MAGAnomics Isn’t Working

At the start of last week, I watched a big cargo ship stacked high with containers enter New York Harbor. As the vessel approached the Verrazzano-Narrows Bridge, it appeared to stop, but that was an illusion created by its size and the slowness of its advance. Fifteen minutes later, it had managed to push its way under the bridge.

Throughout the years, I’ve often compared the U.S. economy to a giant freighter that is tough to deflect from its course, and, since Donald Trump was elected for a second time, this metaphor has become particularly apt. Even as he subjected the economy, a colossus that generates more than thirty trillion dollars’ worth of goods and services annually, to a one-two-three punch of high tariffs (which raise prices), immigration restrictions (which reduce the labor supply), and DOGE-led job cuts in the federal government, things seemed, until recently, to be moving slowly ahead and defying the direst predictions about the consequences of MAGAnomics.

The G.D.P. growth rate turned negative during the first three months of this year, but that was largely a by-product of American households and businesses rushing to import more stuff before the tariffs went into effect. (G.D.P. measures domestic production of goods and services; imports don’t count and they make the growth rate appear weaker.) Spurred partly by corporate investments in A.I., over-all spending and job creation looked to be holding up, and, at the end of July, when the Department of Commerce reported that G.D.P. growth had rebounded to an annualized rate of positive three per cent in the second quarter, the White House hailed “America’s Golden Age,” adding, “The so-called ‘experts’ were wrong (again).”

Hubris is a killer. Two days later, the Bureau of Labor Statistics (B.L.S.) announced that job growth had slowed sharply during the three months from May to July, an indication that, despite the G.D.P. figures, the economy could well be on the verge of stalling. Trump promptly fired the commissioner of the agency, Erika McEntarfer, a Biden appointee, claiming, without any grounds whatsoever, that it had “rigged” the job numbers to make him look bad. This past Friday, the B.L.S., now under the temporary leadership of a longtime agency employee, William J. Wiatrowski, released its latest employment report, which confirms that hiring has stalled. “Total nonfarm payroll employment changed little in August (+22,srcsrcsrc) and has shown little change since April,” the report said. The unemployment rate ticked up a tenth of a percentage point last month, to 4.3 per cent.

In recent years, response rates to the monthly government surveys of employers and households that form the basis of the jobs report have dropped; the figures are also subject to random sampling error and subsequent revisions as fresh data come in. But, contrary to the claims of some Trump apologists, the B.L.S. figures still provide the most comprehensive and objective portrait of employment trends that we have. And the recent numbers largely speak for themselves. Since May, job growth has averaged twenty-seven thousand per month. During the first quarter of this year, the average was about a hundred and eleven thousand jobs per month. By any measure, that’s a significant slowdown.

Outside of health care and social assistance, a sector in which job growth seems to be unaffected by over-all trends, the downturn in hiring extended across large parts of the economy, with fewer than half of all private-sector industries adding jobs last month. This pattern is consistent with many different types of firms putting hiring plans on hold, or cutting workers, because of the uncertainty and chaos that Trump’s tariffs have unleashed. It also jibes with the warnings that many economists critical of his policies issued earlier this year.

The weakness in manufacturing, which was supposed to benefit from the pivot to all-out protectionism, is particularly striking. In August, the total number of people employed in the sector fell by twelve thousand in a one-month span; during the past three months, it has declined by thirty-one thousand. The latest survey from the Institute for Supply Management (I.S.M.), a not-for-profit organization that surveys firms throughout the economy on a monthly basis, provides a more granular portrait of what’s happening. “Tariffs continue to wreak havoc on planning/scheduling activities,” a respondent in the electronics industry said. “Plans to bring production back into [the] U.S. are impacted by higher material costs, making it more difficult to justify the return.” Another respondent who works in trucking reported that the industry was in even worse shape than it had been during the Great Recession of 2srcsrc8-src9; they went on, “This is 1srcsrc percent attributable to current tariff policy and the uncertainty it has created.”

Then there are Trump’s other initiatives. The August employment report showed a fall of fifteen thousand in the number of federal employees, which suggests that the DOGE job cuts may be starting to show up in the official figures. (Many of the people laid off were allowed to stay on the federal payroll for a few more months.) It’s difficult to gauge the impact of Trump’s draconian immigration policies, because undocumented workers are less likely to respond to official surveys. But there has surely been some effect. An analysis by Goldman Sachs showed that employment in industries in which more than ten per cent of the workforce is made up of unauthorized immigrants steeply declined over the summer. Another analysis, by Jed Kolko, a senior fellow at the Peterson Institute for International Economics, reached a similar conclusion by examining the foreign-born workforce.