The US labor market experienced its worst quarter since 2010 in the first two months of the year, according to revised data released by the Bureau of Labor Statistics. Despite this, inflation remained stable and job growth was strong, with President Trump announcing new tariffs on various countries last month.
In April, Trump announced a sweeping round of tariffs, which initially caused concerns about economic catastrophe. However, the crisis never materialized, and instead, the economy saw a rebound in the stock market and low inflation. The Trump administration touted this as a victory lap, claiming that economists were wrong about the impact of tariffs on the economy.
However, new data released today shows that jobs numbers for the previous two months had been revised down considerably after receiving more complete responses from businesses surveyed monthly. This indicates that the initial strong job growth was not sustained and may be due to various factors such as companies stocking up on imported goods before tariffs took effect.
The data also suggests that inflation is still above the Federal Reserve’s 2% target, and economic growth has slowed down compared to the first half of 2024. These trends are consistent with a stagflationary environment, where median growth, a weakening labor market, and rising prices coexist.
The Trump administration is now caught between deflecting blame for the weak economic numbers and denying their validity. President Trump has accused the BLS commissioner of cooking the books to make him look bad, while his advisors attribute the poor performance to various “anomalous factors.”
Overall, it appears that the strong data may have been an anomaly, and a return to a 1970s-style combination of rising inflation and unemployment is looking more likely. The future of the US economy remains uncertain, with many companies expected to be forced to raise prices or slash labor costs due to ongoing tariffs.
Source: https://www.theatlantic.com/economy/archive/2025/08/trump-tariffs-economic-data/683740