The US economy’s initial response to President Trump’s second term has been underwhelming, marked by a slowdown in hiring and persistent economic concerns. The first employment report of his new term revealed a significant drop in job creation, raising questions about the economic outlook.
Table Content:
A Cooling Labor Market
January’s employment report showed a notable decrease in job growth, with only 143,000 jobs added compared to 307,000 the previous month. This figure falls below the 2024 average of 166,000 new jobs per month, signaling a potential shift in the labor market’s momentum. While the unemployment rate dipped slightly to 4%, other indicators paint a less optimistic picture. The average workweek shortened, and the number of individuals working part-time due to a lack of full-time opportunities increased.
These trends suggest a cooling job market, potentially increasing the economy’s vulnerability to future layoffs, as noted by Diane Swonk, chief economist at KPMG. This slowdown contrasts sharply with the robust job growth experienced earlier in President Biden’s term. Job openings, which reached a high of 12.2 million in March 2022, have also declined to 7.6 million by the end of 2024.
Wage Growth and Inflationary Pressures
Despite the hiring slowdown, wage growth remains strong, with a 4.1% increase over the past year. While beneficial for workers, this rise in wages could contribute to inflationary pressures. Increased labor costs might translate into higher prices for consumers, a concern for the Federal Reserve as it aims to curb inflation. This persistent wage growth could lead to further interest rate hikes, contrary to the typical response when inflation concerns ease. David Rosenberg of Rosenberg Research characterized the jobs report as a “growth-depressant,” highlighting potential negative impacts on corporate profits.
Consumer Sentiment and Economic Outlook
Consumer confidence has dipped to its lowest point since last July, reflecting anxieties about potential inflation spurred by President Trump’s import tariffs. Moody’s Analytics assessment that current consumer confidence levels are historically consistent with a recessionary economy adds to the growing unease. President Trump’s relative silence on the economy since taking office further contributes to the uncertainty. This contrasts with his frequent commentary during his first term.
While these economic indicators don’t definitively signal an underperforming economy or imminent crisis, they highlight persistent challenges. The issues that plagued the Biden economy, including inflation fatigue, high housing costs, and rising interest rates, continue to pose threats to the current administration.
Meeting Voter Expectations
President Trump’s decisive economic victory in the last election demonstrated voters’ confidence in his ability to address these challenges. However, the initial economic performance of his second term has been lackluster. As the honeymoon period fades, President Trump faces mounting pressure to deliver on his economic promises and exceed the “meh” performance of his predecessor. American voters anticipate tangible improvements in their economic well-being, setting a high bar for the administration’s economic agenda.
