World Business

America’s economy is struggling

Story Highlights
  • Trump’s tariffs are confusing people and raising prices
  • Immigration rules are hurting industries that need workers.
  • More people are losing jobs, and the economy might shrink soon.

America’s nearly five-year economic growth is beginning to show signs of slowing down.

The economy is facing cracks: layoffs are increasing, hiring is slowing, consumer confidence is dropping, and inflation is rising. While these issues could have happened under Kamala Harris, President Donald Trump’s economic policies are making things worse.

Trump’s tariffs, especially their unpredictable nature, are causing confusion among businesses, consumers, and investors. They’re also raising concerns about inflation at a time when prices are already climbing.

Trump’s immigration policies are threatening key industries like agriculture, construction, and healthcare, all of which are struggling to hire workers. Cuts to federal workers and government aid could harm vulnerable Americans who are already being hit by price increases.

Gus Faucher, chief economist at PNC, warned that federal job losses could be worse than expected, leading to less spending by laid-off workers and slower job growth in other sectors. He also noted that tariff uncertainty could cause businesses to slow hiring, while immigration restrictions could limit the available workforce, affecting employment in the coming years. Trump’s policies are posing real risks to the economy, which is already showing signs of instability.

Trump himself admitted that tariffs would cause “a little disturbance” and has delayed some of the harshest tariffs after business leaders warned they would hurt the economy.

Stock markets have reacted negatively to the tariffs, with the Nasdaq nearing correction levels and the S&P 500 down about 3% since Trump took office. While stock market performance isn’t always a direct reflection of the economy, Trump has often pointed to it as a sign of economic strength. However, recent economic data suggests that the economy is facing more than just “a little disturbance.”

Consumer spending unexpectedly fell in January, with shoppers cutting back more than economists expected. Spending dropped 0.2% for the month, and when adjusted for inflation, it fell 0.5%. These are the biggest monthly declines since February 2021.

Prices are also rising again, with a 0.5% increase from December, the fastest pace since August 2023. This led to an annual inflation rate of 3% for the year ending in January, according to the latest Consumer Price Index data. The next report is expected this Wednesday.

Consumer confidence also took a hit in February, marking its biggest monthly drop since August 2021 and the largest start-of-year drop since 2009, according to the Conference Board’s Consumer Confidence Index. A separate survey from the University of Michigan showed the steepest drop since data began in 1978.

At the same time, employers laid off more workers in February than any time since the Great Recession, and more than any month since the pandemic, according to outplacement firm Challenger, Gray and Christmas. Federal worker layoffs are also creating disruptions, with 10,000 fewer federal workers in February compared to January, according to the latest jobs report from the Bureau of Labor Statistics.

A Federal Reserve forecast predicts that the US economy may contract this quarter, potentially by nearly 3%, marking the first quarter of economic contraction since 2022.

Consumers are spending less as economic concerns weigh on their purchasing decisions. Both Target and Walmart reported that tariffs and inflation are leading people to spend less.

Related Articles