As Maryland’s workforce continues to shed federal jobs at the fastest rate in the U.S., experts still aren’t sure where the bottom is.

The number of federal workers in the state declined by 2,500 in August, according to data released last week by the U.S. Bureau of Labor Statistics. Maryland is down more than 15,000 federal jobs since January — the largest decrease in the country.

The losses have been significant, leaving Maryland with its lowest number of federal employees since the summer of 2020. Economists are still not sure if the data fully captures the impact of the Trump administration’s campaign to slash the federal workforce.

“I think the net [impact] is going to be definitely a slowdown in the state economy,” said Andy Bauer, vice president and regional executive for the Baltimore branch of the Federal Reserve Bank of Richmond. “The extent to which we just don’t know yet because not everything has fully played out.”

The state’s unemployment rate currently stands at 3.6%, up from 3% at the start of the year. But that could increase as federal employees who entered into buyout agreements or volunteered for reductions in force come off the federal government’s books as soon as the end of this month.

Maryland has the third-most federal jobs in the country, with an estimated 229,000 Marylanders serving as federal civil servants, according to a report this year from Maryland’s comptroller. One in 10 workers in the state is employed by the federal government, according to a Banner analysis of U.S. census data.

Montgomery and Prince George’s counties have the largest concentration of Maryland federal workers, followed by Anne Arundel and Baltimore counties, the report found.

Widespread federal job losses of this magnitude have the potential to create a ripple effect that could impact not only workers but also the state’s tax base and private sectors.

“There’s just less dollars coming into the overall economy,” Bauer said. “You’ve got people concerned about the overall state of the economy, so they’re a little bit more reticent to spend.”

Though the outlook at federal agencies is grim, experts assert that other aspects of the state’s economy appear strong. Maryland has a lower unemployment rate than the country’s as a whole, which hit 4.3% last month.

State and local government hiring is up by 14,000 since the beginning of the year, said Joseph Mengedoth, regional economist at the Federal Reserve Bank of Richmond. The sector is nearly back to pre-pandemic levels and has become “a huge driver for employment in Maryland,” nearly offsetting the number of federal jobs lost during the same period.

“It’s not necessarily to say that all the federal workers are just getting state and local jobs, but that could be the case,” Mengedoth said. “We don’t really have a way of directly knowing that, but we’re definitely seeing and thinking some skills are going to overlap” between federal, state and local government.

But the trend of mass hiring at the state level, initiated by a commitment from Gov. Wes Moore in February, has been on hold since July, when his administration froze hiring for a year as the state hit a budget roadblock.

The freeze is expected to save $121 million for the next budget year, but those savings have created a challenge for former federal workers looking for work.

Many of them are also turning to the private sector.

“I talked to an engineering firm earlier this week that said they were able to hire a number of people who used to work in the federal government,” Bauer said. “He noted that for them, these are positions that were difficult to fill. And because these people were displaced at the federal level, he was able to pick them up.”

But economists see warning signs of a weakening labor market and slowed spending in the coming months. Combined with unsettled changes from the federal government, Maryland’s economy could tell a different story by the end of the year.