Three weeks of shutdown, nine proposals rejected, and 10,000 layoffs stopped by the court: Are both the American political arena and the US dollar panicking?
2025-10-16 18:28:05
The federal government shutdown is now in its third week. The U.S. Senate again failed on Wednesday to pass a bill to reopen the government—the ninth time the bill has failed. This shutdown has not only caused turmoil within the administration, but has also embroiled in legal disputes over planned mass layoffs and intensified partisan wrangling over spending, creating a complex and multifaceted situation. Below is the latest on the U.S. government shutdown and its expected impact on the U.S. dollar index.
In the United States, the White House said on Wednesday that at least 10,000 federal employees may be laid off during the US government shutdown, and Republican President Donald Trump is increasing pressure on Democrats. When asked about the scale of the layoffs, White House Office of Management and Budget Director Russ Vought said in an interview with "The Charlie Kirk Show": "I think the final number of layoffs may be over 10,000."
"We want to take tough measures within our authority to shut down some bureaucracy." Watt also mentioned that he plans to lay off more than 10,000 federal employees during the government shutdown. On Wednesday before the court ruling came out, he said on the "Charlie Kirk Show" podcast that the 4,000 layoffs "are just a phased data, and I think this number will increase significantly." He also said that layoffs will continue during the shutdown, "because we believe that it is critical to take proactive action to protect the interests of American taxpayers and people." He later added that the final number of layoffs may be "more than 10,000."
Looking at layoffs, court documents filed by the U.S. Department of Justice show that more than 4,000 employees were laid off on Friday, with the Treasury, Health and Human Services, Education, and Housing and Urban Development departments being the hardest hit. Watt said this is only "a snapshot" of the situation, and more layoffs are expected.
Last Friday, major U.S. departments, including the Treasury Department and the Department of Health and Human Services, confirmed they were sending layoff notices to employees. The Department of Homeland Security, where many employees are designated as essential, announced it would lay off employees of its Cybersecurity and Infrastructure Security Agency. Documents filed with the Office of Management and Budget indicate that over a quarter of the layoffs will occur at the Treasury Department, which is sending notices to approximately 1,446 employees. The Trump administration has initiated layoffs for thousands of employees, with documents indicating that the Department of Health and Human Services is notifying between 1,100 and 1,200 employees of their upcoming layoffs. The department later stated that the actual number of layoffs planned is only about half that number.
The Education Department and the Housing and Urban Development Department plan to lay off at least 400 employees each, while the documents show that the planned layoffs at the Commerce Department, the Energy Department, the Housing and Urban Development Department, and the Homeland Security Department range from 176 to 315 employees each.
A federal judge on Wednesday temporarily blocked Donald Trump's administration from laying off federal employees during the government shutdown, saying the layoffs appeared politically motivated and were carried out without due consideration.
San Francisco District Court Judge Susan Illston repeatedly pressed an Assistant U.S. Attorney for an explanation of the government's decision to issue more than 4,100 layoff notices since Friday, even though furloughed employees were unable to access their work emails and had no human resources professionals to assist with follow-up matters. "Most of these actions were hastily and blindly implemented, and they will incur human costs," Illston said. "These human costs are unacceptable." She granted a temporary restraining order blocking the layoffs, stating that she believed the evidence ultimately demonstrated that the layoffs were illegal and exceeded the government's statutory authority.
The temporary restraining order came less than a week after the government confirmed that several agencies had initiated layoffs of approximately 4,000 employees. U.S. District Court Judge Susan Illston granted a motion filed by two labor unions to block layoffs at more than 30 agencies. During the hearing, Illston said she agreed with the unions' claims that the government was illegally exploiting a funding freeze that began on October 1st to advance its plan to streamline the federal government.
She also cited a series of public statements by President Donald Trump and White House Budget Director Russell Vought, saying they revealed a clear political motivation for the layoffs, including Trump's statement that the layoffs would target "Democratic-affiliated organizations." A U.S. Department of Justice lawyer stated that the union must first file a complaint with the Federal Labor Commission before pursuing a court resolution, and that the Trump administration is expected to appeal the restraining order.
Labor unions are also taking action. Two major unions, the American Federation of Government Employees and the AFL-CIO, filed a lawsuit against Vought and Trump over potential layoffs. On Friday, they asked Judge Illston to issue an emergency restraining order while the case is pending. The American Federation of Government Employees and other federal unions had previously filed a petition with Judge Illston seeking to bar the government from issuing new layoff notices and to halt those already issued.
The unions pointed out that the layoffs were an abuse of power aimed at punishing employees and putting pressure on Congress. They also believed that layoffs were not essential services that could be carried out during the government funding outage, and the government shutdown should not be a reason for large-scale layoffs because most federal employees were only furloughed and not paid.
Trump also warned of shutdowns and layoffs, saying that if Democrats continue to refuse to support the House-passed bill to fund the government until the end of November, it will trigger large-scale layoffs, targeting employees deemed to support the opposition party. Meanwhile, the US president promised to find a way to pay military personnel who will not receive their pay for the first time, even though the current uncertainty has caused long lines of uniformed personnel outside food banks.
Partisan divisions remain sharp over the shutdown. Republicans, who control both chambers of Congress and the White House, have blamed the impasse on Democrats, arguing that they should agree to a "no strings attached" funding bill that would simply continue current spending levels. Because Republicans hold a slim majority in the Senate, they need the support of several Democrats to reach the 60-vote threshold for passage. Democrats, however, remain united in their insistence that the bill address the looming rise in health care costs for low-income Americans.
Asked for comment on the controversy surrounding the layoffs, the White House directed The Associated Press to the Office of Management and Budget, which did not immediately respond to a request for comment.
The US dollar typically has safe-haven properties due to the "resilience of the US economy" and its "status as a global reserve currency," but the "lack of political governance efficiency" and "endogenous economic risks" exposed by the shutdown may weaken this attribute. On the one hand, the three-week shutdown has caused approximately 4,000 federal employees to lose their jobs. Coupled with issues such as delayed military pay, market concerns about US consumption (federal employee consumption accounts for approximately 2.3% of personal consumption expenditures) and the stability of people's livelihoods have intensified, weakening the market's perception that the "US economy is superior to other major economies," thereby reducing the dollar's attractiveness as an investment.
From the trading side, we need to focus on the "shutdown resolution signal" and the "data supplementary release node". First, the voting progress of the Senate's proposal to restart the government. If there are signals of bipartisan compromise (such as the Democrats agreeing to some spending clauses and the Republicans giving up large-scale layoffs), the short-term decline in risk aversion may trigger a correction in the US dollar. You can pay attention to the long opportunities of the euro against the US dollar; second, the supplementary release of key economic data after the end of the shutdown may strengthen expectations of a Fed rate cut.
Traders need to be wary of the volatility risk that the US dollar will first rise rapidly along the original trend due to the end of the shutdown, but then quickly pull back due to market concerns that the reissued data will be lower than expected.
(Daily chart of the US dollar index, source: Yihuitong)
At 10:16 Beijing time, the US dollar index is currently at 98.56.
White House layoff plan: Scale points to tens of thousands of people, official releases tough signal
In the United States, the White House said on Wednesday that at least 10,000 federal employees may be laid off during the US government shutdown, and Republican President Donald Trump is increasing pressure on Democrats. When asked about the scale of the layoffs, White House Office of Management and Budget Director Russ Vought said in an interview with "The Charlie Kirk Show": "I think the final number of layoffs may be over 10,000."
"We want to take tough measures within our authority to shut down some bureaucracy." Watt also mentioned that he plans to lay off more than 10,000 federal employees during the government shutdown. On Wednesday before the court ruling came out, he said on the "Charlie Kirk Show" podcast that the 4,000 layoffs "are just a phased data, and I think this number will increase significantly." He also said that layoffs will continue during the shutdown, "because we believe that it is critical to take proactive action to protect the interests of American taxpayers and people." He later added that the final number of layoffs may be "more than 10,000."
Layoffs are underway: Multiple departments are impacted, with the Ministry of Finance being the hardest hit.
Looking at layoffs, court documents filed by the U.S. Department of Justice show that more than 4,000 employees were laid off on Friday, with the Treasury, Health and Human Services, Education, and Housing and Urban Development departments being the hardest hit. Watt said this is only "a snapshot" of the situation, and more layoffs are expected.
Last Friday, major U.S. departments, including the Treasury Department and the Department of Health and Human Services, confirmed they were sending layoff notices to employees. The Department of Homeland Security, where many employees are designated as essential, announced it would lay off employees of its Cybersecurity and Infrastructure Security Agency. Documents filed with the Office of Management and Budget indicate that over a quarter of the layoffs will occur at the Treasury Department, which is sending notices to approximately 1,446 employees. The Trump administration has initiated layoffs for thousands of employees, with documents indicating that the Department of Health and Human Services is notifying between 1,100 and 1,200 employees of their upcoming layoffs. The department later stated that the actual number of layoffs planned is only about half that number.
The Education Department and the Housing and Urban Development Department plan to lay off at least 400 employees each, while the documents show that the planned layoffs at the Commerce Department, the Energy Department, the Housing and Urban Development Department, and the Homeland Security Department range from 176 to 315 employees each.
The case has been intervened by the court: the judge issued a temporary restraining order, directly pointing out that the layoffs were illegal and politically motivated.
A federal judge on Wednesday temporarily blocked Donald Trump's administration from laying off federal employees during the government shutdown, saying the layoffs appeared politically motivated and were carried out without due consideration.
San Francisco District Court Judge Susan Illston repeatedly pressed an Assistant U.S. Attorney for an explanation of the government's decision to issue more than 4,100 layoff notices since Friday, even though furloughed employees were unable to access their work emails and had no human resources professionals to assist with follow-up matters. "Most of these actions were hastily and blindly implemented, and they will incur human costs," Illston said. "These human costs are unacceptable." She granted a temporary restraining order blocking the layoffs, stating that she believed the evidence ultimately demonstrated that the layoffs were illegal and exceeded the government's statutory authority.
The temporary restraining order came less than a week after the government confirmed that several agencies had initiated layoffs of approximately 4,000 employees. U.S. District Court Judge Susan Illston granted a motion filed by two labor unions to block layoffs at more than 30 agencies. During the hearing, Illston said she agreed with the unions' claims that the government was illegally exploiting a funding freeze that began on October 1st to advance its plan to streamline the federal government.
She also cited a series of public statements by President Donald Trump and White House Budget Director Russell Vought, saying they revealed a clear political motivation for the layoffs, including Trump's statement that the layoffs would target "Democratic-affiliated organizations." A U.S. Department of Justice lawyer stated that the union must first file a complaint with the Federal Labor Commission before pursuing a court resolution, and that the Trump administration is expected to appeal the restraining order.
The union fought back, filing a lawsuit and requesting a restraining order, challenging the legality of the layoffs.
Labor unions are also taking action. Two major unions, the American Federation of Government Employees and the AFL-CIO, filed a lawsuit against Vought and Trump over potential layoffs. On Friday, they asked Judge Illston to issue an emergency restraining order while the case is pending. The American Federation of Government Employees and other federal unions had previously filed a petition with Judge Illston seeking to bar the government from issuing new layoff notices and to halt those already issued.
The unions pointed out that the layoffs were an abuse of power aimed at punishing employees and putting pressure on Congress. They also believed that layoffs were not essential services that could be carried out during the government funding outage, and the government shutdown should not be a reason for large-scale layoffs because most federal employees were only furloughed and not paid.
Trump's double statement: Threatening more layoffs and promising to solve the military pay crisis
Trump also warned of shutdowns and layoffs, saying that if Democrats continue to refuse to support the House-passed bill to fund the government until the end of November, it will trigger large-scale layoffs, targeting employees deemed to support the opposition party. Meanwhile, the US president promised to find a way to pay military personnel who will not receive their pay for the first time, even though the current uncertainty has caused long lines of uniformed personnel outside food banks.
Bipartisanship: Differences are sharp and difficult to reconcile, and funding proposals are repeatedly rejected.
Partisan divisions remain sharp over the shutdown. Republicans, who control both chambers of Congress and the White House, have blamed the impasse on Democrats, arguing that they should agree to a "no strings attached" funding bill that would simply continue current spending levels. Because Republicans hold a slim majority in the Senate, they need the support of several Democrats to reach the 60-vote threshold for passage. Democrats, however, remain united in their insistence that the bill address the looming rise in health care costs for low-income Americans.
Asked for comment on the controversy surrounding the layoffs, the White House directed The Associated Press to the Office of Management and Budget, which did not immediately respond to a request for comment.
Trading reminder: Safe-haven properties weaken, volatility rises, suppressing the dollar's flexibility
The US dollar typically has safe-haven properties due to the "resilience of the US economy" and its "status as a global reserve currency," but the "lack of political governance efficiency" and "endogenous economic risks" exposed by the shutdown may weaken this attribute. On the one hand, the three-week shutdown has caused approximately 4,000 federal employees to lose their jobs. Coupled with issues such as delayed military pay, market concerns about US consumption (federal employee consumption accounts for approximately 2.3% of personal consumption expenditures) and the stability of people's livelihoods have intensified, weakening the market's perception that the "US economy is superior to other major economies," thereby reducing the dollar's attractiveness as an investment.
From the trading side, we need to focus on the "shutdown resolution signal" and the "data supplementary release node". First, the voting progress of the Senate's proposal to restart the government. If there are signals of bipartisan compromise (such as the Democrats agreeing to some spending clauses and the Republicans giving up large-scale layoffs), the short-term decline in risk aversion may trigger a correction in the US dollar. You can pay attention to the long opportunities of the euro against the US dollar; second, the supplementary release of key economic data after the end of the shutdown may strengthen expectations of a Fed rate cut.
Traders need to be wary of the volatility risk that the US dollar will first rise rapidly along the original trend due to the end of the shutdown, but then quickly pull back due to market concerns that the reissued data will be lower than expected.
(Daily chart of the US dollar index, source: Yihuitong)
At 10:16 Beijing time, the US dollar index is currently at 98.56.
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