President Donald Trump has recently been touting economic growth, what he says is low inflation and his tariff policies. “We have quickly gone from the worst numbers on record to the best and strongest numbers, and an economy that is far ahead,” Trump asserted Tuesday in Detroit.
But economists say there are real struggles for Americans reflected in the data. Many Americans continue to report in polls that it’s becoming tougher to afford everyday basics. While it’s not soaring, inflation has been tough to bring down during Trump’s first year back in the White House. And even though consumers continue to spend and businesses keep investing, there aren’t a lot of jobs available. Trump’s approval rating on the economy hit a new low of 36 percent, according to a recent NPR/PBS/Marist poll.
“People are feeling left behind,” said Diane Swonk, chief economist with the tax and accounting firm KPMG. “And that’s not good for anyone. It’s not a new phenomenon, but it’s accelerated.”
The labor market isn’t bad — but it isn’t great
The unemployment rate ticked down slightly in December, Nancy Lazar, chief global economist at the investment bank Piper Sandler, noted in an email Sunday to clients.
Underneath that, however, some economists see evidence of potentially more job losses: The country had the weakest job gains in years, and much of it is part-time work.
Despite consumers spending, companies just aren’t hiring, which is especially hard for those entering the labor market. “We’re not in a recession, but if you’re a young graduate, it kind of feels like one,” said Claudia Sahm, chief economist at the investment management firm New Century Advisors. “And that could hurt the economy in the long run.”
What jobs were created basically stopped this spring after Trump announced global tariffs and companies froze plans to hire to wait out the uncertainty, Swonk said.
Sahm also wonders if companies are holding off on hiring to see what can be replaced by artificial intelligence. “We could be on the very front end of AI [taking jobs],” she said.
Prices are still up
On Tuesday, Trump called affordability “a fake word.”
But the data shows that Americans are struggling: Income is barely keeping up with stubborn inflation, as basics are getting more expensive. Food, transportation and housing all went up in December. Utility bills are increasing, child care and elder care are rising rapidly. Groceries are still expensive. NPR found that prices at Walmart have risen 5 percent from a year ago. Housing remains unaffordable for many.
The Trump administration is considering several ideas to bring down the cost of housing, especially for first-time home buyers, and to cap credit card interest rates at 10 percent for a year.
Tax refunds could help grow the economy, especially since Republicans extended Trump’s 2017 tax cuts, economists say. But some compared it to a “sugar high” that will quickly fade as the economy struggles with broader problems of unaffordability.
Others worry that Trump’s battle with the Federal Reserve, which helps set interest rates, will actually make things more expensive by creating uncertainty. “This is only going to put all the upward pressure on interest rates,” said Michael Strain, an economist with the conservative-leaning American Enterprise Institute, referring to theprobe of Federal Reserve Chair Jerome H. Powell, “because it will increase the perceived riskiness of holding U.S. debt.”
There are a lot of unknowns
What’s going to happen with Trump’s tariffs? Businesses have been absorbing some of the costs of tariffs, more so than economists expected last year, so it hasn’t affected consumers as much — yet. The World Bank predictedthis week the global economy could slow over the next decade in part due to Trump’s tariffs. But the Supreme Court could also strike down many of them any day now.
What’s going to happen with fewer immigrants working? Mass deportations are affecting the economy in many ways: Deportations of farm workers are raising grocery prices; immigrants who don’t show up to work in the health care sector are contributing to a spike in child care costs and elder care costs, Swonk said.
The wealthy are doing much better than the bottom half of the economy: Many of the problems with the economy right now are particularly hurting lower-income Americans. The stock market is doing great with AI investment and helping make the wealthy wealthier, while wages at the high end have done better than wages at the low end. Economists I talked to worry that the inequality could become more exacerbated if the labor market continues to cool while there’s an AI boom. “We are in a jobless expansion,” said Swonk. “I’ve never seen anything like it.”
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