WASHINGTON (Reuters) - The Trump administration this week fired employees who were building a system to manage satellite traffic in space, weakening a badly needed effort championed by the U.S. space industry and the president's first administration, according to people familiar with the move.

Roughly a third of the National Oceanic and Atmospheric Administration's 25-person Office of Space Commerce, a little-known body relied heavily upon by the space industry, were given a few hours' notice of their termination on Thursday by acting NOAA chief Nancy Hann and were forced out of the office by the end of the day, two of the sources said.

Their termination, the sources said, threatens to undermine efforts to complete what is essentially an air traffic coordination system for space, currently operating in a trial phase as growing global demand for crucial satellite services sharply increases the number of spacecraft in Earth's orbit.

A NOAA spokesperson declined to comment on personnel matters. The layoffs were among hundreds of employees fired Thursday at NOAA, which also provides the U.S. government's weather forecasts and hurricane warnings.

The chief of the Traffic Coordination System for Space, Dmitry Poisik, was among the employees fired, according to one of the sources. He could not be reached for comment.

Cutting staff from the space traffic program, which currently alerts satellite operators of potential collisions with debris or other spacecraft, complicates a years-long effort to migrate those alerting duties out of the Pentagon and could cause confusion among early users of the system, two of the sources said.

Donald Trump, as president in 2018, released a space policy directive calling on the Office of Space Commerce to create its own traffic management system, acknowledging an increasingly congested orbital environment.

Elon Musk's government efficiency effort has led to thousands of layoffs in the federal government, disrupting government operations across the country. Musk, who leads space company SpaceX, has long criticized space regulations for being too slow and outdated.

"These are like air traffic controllers for space, they handle space traffic coordination to prevent collisions," one of the sources said, adding the layoffs come at a bad time given the number of collision notices sent out. A collision notice is an alert that a satellite could collide with another object in space.

"We are not talking a few dozen per year. We are talking tens of thousands," the source said. "It's like a game of chicken up there."

The layoffs also upend the agency's core function of licensing commercial imagery satellites. By Friday, companies seeking licenses or asking regulatory questions by email were met with a response stating all those communications will be handled by NOAA lawyers, according to an email seen by Reuters.

"This is a temporary arrangement to address continuity of operations as no senior personnel remain in the office due to ongoing reductions in force," the email read.

The firings at one of the most important U.S. space-licensing agencies hit at a particular dire time for a booming U.S. space industry that has long pushed for more nimble and simplified satellite regulatory processes, a bipartisan push echoed by lawmakers and agency heads.

But the sources and other individuals across the space industry and U.S. government who spoke with Reuters said these layoffs are likely to trigger major delays in getting spacecraft approved for launch.

The Federal Aviation Administration, which signs off on rocket payloads, cannot approve the launch of a satellite requiring a NOAA license if it has not obtained it.