No. of Recommendations: 6
Most importantly, the data show a weak labor market. Employment isn’t falling off a cliff, but job growth has been weak and hasn’t kept pace with the number of people seeking work. The headline unemployment rate in November was 4.6 percent, up from an average of 4 percent in 2024. That number is close to triggering the Sahm Rule, an economic rule of thumb devised by Claudia Sahm, a former economist at the Board of Governors of the Federal Reserve, that has historically been highly successful at identifying the early stages of a recession.
We can’t do a strict application of the Sahm Rule yet because Sahm’s method is based on the average unemployment rate over the past three months. Unfortunately, the shutdown prevented the Bureau of Labor Statistics from collecting key data in October. But if we do an interpolation of October’s unemployment rate by averaging over September’s rate of 4.4% and November’s rate of 4.6%, we can estimate that October’s unemployment rate was 4.5%. And those 3 months of unemployment numbers bring us within a whisker of the unemployment rise that, according to the Sahm Rule, signals that a recession is on the horizon.
The state of the economy looks even worse if we take a wider view of the labor market. The BLS calculates 6 different measures of unemployment. The most commonly cited number is U-3 — the number of workers who are actively seeking jobs but haven’t found them. But the broadest measure is U-6, which includes underemployed workers stuck in part-time employment and discouraged workers who have temporarily given up job search. And U-6 has risen sharply since January, when Trump took office:
Further evidence consistent with a poor and deteriorating job market is data showing that the number of job-seekers who are long-term unemployed – that is, have been unemployed for 27 weeks or more – has risen by almost a third (from 1.45 million to 1.91 million) since 2024. This means that the unemployed are finding it harder to find jobs.
In addition to collecting data from workers, the BLS surveys employers. Interpreting the employer-side numbers is a bit tricky right now, because there are technical challenges in how the BLS models the birth of new firms and the deaths of old ones. None other than Jerome Powell has suggested that official job growth is probably overstated by around 60,000 a month. Yet even if we ignore this likely overstatement of the number of jobs created, yesterday’s numbers are definitely pointing to a troubled economy.
In particular, the Trumpian project of bringing “masculine” blue-collar jobs back is going badly. I’m going to steal a chart from Joey Politano, whose Substack you should be reading:
...So while yesterday’s job report wasn’t a cause for outright panic, it does reveal real reasons to worry that the economy is deteriorating.
And Trump owns this economy — because he broke it.
Normally, when a president experiences a troubled economy during his first year he dispatches his (flying monkeys?) minions to declare that it’s all his predecessor’s fault. And some Trump officials, like Scott Bessent, are indeed trying to play the blame game. But this standard political tactic is unlikely to work for this president.
First, the economy that Trump inherited when he took office was in much better shape than today’s economy, with lower unemployment combined with faster job growth, and inflation trending down.
Second, Trump’s radical policy changes – huge (illegal) tariffs, mass deportations, big tax cuts (for the rich), benefit cuts (for the poor and middle class), mass layoffs of federal workers, disinvesting in huge green energy projects and aid to farmers — have been clearly damaging to everything besides crypto and AI. It strains credulity – even for the Trump faithful – to claim that we are still in Joe Biden’s economy.
Third, how can Trump blame Biden for a troubled economy when he won’t admit that we have a troubled economy? It’s more than credible that the source of the public’s falling economic confidence is the two Trump “gaps” — the difference between what he promised and what he has delivered, and the gap between what he says is happening and what everyone can see with their own eyes.
Politics aside, it’s important to understand that the bleak economic news we’re getting is only the beginning. “Populist” leaders like Trump — I don’t like the term, but it has come to mean politicians who have disdain for responsible policy and the rule of law — do long-term economic damage. One comprehensive comparative study found that, on average, such leaders leave GDP 10 percent lower after 15 years than it would otherwise have been. So Trumpism is reducing our future living standards.
Trump is going to make a prime-time address to the nation tonight. The details of his speech haven’t been announced, but it’s a good guess that he intends to gaslight Americans yet again, claiming that things are going well. They aren’t.
—Nobel Laureate Paul Krugman
