The financial market may face another heavy blow! The White House is working on a "government shutdown contingency plan" as mass layoffs loom

According to the Zhitong Finance APP, the White House has instructed federal agencies to prepare for the possibility of a government shutdown on October 1, with plans for large-scale layoffs of relevant government projects if funding to maintain government operations expires and no other funding sources are available. The White House and the Office of Management and Budget (OMB) have requested that all federal agencies prepare Reduction in Force (RIF) plans and other emergency measures for a government shutdown, indicating that the Trump administration is unwilling to compromise with the Democrats and is beginning to make significant preparations for the pessimistic scenario of "not being able to renew funding on time."

Overall, the risk of a government shutdown in the United States is "imminent," but it still depends on whether Congress can reach a short-term funding agreement (CR) before September 30. Currently, there are significant differences between the House and Senate, and the White House has issued the strictest "government shutdown plan" under such a sharply divided situation. Not only does the federal government face the risk of large-scale layoffs, but the financial markets are also at high risk, which is why U.S. stocks have continued to decline in recent days. If no agreement is reached as the deadline approaches, traditional safe-haven assets like gold and front-end interest rates may experience increased volatility, while market risk appetite could sharply decline, leading to a sustained correction in global stock markets.

The OMB has also instructed federal agencies to prepare formal layoff notices (the so-called RIF, usually referring to "permanent layoffs") for employees of projects that are completely inconsistent with the core priorities of President Donald Trump.

"The RIF notice will supplement any unpaid leave notices issued due to the interruption of government funding," the OMB wrote in an internal memo. "After the appropriations for fiscal year 2026 take effect, federal agencies should adjust their RIFs as necessary to retain the minimum number of employees required to perform statutory government functions," the memo added.

The OMB pointed out that if Congress can successfully pass a "clean" continuing resolution to fund the government before the deadline, the steps outlined in the memo will no longer be necessary.

In recent decades, federal workers during a government shutdown have typically been placed on unpaid leave until a budget agreement is reached, after which they return to work.

This "RIF plan" can be seen as an additional contingency: the OMB memo requires agencies to prepare RIF notices for projects without alternative funding and that are inconsistent with presidential priorities, but it also states that if a "clean" continuing resolution is passed, execution will not be necessary; and even if executed, at least advance notice must be given and procedures specified by the Office of Personnel Management (OPM) must be followed, making it impossible to "instantaneously permanently lay off" on the day of the shutdown.

RIF (a form of permanent layoff) has strict legal procedures and timelines: RIF differs from leave in that it involves job competition/placement, qualifications and priorities, and the right to appeal, and long-term unpaid leave exceeding a certain number of days can also be considered part of the RIF process. Therefore, federal agencies typically cannot use a government shutdown as a "shortcut" to bypass procedures for layoffs. Thus, the feasibility and legality of the large-scale RIF that the Trump administration intends to implement in the event of a shutdown are being questioned and face political and judicial challenges An OMB official stated in a media interview that ongoing projects, regardless of whether the government shuts down, include Social Security, federal Medicare, legal and immigration enforcement, veterans' benefits, military operations, and air traffic control.

"This is an intimidation attempt," said Senate Minority Leader Chuck Schumer (D-NY) regarding the OMB's directive. "These unnecessary layoff orders will either be overturned by the courts or the government will ultimately rehire these employees, just like what happened just this past week."

Federal funding is set to expire on September 30. The Republican-controlled House passed a temporary bill extending federal operating funds to November 21 without Democratic support.

The Senate needs at least seven Democratic votes to pass the bill. Democrats' demands for this funding bill include extending subsidies for the Affordable Care Act