term is complete, early indicators suggest this goal is being realized.
Private Sector Job Growth
Under the previous administration, government payrolls accounted for a large share of overall employment gains, particularly in the second half of former President Joe Biden's term. In the first few months of the new administration, the trend is reversing and could accelerate as the country heads into 2026.
From January to May, private sector payrolls have jumped by nearly 600,000. By comparison, US government employment growth has flatlined, and the federal headcount has declined by 59,000.
What’s more, this number could soar in the coming months. Economists have been monitoring the Department of Labor's initial jobless claims data, a weekly report that provides insights into federal employees who file for unemployment benefits. The number has increased gradually this year, reaching 561 for the week ending May 31, up from 400 at the same time last year. However, experts suggest that the figure could be much higher because terminated workers may have been given one-year severance pay, meaning jobless benefit applications might not surge substantially for several more months.
Either way, the concerning trend of the last couple of years is grinding to a halt. While it may not provide material savings to US taxpayers, every little bit helps when Uncle Sam is running an annual budget deficit of $2 trillion. Additionally, it also signals that the world’s largest economy may be relying on the private sector for enhanced growth prospects.
According to the Bureau of Economic Analysis, government outlays fell by 0.7% in the first quarter. Under this category, federal consumption expenditures and gross investment tumbled by 4.6%, including a 7.1% decrease in national defense and a 1.1% drop in nondefense spending.
For the first time in several years, government spending became a negative contributor to the GDP growth rate during the January-March period. In addition, the Atlanta Federal Reserve's widely watched GDPNow Model, a running estimate of GDP growth, estimates that government spending will again account for a small percentage of the economy's second-quarter expansion.
Changing the ‘Barbell Economy’
Will President Trump and his administration unleash the nation’s economic force?
The White House insists that the One Big Beautiful Bill (OBBB) will bolster growth. Independent economic forecasts suggest that long-term GDP growth will be modest over the next decade, resulting from the tax-and-spending legislation. However, the OBBB could be just a drop in the bucket of what the administration has planned.
Bessent has regularly referenced the nation's "barbell economy," stating that the United States suffers from imbalanced economic growth. He has averred that financial markets, Big Tech, and the government thrive, but working-class Americans struggle. The administration has presented various economic proposals to reverse course, focusing on across-the-board tax cuts, trimming regulations, and rebalancing trade (making America a manufacturer and the rest of the world a consumer).
At the same time, it has attracted trillions of dollars in private investment without leaning on taxpayer-funded subsidies to wealthy domestic and foreign corporations. Micron Technology has become the latest tech titan to announce a $200 billion investment in manufacturing advanced memory chips.
The primary challenge will be improving America’s fiscal health. If the US government continues to register $2 trillion shortfalls every year and pays $1 trillion in interest payments, the Treasury will need to issue more bonds to manage deficits and debt-servicing charges. This will initiate a crowding-out effect because the supply of US Treasury securities will flood capital markets, outweighing private borrowing needs that have been prevalent in recent years.
Government Creates Nothing
The previous administration published a paper discussing that Bidenomics consisted of a cozy relationship between the public and private sectors. Current rhetoric emanating from 1600 Pennsylvania Avenue suggests that Trumponomics 2.0 wants to return the economy to the private sector. Whether it is targeting manpower in Washington or trimming the fat in the budget, any avenue that reprivatizes the economy is worth exploring.
