Fed To Shrink Staff By About 10% Over Next Several Years

The Federal Reserve plans to shrink its system-wide workforce by about 10% over the next couple of years, mainly through attrition.

Fed Chair Jerome Powell informed staff of the move on Friday in a memo viewed by Bloomberg News. The reduction includes offering some employees voluntary deferred resignation, which Powell said is similar to an effort the central bank undertook in 1997.

The Fed will offer the deferred resignation program to staff at the Washington-based Board of Governors who are fully eligible to retire as of Dec. 31, 2027.

“I have directed the leadership of the Federal Reserve, here at the Board and across the System, to find incremental ways to consolidate functions where appropriate, modernize some business practices and ensure that we are right-sized and able to meet our statutory mission,” Powell said in the memo. “Over the next couple of years, our overall staffing level will decline by about 10% from today.”

In its 2023 annual report, the Fed reported 23,950 employees across the Fed system. The 2024 budget foresaw boosting headcount to 24,553, about a 2.5% increase.

A 10% reduction suggests lowering headcount by nearly 2,500 workers at the Fed board and across the 12 regional reserve banks. That would leave staffing levels closer to those a decade ago.

The announcement comes as the Trump administration has been pressuring federal agencies to reduce headcount and streamline operations. 

The Fed is an independent agency that does not rely on Congress for funding. Still, the central bank has been criticized by Elon Musk — who is running the administration’s Department of Government Efficiency, or DOGE — for what he claimed is overstaffing and exorbitant costs associated with ongoing building renovations.

Powell has denied the central bank is overstaffed. “Overworked maybe, not overstaffed,” he said during a congressional hearing in February. “Everybody at the Fed works really hard.”

In the memo Friday, Powell said the central bank “is a careful and responsible steward of public resources,” and called the system staff “our most valued asset.” 

The effort “will provide new professional growth opportunities for our staff and help us remain well-prepared to carry out our important responsibilities in the years to come,” he said.

For years, the Fed’s income exceeded its operating expenses, and it turned over billions of dollars in profits to the US Treasury that helped narrow the government’s budget deficit. As interest rates have risen, however, the opposite has happened: The Fed recorded operating losses in 2023 and 2024, forcing it to forgo remittances to the Treasury.

The Fed has drawn Musk’s attention, including its multiyear headquarters renovation. Reported costs associated with that had ballooned to about $2.5 billion as of 2022, a figure that the Fed pinned to higher costs of building materials and labor since the project started in 2021, right as inflation began to soar.

Earlier this month, Musk called those costs “an eyebrow raiser.”

In a report published earlier this year, Andrew Levin, a Dartmouth College professor and former special adviser at the central bank said the number of Fed employees has increased substantially since 2010. That contrasts sharply with other large federal agencies, he said, whose payrolls have declined by 10%.

(Adds additional comment from Powell memo. A previous version of this story was corrected to fix spelling of Dartmouth and clarify which staff are eligible for deferred resignation program.)

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