What Prediction Markets Are Forecasting

Prediction markets currently estimate about a 4 in 5 chance that the federal government will cut more than 50,000 employees before January 2027. This forecast is based on the scenario of a second Trump administration taking office in 2025. In simpler terms, traders collectively believe it is more likely than not that a significant reduction in the federal workforce would occur. The 78% probability suggests high confidence, but not certainty, in this outcome.

Why the Market Sees It This Way

Two main factors are driving these predictions. First, it reflects a core policy promise from Donald Trump's campaign. He has explicitly pledged to slash what he calls the "deep state" bureaucracy, proposing an executive order that would reclassify many federal workers so they could be more easily fired. This isn't a new idea. A similar proposal, known as Schedule F, was drafted near the end of his first term but was not implemented before he left office.

Second, markets are weighing the practical and political will to follow through. While a president has authority over executive branch employees, large-scale cuts face hurdles. Congress controls budgets for agencies, and mass layoffs could trigger legal challenges and operational disruptions. The high probability suggests traders believe a determined administration could overcome these barriers to reach the 50,000 threshold, viewing the campaign rhetoric as a serious intent.

Key Dates and Events to Watch

The primary event to watch is the 2024 presidential election in November. A Trump victory would make these workforce cuts a central agenda item for 2025. If he wins, the focus would shift to early 2026. Key signals would be the issuance of an executive order reclassifying employees, proposed federal budgets that reduce agency funding for personnel, and reports from the Office of Personnel Management on workforce numbers. Legal challenges from unions or Congress could delay or alter the scale of cuts, so court rulings would also be important milestones.

How Reliable Are These Predictions?

Prediction markets have a mixed record on specific policy outcomes like this. They are generally good at aggregating collective judgment about political will and the direction of policy. However, forecasting an exact numerical outcome—like a specific number of job cuts—is harder. Markets can accurately sense high probability of an attempt, but the final number depends on complex implementation. The 78% chance is likely a strong indicator that traders expect a serious effort to reduce the workforce, even if the final count is uncertain.