The economy could be set for a harsh reality check because of one issue highlighted by a Nobel Prize winner.
Paul Krugman suggests that while the unemployment figures under Donald Trump’s administration remained relatively typical, the anti-immigration policies of his team will cause a rupture further down the line. The economist, writing in his Substack, suggested the policy of barring immigration to open up jobs for native-born Americans had failed.
He wrote, “One way to think about what is happening is that we’ve stopped gaining jobs, but we’ve also stopped adding workers, so unemployment hasn’t risen a lot. But one can also turn this around and say that as a result of anti-immigrant policies we’ve stopped adding workers, but we have also stopped gaining jobs.”
“This is bad news for anyone who believed the predictions of immigration opponents. They claimed that cracking down on immigration would open up more jobs for native-born Americans, but this hasn’t happened. In fact, the unemployment rate for native-born workers has gone up under Trump, although not drastically.”
“There’s also another way in which the plunge in breakeven employment growth is bad news: It makes America’s already problematic fiscal outlook considerably worse, because future tax receipts depend on future economic growth — and economic growth will be much slower with zero growth in the labor force than it would have been with growing labor supply.”
Krugman went on to suggest the aims of the administration were strained further by a poor economy, which Trump’s team has turned a blind eye to.
“One point in particular that’s relevant given where we are politically: Donald Trump, Pete Hegseth and others envision a world of perpetual U.S. military dominance,” he wrote. “But how can we maintain that dominance if, as the plunge in breakeven job growth suggests, we’ve entered an era of basically zero growth in our workforce?
“So when it comes to jobs, the bad news is that job growth has come to a screeching halt. The good news is that this hasn’t caused surging unemployment.”
“But the bad news within the good news is that the disconnect between job growth and unemployment reflects a collapse in the inflow of immigrants, which is really bad for economic growth and America’s position in the world.”
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