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Emigration and immigration

Trump's Economic Policies Unleash Uncertainty and Weakening Labor Market

Strategic Insights

— 2 min read

The US economy appeared to be weathering the effects of President Donald Trump's trade and immigration policies for months, but a series of recent developments, including a disappointing jobs report, has revealed a labor market much weaker than initially thought. The jobs report revealed a labor market that is experiencing a downshift, with the economy growing at an annual rate of 1.2 percent over the first half of the year, compared to 2.4 percent at the end of 2024. This downshift has resulted in the S&P 500 index shedding 2.5 percent of its value this week. The uncertainty caused by Trump's policies is freezing business decision-making, including hiring, economists said.

Key Takeaways:

  • The US economy grew at an annual rate of 1.2 percent over the first half of the year, a notable downshift from its 2.4 percent pace at the end of 2024.
  • The jobs report revealed that employers created just 73,000 jobs in July and the Bureau of Labor Statistics (BLS) overstated hiring for the prior two months by 258,000 positions.
  • The president's policies are dominating labor market trends, with policy uncertainty forcing companies to freeze hiring and expansion.
  • The immigration crackdown, including restrictions on student visas, is shrinking the labor supply and affecting businesses like violin sales and repair shops.
  • Companies' need for more workers and the number of job seekers available have declined to the same degree, keeping the unemployment rate from spiking, but a smaller labor force with less hiring has troubling implications.
  • The Fed's monetary policy committee has opted to stand pat, with Fed Chair Jerome Powell saying the labor market is "solid," but investors believe there is a more than 80 percent chance of a rate cut at the next meeting in September.
  • Trump's policies are making company owners like Craig Batory, who owns a roastery and cafe, and Kevin Chapin, who owns a violin sales and repair shop, anxious about their businesses, causing them to freeze expansion plans and anticipate hits in their sales.

Statistics:

  • The economy grew at an annual rate of 1.2 percent over the first half of the year, a notable downshift from its 2.4 percent pace at the end of 2024.
  • 73,000 jobs were created in July.
  • The BLS overstated hiring for the prior two months by 258,000 positions.
  • The number of jobs created over the past three months is an anemic 106,000, compared to the 368,000 jobs created during the same period in 2024.
  • About 30 percent of Craig Batory's regulars have pared their monthly subscriptions this year from two bags of coffee to one.
  • Companies lost a combined 49,000 jobs over the past three months.
  • The S&P 500 index shed 2.5 percent of its value this week.

Sources:

  • Abha Bhattarai and David J. Lynch, "Trump's trade and immigration policies are unleashing uncertainty and weakening the labor market," The Washington Post, August 2024
  • Bureau of Labor Statistics, "Employment Situation Report," July 2024
  • The White House Council of Economic Advisers, "Press Release," August 2024
  • Cornell University, "Erica Groshen, Senior Labor Market Adviser, Discusses the Labor Market"

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