The latest labor market data is sending a clear message—Elon Musk's Department of Government Efficiency (DOGE) is making its mark. Federal employment dropped by 10,000 jobs in February, a stark contrast to the 9,000 jobs added the month before. This shift aligns with DOGE's push to streamline the government, cutting costs and reducing headcount. Meanwhile, private-sector data from Challenger, Gray & Christmas shows February layoffs skyrocketed to their highest level since July 2020, with DOGE-related cuts playing a key role. With a federal hiring freeze in place and thousands of workers taking buyouts, the full impact of these cuts is still unfolding.

For investors, the big question is what happens next. Morgan Stanley's Mike Wilson warns that DOGE's aggressive cost-cutting could create economic headwinds, at least in the short term, as reduced government spending ripples through the economy. Apollo Global Management's Torsten Sløk estimates that total layoffs tied to these measures could eventually hit 1 million, a figure that could push jobless claims higher and put pressure on equities, rates, and credit markets. If unemployment starts creeping up, that could trigger broader market concerns and impact growth expectations moving forward.

Still, not everyone is hitting the panic button. RSM chief economist Joe Brusuelas sees limited downside risk, arguing that the labor market remains tight, and external hiring in the tech sector has already slowed. In his view, DOGE's cuts may not be enough to significantly shake the broader employment picture. But as government spending contracts and layoffs mount, investors will be watching closely to see if this is just a temporary bump or the start of something bigger.