Trump and Musk Score Court Win to Halt Federal Layoffs—Wall Street Baffled by Non-Market Intervention

A federal judge just handed Trump and Elon Musk an emergency injunction—freezing planned government workforce cuts. The move throws Biden’s austerity measures into chaos.

Behind the scenes: Musk’s legal team leveraged an obscure 1940s labor statute, while Trump’s camp argued ’economic destabilization.’ Neither mentioned how this plays to their 2026 midterm strategies.

Finance take: Nothing boosts markets like two billionaires fighting to preserve... government payrolls? (Someone check if this is inverse ETFs at work.)

Judge says layoffs can’t start until May 23

According to Politico, Illston froze all new layoff notices and stopped any existing ones from being carried out until May 23. This includes notices by the Office of Management and Budget and Office of Personnel Management.

Some agencies were less than two weeks away from starting the firings. The court order now stops every single one of them—at least temporarily.

The court named several departments targeted in Trump’s executive order. That includes Energy, Commerce, Health and Human Services, Interior, Labor, Housing and Urban Development, Agriculture, DOGE, AmeriCorps, the National Labor Relations Board, National Science Foundation, and the Small Business Administration.

During the Friday hearing, Illston said the executive order looked like it was written to dodge all the slow parts of the law. She didn’t hold back on why she believed the plan moved the way it did. “I think that is probably why the executive order said what it said, because there is some impatience with how slow that process can be,” she told the courtroom. “But if the statutes provide for the process, then the process needs to be followed.”

Illston reminded everyone this isn’t the first time Trump tried something like this. In 2017, he made another effort to overhaul the government, but that time, he asked Congress to pass legislation to support it. In her ruling, she wrote, “Nothing prevents the President from requesting this cooperation — as he did in his prior term of office.”

Unions and nonprofits push back against Trump’s plan

The court fight started when major federal worker unions and several nonprofits sued the administration over the February order. They said Trump’s plan to shut down offices and fire workers through voluntary retirement and large-scale reductions-in-force broke federal law and violated the Constitution.

They argued the White House ignored the requirement to provide 60 days’ notice, assess veteran status, and check if workers could be reassigned instead of fired.

Lawyers for Trump claimed the court didn’t have the power to hear the case. They said workers could take their complaints to the Merit Systems Protection Board, the body that handles job disputes in the federal workforce. But that’s where the whole thing fell apart.

Illston pointed out that the Merit Systems Protection Board doesn’t have enough people to make decisions. She also said the Trump administration hadn’t told Congress or the unions anything about how the layoffs WOULD be done.

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