Revelio Labs found that the labor market lost 9,000 jobs last month as the government sector and the retail industry in particular continued to shed jobs. In the latter sector, seasonal hiring has been unusually slow as retailers cite concerns about slowing consumer spending and increased costs from tariffs. 

In contrast to this, ADP’s employment report found that 42,000 jobs were added in October, with the logistics and healthcare sectors adding sizable gains. This was the first month of positive jobs growth since July and a modest one compared to gains made earlier this year. October also saw over 150,000 job cuts, the most in an October since 2003.

Artificial intelligence (AI) was the top reason for job cuts in October, accounting for a fifth of all staffing reductions. The debate over whether AI is leading to negative outcomes for workers has intensified. The chairman of the Federal Reserve, Jerome Powell, believes that it has shrunk employment opportunities for job seekers. However, economists aren’t so sure. Nevertheless, the types of jobs that are most vulnerable to elimination by way of AI and automation developments tend to employ large numbers of Black workers.

The AI boom has taken the stock market to record highs and ushered in hundreds of billions of dollars in capital expenditures into data centers. The data centers are seen as a necessity in the global AI arms race and are seen by some as a means of economic development for local communities. While touted as investments that will reap transformative future benefits to local economies, they remain controversial for the communities in which they are located or plan to be built.

Sentiments towards data centers can be summarized best by Davante Lewis, a local Louisiana official who voted against a data center power project in the notorious “Cancer Alley” region: “Not all economic development is good economic development.” 

Data centers use an enormous amount of electricity, which has meant a 257% increase in electricity prices for communities near data centers since 2020. Additionally, recent research has shown that AI data centers create relatively few permanent jobs. Building what are essentially warehouses of computer servers is a labor-intensive endeavor, employing a thousand or more temporary construction, engineering and logistical positions. Once constructed, they employ a much smaller and more specialized workforce, typically consisting of imported talent rather than existing workers from the local area.

In addition to electricity usage, concerns about high water consumption and increasing levels of air pollution have led to intense pushback from communities. Data centers are typically built in rural areas and more economically disadvantaged communities. In places where economic development is hard to come by, a data center promising 100 jobs is an enticing prospect for a rural town with a declining population. However, in practice, claims about job creation and economic development made by data center builders are frequently overstated.

In addition to little to no tangible economic benefit for impacted communities and higher monthly utility bills, there is a troubling racial component to data center construction as well. Many are built in what is called “the Black Belt” of the country, an area that stretches from Texas to Virginia with large concentrations of Black residents. Historically, Black communities have been treated as zones of extraction for agricultural and industrial operators and have been left with the effects of environmental waste and pollution as a result. Given this ignominious history, some of the stiffest opposition to data center construction has come from Black communities.

Artificial intelligence, the data centers that power AI and the corporations that own and are expanding both are affecting the lives of Americans on all sides of the AI debate. Workers and job seekers have experienced the negative labor impacts of this fast-growing technology. For communities, it could mean another form of resource extraction that benefits shareholders and not locals. 

Data center proliferation has not reversed the slowdown in the labor market going into the final months of 2025. With seasonal hiring down and consumer spending decreasing, the chances of a Christmas miracle remain slim.

Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: Geoffrey Moffett via Upsplash.

ADP and Revelio Labs both produced employment reports based on private data. However, they reached diametrically opposite estimates. ADP found that the private sector lost 32,000 jobs. Only the education and healthcare sectors added a meaningful number of jobs according to the study, with 33,000 gained in September. Additionally, only very large employers (500+ employees) added jobs (33,000), while smaller employers (>50 employees) lost 40,000 jobs. 

Revelio Labs’ employment report found that the economy added 60,000 jobs, with large increases in the healthcare and retail sectors. Revelio Labs derives its figures from online professional profiles from websites like LinkedIn, making it less reliable compared to ADP, which uses private payroll data. LinkedIn also produces a monthly jobs report based on its own data, which showed a notable slowdown in hiring for the month of September.

The outplacement firm Challenger produces a monthly job cuts report that also includes information on future company hiring plans. In September, employers announced around 54,000 job cuts, a decline of 26% compared to September of last year. However, job growth this year has been at its lowest level since 2009, due to a drop in seasonal hiring plans for the upcoming holiday season, adding more credence to the argument that the labor market is slowing down.

However, not all are convinced that the slowdown in hiring is a cause for concern. A recent blog from the Dallas Federal Reserve Bank and a research blog from the Royal Bank of Canada (RBC) have put forth the argument that the break-even employment growth rate – the number of jobs required to keep the unemployment rate stable – has declined. Both studies claim that partly due to the Trump administration’s hardline immigration policies, the labor force has shrunk. Put more succinctly, there are fewer people in the country, meaning the economy does not need to produce as many jobs compared to previous years. Thus, the labor market is recalibrating to this new reality rather than stalling.

There are several problems with this argument and its suitability in explaining current labor market conditions. Both studies estimate that the break-even employment rate is somewhere between 30,000 to 50,000 monthly job gains. However, 3 out of the last 4 months have seen fewer than 25,000 jobs added, including a net loss of 13,000 jobs in June. Additionally, the link between immigration and the break-even rate must be taken into account along with the sectoral differences present in the labor market.

Although the break-even rate is an economy-wide threshold, most undocumented workers are concentrated in a handful of sectors, such as the construction and hospitality industries. The former industry has been stagnant, while the latter has added about 100,000 jobs this year. Recalibration would mean decreases in employment levels among industries that employ large numbers of undocumented immigrants, which is not happening.

A recalibration in the labor market implies that demand is adjusting to a decrease in the supply; in this context, the number of available workers. This adjustment in labor supply would take the form of an increase in the demand for workers. If the labor market were recalibrating, there wouldn’t be increases in Black unemployment and joblessness among new college graduates. Pay for workers would not be stagnant, especially for those who are changing jobs. The fact that long-term unemployment has risen alongside the average length of joblessness while the resignation rate remains low implies that rather than recalibrating, the labor market is stalling. 

The question of whether the labor market is slowing down or recalibrating is crucial to the Federal Reserve’s decision to continue cutting interest rates, which will be determined at its October 29th meeting. In the absence of official data, they will be forced to rely heavily on ADP, Revelio and other private data sources. In theory, a decline in interest rates should stimulate the economy and the labor market, thus giving relief to millions of unemployed and underemployed workers.

The government shutdown is expected to last well into November, potentially halting the release of the next month’s jobs report as well. Because September and October are the crucial seasonal hiring months, the lack of official data complicates the ability to accurately analyze hiring trends for the upcoming holiday season.

As the economy enters the final months of the year, the labor market should be seen as stalling rather than simply recalibrating. This designation captures the reality for millions of Americans dealing with joblessness and an inability to find new work. The failure to recognize this fact could mean that much-needed relief may not come as job gains further stall and potentially shift into an even worse situation.

Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: Karola G. from Pexels.com.

The most shocking finding from the report was the massive downward revision of May and June’s job gains, from 144,000 and 147,000 to a measly 19,000 and 14,000, respectively. These revisions prompted the President to accuse the BLS commissioner of altering the numbers before firing her unceremoniously this month. 

Revisions are an important part of the data collection process, where the BLS surveys businesses about the number of employees they have on payroll through the 12th of each month. Over the next three weeks, the data is cleaned, seasonally adjusted and then typically released on the first day of the next month. 

These figures are considered preliminary estimates that are then revised based on new data from employers that submit their payroll statements late, along with other seasonal adjustment changes. These revisions are released in the two months following the initial report. The method is transparent and it is nearly impossible for the BLS commissioner to misrepresent any of the data that the agency releases. 

While some downward revisions are common, the size of these revisions are larger than normal and indicative of structural weaknesses in the labor market. Revisions of this magnitude are typically signs of a major shift in the trajectory of the economy.

The revisions indicate that the only sector in the economy consistently adding jobs is the healthcare industry, while most other sectors remain stagnant. Last month, the healthcare sector added 55,000 jobs while all other sectors experienced very little growth. 

The year-over-year job growth numbers have slowed to levels not seen since the start of the  Great Recession of 2007 (excluding 2020). At a .97% rate, growth is now lower than what was seen during the 2019 pre-pandemic era, with the chances of a turnaround very unlikely. 

Black Workers and College Graduates Hiring Difficulties

While the overall unemployment rate increased by only 0.1%, all racial and ethnic groups experienced an increase in July. Alarmingly, the Black unemployment rate surpassed the 7% threshold, reaching 7.2%. Black youth unemployment spiked to 21.7% compared to 13.4% in July of last year. Rising rates of Black joblessness is a major indicator of a labor market that is slowing down. 

Additionally, the labor force participation rate of Black women has declined significantly this year. Though one can only speculate as to the exact reasons why, a deteriorating job outlook and attacks on DEI-oriented hiring and retention practices could be contributing factors.

While all college graduates are experiencing a difficult labor market, young men appear to be bearing the brunt of it. The jobless rate for young, male college graduates (22 to 27 years old) is now at the same level as that of non-college graduates, while young women college grads are experiencing a declining unemployment rate. This tracks with the rising percentage of young men who are opting out of the labor force altogether.

The jump in the unemployment rate was caused by more than 300,000 new entrants being added to the ranks of the unemployed. One partial explanation for why young male college graduates are experiencing such a difficult time finding stable employment is that they are over-represented in certain industries, such as the information technology field, that are undergoing a slowdown in hiring. 

In contrast, women graduates who have flocked to the high-performing health care sector are faring much better. According to the Challenger job cuts report, the technology sector leads the private sector this year in job cuts through the month of July, with workforce reductions up 36% compared to last year.

The Possibility of Stagflation

The ISM Services employment index dipped to its third lowest level in 10 years (excluding 2020), while the price index rose to its highest level since October 2022. The combination of declining employment and rising prices raises the possibility of something worse than a recession: stagflation.

Stagflation is a combination of declining growth and rising prices. It is devastating due to the limitations it places on policy responses. When inflation is rising, the Federal Reserve responds by raising interest rates and then lowering them once more when job growth is declining to stimulate economic activity. When both are occurring at the same time, the Federal Reserve is in a catch-22, as its main tool to combat one problem exacerbates the other. As a result, stagflation is generally considered worse than a recession. In a typical recession where economic growth declines with no accompanying rise in prices, the Federal Reserve has a clear policy decision: lowering interest rates.

More people are becoming unemployed while the prices for basic necessities are rising. Additionally, the percentage of unemployed workers who have remained jobless for more than 27 weeks has risen to its highest level since the start of 2022. The main takeaway from the August BLS jobs report is that the economy has very likely reached a concerning inflection point, with a noticeable decline in hiring and an expected uptick in layoffs. 

Unemployment rates will only get worse as more federal workers begin showing up in the unemployment rolls, tariff costs are increasingly passed on to consumers and student loan interest accrual and repayment take a bite out of consumer spending. The percentage of student loan borrowers in serious delinquency has reached the highest level in 21 years, which is all the more disheartening for new graduates already struggling to find employment.

With the sacking of the BLS commissioner and her possible replacement floating the idea of discontinuing the BLS jobs report, declining job growth and rising inflation, the economy has reached an inflection point. Next month’s slate of economic data releases will help verify if the labor market is simply passing over a bump in the road or headed towards a serious collision.

Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: RDNE Stock via Pexels.

The report surprised many given the continued economic uncertainty spurred by the ongoing trade wars with other countries. While the topline figure was positive, it masks structural problems in the economy. 

The private sector added 74,000 jobs in June, with the majority coming from the healthcare and leisure/hospitality sectors. Among all industries that had a positive net job growth in June, 51% of total hiring came from those two sectors alone.

ADP, the payment processing firm, reported that the private sector shed approximately 33,000 jobs – or around 100,000 fewer than the job figures from the BLS. 

Whether one uses the BLS or ADP’s report, the three-month private sector job gains have slowed in the first half of 2025. The private sector’s decline in job growth has been especially pronounced, going from 200,000 in December to just 19,000 in June. Private businesses with under 50 employees, which are considered the backbone of the economy, shed 47,000 jobs in June. 

The career placement firm Challenger’s monthly report found that job cuts in the first half of this year were the highest since 2020. They also noted that retailers were the largest shedders of jobs, with the industry being hit the hardest by market volatility, tariffs and reduced consumer spending. 

The Challenger report states that economic conditions were the most cited reason for layoffs in the private sector. Despite this, employment firms plan to hire workers at a higher rate in the second half of the year compared to this time last year. What is unclear is if this hiring will benefit all groups, such as recent high school and college graduates who are having a difficult time acquiring suitable jobs. 

The labor market experiences of Black and Brown workers is also souring. The unemployment rate of Black workers rose to 6.8%, the highest rate since January 2022. While month-to-month changes are difficult to interpret and may simply be statistical noise, broader economic trends suggest that the challenges facing Black workers stem partly from the recent trade war. 

Black workers are more likely to work in the transportation and warehousing sectors (especially Black men), which are industries that have been hammered by trade uncertainty and slow hiring in recent months. Cuts to the federal government, which has a history of providing employment opportunities to Black Americans, may also be depressing Black employment rates. 

The decline in the unemployment rate to 4.1% was due to a decline in the labor force by over 130,000 workers. That contraction is likely a byproduct of the current administration’s hardline immigration policy: The total number of foreign-born workers has dropped by almost 1 million since the beginning of the year. 

Other labor market metrics show signs of concern as well. The number of continued unemployment claims reached its highest level since November 2022. While the number of new claims decreased slightly, the total unemployed population continues to rise. The household survey for June found that the number of long-term unemployed individuals (27 weeks and more) is close to its highest level since the beginning of 2022. 

Thus far, the anticipated uptick in consumer prices due to tariffs has not materialized, though that was before the recent announcement of potentially more tariffs effective August 1. Like the previous trade war incidents, the President could end up rescinding these measures. This kind of policy erraticism means that uncertainty has unfortunately become the modus operandi for business, households and governments alike. One thing is clear: It is increasingly difficult to attain stable employment and economic security for large swathes of American society.

Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: Felipe Pelaquim via Pexels.

If the trend in revisions continues for May, the job gains could ultimately be revised to around 70,000 from the 139,000 originally forecasted. This slowdown is evident from the latest ADP employment report, which showed that private employers added 39,000 jobs in May. And with some economists saying they are concerned about the quality of BLS data given the staffing cuts at the agency, the ADP job numbers will likely play a more important role in the economic analysis of the labor market moving forward given their use of actual payroll data.

The healthcare and leisure/hospitality industries experienced the largest sectoral gains at 62,000 and 48,000 respectively, accounting for 80% of total job gains. The federal government lost 22,000 jobs while all other sectors experienced minimal changes. 

During May and June of this year, many of the nation’s high school and college graduates will enter the workforce. They will be forced to contend with cuts to government-sponsored employment programs, such as Job Corps and AmeriCorps. Additionally, they will also face an uphill battle finding jobs due to the unpredictable nature of rapid developments in the AI sphere. 

AI is shaking up the labor market for certain industries. Due to its ability to automate routine tasks, human resources and customer service positions are particularly vulnerable to layoffs. But the threat to human jobs is much wider than that. In fact, administrative work overall is changing due to the introduction of artificial intelligence. 

The information sector has been hammered by technological changes as entry-level positions have evaporated, a trend that may extend to other sectors. The information sector as a whole has contracted as many workers continue to leave the field due to AI disruptions.

Employment challenges for college graduates vary based on the type of industry they are planning to enter. While the healthcare and education sectors provide ample opportunities for new graduates, they often face a tougher time in certain scientific and technical fields. Scientific research and development (R&D) job postings on Indeed.com have declined by 18% since mid-January. Cuts to federal R&D spending will also have a sizable impact on the job outlook for recent graduates. 

Graduates looking to find temporary jobs until they secure more permanent employment will also be disappointed as employers have shed 41,600 temporary positions this year so far. Due to continued industry disturbances from AI and trade war uncertainty, the unemployment rate for recent college graduates aged 22-27 rose by a full percentage point to 5.8% in March, compared to 2.7% for all college graduates. 

Not only are job gains weakening, but the unemployment rate is likely worse than it appears. While it remained unchanged for May, this was due to a decrease in the labor force participation rate (LFPR) by 0.2 percentage points. In the absence of this decline, the unemployment rate would have increased to 4.6%. The decline in the LFPR might be due to workers becoming discouraged and no longer actively looking for work.

While the unemployment rate remains low, job gains will likely be revised down and soften in the coming months. As unemployment claims rise, so has the number of job openings, possibly due to so-called ghost job postings. Even though some sectors continue to steadily add jobs, others are in contraction. In short, the labor market is sending mixed signals about its future direction.

Outside of the labor market, negative economic trends can be seen elsewhere. Perhaps the biggest cautionary signal came last month via the US Treasury market. The Treasury conducts regular auctions of treasury notes, bills and bonds. On May 21st, demand for the 20-year Treasury bond was lower than expected, leading to an increase in the yield. 

When demand is low for yields, the interest rate that the government must pay on the bond has to rise. Because of the looming national deficit crisis and the ongoing trade wars with other countries, investors were jittery about buying long-term government bonds. This caused US Treasuries to drop dramatically in price last month – with worrying knock-on effects on the housing market and other key determinants of overall economic health.

So far, Treasury bond yields have risen mainly for long-term bonds. However, some market participants, such as JP Morgan CEO Jamie Dimon, believe that an interruption to the bond market is likely.

Beyond the labor and bond markets, manufacturers continue to report a retraction in new orders and an increase in prices. Despite the tariffs, the latest BLS consumer price index rose only slightly, indicating that consumers have not faced price increases yet. While the May jobs report shows that the dam has not broken, it is evident that the pressure is building.

Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: Dào Thân via Pexels.

The economy added 177,000 jobs in April while the unemployment rate remained at 4.2%. The February and March job gains were revised down by 15,000 and 43,000, respectively. 

The April job gains came primarily in the healthcare and education (+58,000), transportation and warehousing (+29,000), and leisure and hospitality (+24,000) sectors. The federal government lost 9,000 jobs in April, with losses now exceeding 26,000 so far this year. The auto manufacturing sector, of particular interest to the President, lost almost 5,000 jobs.

ADP’s private payroll data showed only 62,000 jobs were added in April. Interestingly, while many sectors matched the BLS’ numbers, the education and health services sectors lost 23,000 jobs. If ADP’s numbers are correct, then the long-term, multi-year decline in private sector job creation will continue.

According to the New York Federal Reserve, recent college graduates are having an increasingly difficult experience in the labor market. Their joblessness rate spiked to 5.8% (the highest since 2021), while the underemployment rate rose to 41.2%. These figures are three-month moving averages, which suggest that the rise is a significant departure from the pre-Trump trend.

As college graduates experience labor market difficulties, student loan borrowers will endure their own challenges. On May 5, the Trump administration ordered defaulted student-loan borrowers back into the hands of collection agencies. Of the roughly 42 million Americans with student loans, about 5 million are in default. 

Now, the wages and benefits of these defaulted borrowers will be garnished to pay back the loans, which will almost certainly lead to a decline in consumer spending to the tune of $63 billion. 1 in 5 borrowers are currently classified as “seriously delinquent”, meaning they are 90 days or more past due, according to a TransUnion report.

The debt collection efforts for defaulted student loan borrowers overlap with the increased reliance on debt by consumers for spending on everyday expenses. A quarter of consumers are now using buy-now-pay-later (BNPL) services to finance groceries, up from 14% the previous year. As a consequence of debt-financed household spending, the percentage of credit card borrowers making their minimum payments reached an all-time high in the first quarter of this year. As the Federal Reserve declined to lower its interest rate target on May 7, households dependent on debt financing for their spending will continue to face heightened difficulties.

The Possibility of a Tariff-Induced Recession

While the labor market is being lauded as resilient, and rightly so, there are still concerning trends in other areas of the economy. There have been recent headlines about a possible slowdown in shipments from China and the rise in so-called “blank sailings.’ Blank sailings are when a shipper cancels a scheduled stop at a port entirely. This can happen when there are changes in the demand for cargo or in the case of customers cancelling shipments. A shipper will “blank” the sailing and reroute goods on another voyage.

This scenario is playing out in real time thanks to the uncertainty of US trade policy under the Trump administration. Many factors, including the proposed 145% tariffs on China and the recently closed de minimis exemption that enabled duty-free imports of some consumer goods produced in China, have led to a plunge in cargo bookings from China to the US.

The drop in transpacific shipping activity prompted the chief economist at Apollo Global Management to declare that a trade-induced recession was likely to occur in the summer. As container ships stop coming to US ports, the demand for trucking halts, leading to layoffs in the trucking, warehousing and retail industries. This chain of events is why the Longshoreman Union issued a statement calling the tariffs “reckless” and a “direct attack on the working class,” while warning of catastrophic job losses across the supply chain. 

This trade-induced recession scenario is likely what prompted the CEOs of Walmart (both the largest retailer and private employer in the United States), Target and Home Depot to meet with the president on April 21. It was widely reported that they told the president directly that his trade policies could lead to empty shelves in the coming weeks. 

These trends in trade and consumer finance coincide with the recent Bureau of Economic Analysis announcement that the advance estimate of the US’s first quarter of 2025 GDP was an annualized -0.3%. This means the economy shrank over the first 3 months of 2025 after a 2.4% annualized growth rate in the fourth quarter of 2024. The primary reason for this decline was due to a surge in imports, which is a sign that firms were attempting to get ahead of the tariffs. 

Consumer spending and private investment remained steady during the first quarter of this year.  However, the rise in imports contradicts the president’s goal of reviving US manufacturing and increasing exports. 

In fact, the ISM manufacturing report showed economic activity in the manufacturing sector contracted for the second month in a row. Demand weakened as new orders and exports contracted sharply. Employment slowed, which showed up in the BLS numbers. 

A Trade Deal Reached, Uncertainty Remains

The word uncertainty can be heard on Wall Street and at kitchen tables across the country. It is becoming impossible to make informed financial decisions due to the heavy fog of trade wars hanging over the economy.

Large corporations are suspending guidance or, even worse, withdrawing guidance as their previous plans and forecasts were based on a set of economic conditions that no longer exist. Two-thirds of small businesses stated that the trade war will negatively impact their company, according to a survey commissioned by the Wall Street Journal.

66% of respondents to the University of Michigan’s Survey of Consumers said they expect an increase in unemployment over the next 12 months. 63% of respondents – the highest on record – believe the federal government is doing a poor job regarding economic policy. 

The backlash from the business community, the drop in consumer sentiment and the possibility of empty shelves likely spurred the president to reach a trade deal with China sooner than many analysts expected. On May 12, both the United States and China agreed to lower their tariffs on each other’s exports for 90 days. It’s unclear if this pause in the trade war will permanently hold. 

The whiplash that the current administration is giving to the economy makes financial planning for the future nearly impossible. The deal will push transport prices higher due to a jump in demand for imports, which will also push the US trade balance on goods higher. The surge in imports will also likely overwhelm west coast ports, which are not prepared to deal with large jumps in incoming shipments. 

While the deal is a reprieve for an economy deeply concerned about price increases, uncertainty remains. The details of the 90-day deal announced Monday do not align with what President Trump has previously described as his definition of victory. Additionally, three months is a very long time for this chaotic administration to stick to any given plan.

Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: Patrick Winzler via Pexels.

In February, the economy added 151,000 jobs, while the unemployment rate ticked up to 4.1%.  Although the topline figures are relatively solid, especially considering the current tumultuous political climate, the report does contain some concerning red flags. 

The government sector only added 11,000 jobs, while the federal government shed almost 10,000 workers. As a strong backstop for the economy, declines in public sector hiring leave a weak private sector to pick up the slack. Additionally, nearly 590,000 fewer people were employed in the economy in February, the biggest one-month decline in the past 14 months. 

The human resources provider ADP produces a monthly employment report based on payroll data from their clients. The latest report found that only 77,000 private sector jobs were added in February, the lowest reading since July 2024. While the construction and manufacturing sectors performed well (26,000 and 18,000 additional positions respectively), the education and health services sectors reported collective losses of around 28,000 jobs. 

Adding to these concerns, US-based employers announced 170,000 job cuts in February, the highest figure since July 2020. The combination of slow government hiring and lousy private sector job creation are red flags for an economy barely into the third month of 2025. 

The BLS jobs report did not assuage the concerns of investors as markets continue their months-long decline and the unpredictable Trump administration continues to push aggressively on trade policy. The concerns have boiled over into open talks of an impending recession. The odds of a recession have risen dramatically, with even President Trump himself admitting that a recession is possible.

The Disparate Impact of Tariffs

Despite a pause on the 20% across-the-board tariffs set to take effect on March 6th on Canada and Mexico, consumers are increasingly rattled. Many expect tariffs to increase prices on a variety of goods and services. As the 2024 election showed, among all goods and services, food costs may be the most salient concern for households.

According to the Survey of Consumer Expenditures, food accounts for 16% of total expenditures in the average household. If tariffs cause food expenditures to increase by even 10%, the effects would be heaviest on low- and moderate-income households by a projected additional amount of $848 per year. Although higher-income households would pay a higher dollar amount on food ($2,054 per year), the cost to lower-income households as a percentage of total expenditures is about 60% higher.

These estimates assume that total household expenditures will remain constant while food costs increase. This assumption may not hold for upper-income households who can increase their expenditures by drawing down their savings. However, low- and moderate-income households will feel the brunt of these economic changes, as they are more likely to be on a fixed budget that cannot easily accommodate higher food prices.

While most analyses of the projected effects of the tariffs find they would increase food prices by 1% to 3%, a 10% increase in food prices is not unrealistic for two reasons. First, there is the inflation spiral that occurred during the COVID era. This led to a 9%, or $440 per year, increase in food expenditures during the 2021-2022 period, which could serve as an indication of future trends. For Black households, overall food expenditures increased by 19% in those years, or $1,128. A 10% increase in food expenditures for low-income Black households would push their share of total expenditures to 23%. 

Secondly, the monopoly power of grocery store chains and food distributors often leads to a phenomenon known as seller’s inflation. This is when firms take advantage of price shocks by leveraging their market power to charge higher prices to maintain their profit margins. The practice was so egregious that the Biden-Harris Administration began calling out the practice, with Kamala Harris campaigning on capping food prices during her presidential run. Many of the analyses of the effects of the tariffs may be underestimating food price increases because they ignore the potential effect of market concentration.

Consumer sentiment has dropped dramatically because of the uncertainty of the future, while households report delaying or cutting out non-essential spending in anticipation of increasing consumer costs. In January, consumers cut down their spending by the largest amount in 4 years. This includes a large reduction in households planning to take a vacation within the next six months. 

Given that people often plan to vacation months in advance, reductions in planned travel can be a sign that consumer expectations of the future are dampening. Additionally, as the Wall Street Journal has reported, the share of spending by top earners accounts for half of all consumer spending. Thus, reductions in future travel by this group show that even high-earning households are cutting expenditures based on a deteriorating economic outlook.

Recession Odds Continue to Climb

A recession would be devastating for many households because so many Americans lack financial security. Liquid assets, like savings and cash, are the first line of financial defense for a household. Liquid asset poverty is defined as the inability of a household to sustain itself at the federal poverty level (~$7,000 for a family of four) for three months on liquid assets alone without income. Almost two-thirds of Black and Hispanic households are liquid asset poor, with over a third having less than $1,000 in liquid assets.

Upcoming tariffs on aluminum and steel are expected to raise the price of everything, from baseball bats to everyday grocery products. This comes at a time when inflation is picking back up, with the price of goods most central for families, like eggs, surging considerably. Consumers aren’t the only ones anticipating higher prices. Manufacturers are also expecting higher prices, with the price index surging to its highest point since June 2022. According to the Federal Reserve Bank of New York, firm inflation expectations have picked up also, reaching 2022 levels.

The combination of a potential trade war, rising prices and slow consumption growth has caused the Federal Reserve Bank of Atlanta’s GDPNow forecast to go from 2.3% in February to -2.4% presently. It is difficult to predict recessions, yet evidence in favor of one occurring in the near future is mounting. Moreover, what is certain is the devastating impact a potential economic downturn will have low-income and working class households who already report living paycheck to paycheck with the economy in its current state.

Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: Dariia Lemesheva via Upsplash

Analysis of Topline Figures in the January BLS Report

This month’s report included the annual benchmark revision for 2024. The jobs report consists of two underlying surveys: the household survey and the establishment survey. Annually, the surveys are calibrated using more reliable population data, such as state unemployment insurance tax records. 

In January, the economy added 143,000 jobs while the unemployment rate receded a tenth of a percentage point to 4.0%. The private sector added 111,000 jobs in January, all in the service sector. Gains from November and December were made upward by 100,000 jobs. When it comes to the household survey, the BLS updates the population estimates with new data from the Census Bureau. The civilian non-institutional population was revised up by more than 2.9 million, which was most likely due to net immigration rates. 

There were significant revisions to the establishment data. The year-over-year change in total non-farm employment for March 2024 trended down from 2,900,000 to 2,346,000. Such a massive reduction suggests hiring has been overstated for the year. However, this does not change the overall assessment of a strong labor market.

The Trump Administration vs. the Administrative State

The first weeks of the new Trump administration have been anything but uneventful. In a flurry of executive orders, President Trump has sought to do everything from end birthright citizenship to freezing trillions of dollars in federal spending, both of which were blocked by federal courts. One of those executive orders will likely have a particularly destabilizing effect: The administration’s new Department of Government Efficiency (DOGE) – which is not a government agency but an externally contracted advisory body – is designed to “slash excess regulation [and] cut wasteful expenditures.” That team of contractors immediately began to lay off a large swathe of the federal workforce and restructure federal agencies with no oversight from Congress.

One such example was the January 28th buyout or termination notice sent to millions of federal employees. The possibility of a large exodus of federal employees in the coming months is quite noteworthy due to the importance of the federal government sector to employment gains. While private sector job creation has slowed, the government sector has emerged as a kind of backstop of the US labor market. A slowdown in job creation and a subsequent negative jobs report could dampen business outlook and lead to lower levels of investment based on the assumption that the labor market is weakening. Additionally, a looser labor market provides more leverage to employers regarding pay and hiring, potentially lowering the earnings potential of prospective hires.

The protest resignation of Fiscal Assistant Secretary of the Treasury David Lebryk, the highest-ranking position a civilian can reach in the agency, has sent shockwaves throughout the agencies that provide the public services we all rely upon. Lebryk had refused to give the DOGE team operational access to the Treasury’s payment system. Managed by the Bureau of the Fiscal Service, a fifth of the US economy flows through its system. The ability of DOGE, and by extension the President, to directly block payments already authorized by Congress could disrupt vital funds for low-and moderate-income communities.

A Strong Economy with an Uncertain Future

With low unemployment, layoffs and resignations stabilizing and moderate inflation taking place, it might sound paradoxical to say the economy is resilient yet precarious. However, the first month of the Trump administration’s chaotic actions have sent market participants into a state of anxiety. Although an 11th-hour deal was reached with Mexico and Canada to avoid 20% tariffs on their exports to the United States, China still faces an additional 10% levy on its exports to the United States. On February 10, the President imposed a flat 25% tariff on steel and aluminum imports “without exceptions or exemptions,” in an effort to boost domestic production. The move increases worries of a trade war, especially with Canada, which supplies 40% of aluminum imports.

Inflation expectations for consumers jumped dramatically as the threats of a trade war and tariffs increased. Most Americans believe that the costs of a hypothetical 20% across-the-board tariff would be passed on to consumers, running contrary of the Trump administration. Four out of 10 respondents from a recent survey said they were more likely to purchase and stockpile goods before the proposed tariffs take effect. Similar to consumers, businesses are also concerned about the anticipated effects of tariffs. Ample evidence suggests they are stockpiling supplies in anticipation of future increases in prices. Small businesses will be particularly affected with 30% anticipating revenue losses from the proposed tariffs. 

Several economic analyses of the proposed tariffs predict far-reaching and potentially devastating impacts. The Tax Foundation estimates the loss of full-time jobs at 330,000 with increases in taxes by $1.1 trillion, or $800 per household. The overwhelming body of evidence suggests that tariffs will negatively impact consumers, businesses and the US economy as a whole. 

The ability of the government sector to supply the economy with a steady flow of job gains may be ending soon. The federal hiring freeze will certainly dampen the sector’s job growth. Additionally, most of the government sector’s job gains come from local governments, which has led to detrimental effects on state and local organizations, raising the prospect of a slowdown in job creation below the federal level. 

There might not be an immediate jump in the unemployment rate, as a large number of the laid off federal workers have technically been put on administrative leave. But the number of people filing for unemployment insurance jumped in the Washington, DC metro this week.

The tariffs coupled with the ongoing deportations have the potential to slow down affordable housing projects. People from racial and ethnic groups currently targeted by the administration’s deportation project are also overrepresented in the building trades. And threats of tariffs on Canadian lumber would spike the cost of building supplies – potentially leaving developers with both a worker shortage and untenable supply costs. Evidence suggests this has already occurred with videos on social media showing empty stores and factories and reports of workers being too scared to show up for work. 

While the long-lasting economic effects of tariffs, deportations and the dismantling of the federal government are yet to be determined, the social and political impacts are becoming clear.  We are already seeing organized resistance to these actions. US cities with large immigrant populations have seen massive demonstrations with businesses, workers and students joining in on the political actions. ICE raids have also been hampered by not only state officials but through highly coordinated community organizing efforts by everyday citizens. 

Federal workers and DC citizens have staged daily protests in front of various government buildings to stop the dismantling and seizure of federal agencies and properties by DOGE. The US federal court system has become a major tool of accountability as a coalition of organizations continues to bring various legal injunctions toward blocking the most worrisome of the Trump administration’s initiatives. Additionally, data stalwarts and concerned researchers are busy downloading government datasets before websites go dark.

It is too early to know if these resistance actions will yield substantive change from the Trump administration. Likewise, whether either Congress or the judicial branch will put limits on the President has yet to be seen. These factors only intensify the uncertainty described above, and further blur economic forecasts.

While domestic resistance spreads, international opposition to the Trump administration grows. After Trump called Canada the “51st state” and threatened them with substantial tariffs, anti-American and anti-Trump sentiments exploded, including calls for a boycott of US products. Chrystia Freeland, Canada’s former finance minister, called for an international summit of countries targeted by the US president. The list included Denmark, from whom Trump threatened to take Greenland, and Panama, which has dealt with threats from the current US administration to take the Panama Canal away from the Central American country – and which the New York Times reports is now home to a jungle detention camp of “fenced cages” for immigrants deported earlier this year. 

The European Union, a long-time target of Trump and his most ardent allies, already has a plan for resistance in place. South Africa has also recently come under economic sanctions for its new land expropriation bill designed to redress apartheid-era land grabs by White settlers. As the list of countries threatened by the Trump Administration grows, so too do the chances of a global anti-Trump coalition developing.

President Trump’s efforts to implement his agenda are facing significant legal, social and geopolitical opposition. There are also contradictions inherent in his plans. For example, deportations and tariffs could raise prices on a variety of everyday goods for consumers and lower housing affordability, which is the opposite of what Trump promised on the campaign trail. Additionally, there is a multi-front war brewing with multiple factions, including federal government employees and non-profits at risk of funding losses, taking the fight against the Trump administration to the streets and inside the courtroom. 

Joseph Dean is NCRC’s Racial Economic Junior Research Specialist.

Photo from Getty Images.

Analysis of Topline Figures in the January 2025 BLS Report

The economy added 256,000 jobs in December, a hardy showing to close out 2024. The unemployment rate inched down to 4.1%.

The biggest industry gainers were health care (+46,000), leisure and hospitality (+43,000), retail (+43,000) and government (+33,000). The private sector ended the year with 138,000 jobs added, a welcoming sign following months of decline. The private sector diffusion index was above 50, indicating that a majority of industries gained jobs rather than stagnating or losing jobs.

In November, the Black unemployment rate reached its highest level since early 2022 at 6.4%. In December, the unemployment rate of Black men and women declined to 5.6% and 5.4%, respectively. Despite these sub-6% rates, the overall Black unemployment rate receded to 6.1% in December, partly due to the nearly 20% Black youth jobless rate. The Hispanic unemployment rate ended the year at roughly the same point it started at (5.1%).

For the first time since the spring of 2022, job openings have risen for two consecutive months (October and November of last year). With the stabilization of hires and resignations, the labor market is showing signs of growth as we start the new year. Additionally, the job growth is broad-based and seems to be in high-paying industries like finance and professional services.

Holiday Shopping

One way to gauge the strength of the economy is by analyzing the spending trends of consumers during the holiday season. The Washington Post reported that during the shopping seasons consumers were price-conscious and the lingering effects of inflation were dampening their outlook on spending. This was particularly the case for low- and moderate-income households who are more focused on basic necessities than in previous holiday seasons.

Despite these fears, consumer spending was robust this holiday season. According to Adobe, online spending from November 1 to December 31 was up 8.7% year-over-year, reaching $241 billion. While inflation has made consumers more price-conscious, e-commerce prices have fallen for over two years straight. Because of this, experts have concluded that increased holiday spending was due mainly to higher demand and not lower prices, a welcome sign for an economy battered by inflation.

Visa reported that total holiday spending increased by 4.8% year-over-year. Consumers relied more on deals and promotions according to Mastercard data, indicating an increased sensitivity to prices, even as Americans spent more overall during the holiday seasons.

The strong spending numbers give credence to the idea that the consumer is solid. While the numbers are promising, one aspect raises concerns: an explosion in the usage of “Buy Now-Pay Later” (BNPL) services. These fintech products allow consumers to access short-term, interest-free (if repayment occurs on schedule) credit for retail purchases. Usage during the holiday season increased by 10%. However, in the last two years usage nationally has increased by 40%. 

Consumers who use BNPL services are more likely to have filed for bankruptcy during the previous year and reported lower amounts of liquid assets. The greatest predictor of BNPL usage is a person’s credit score. 23% of those with credit scores below 600 reported using BNPL services versus only 3% of those with credit scores above 800. Presently, only 9% of consumers use BNPL services. However, that usage continues to rise, indicating a vulnerability for low-income households.

While consumer spending will be a closely watched metric as we advance through 2025, the mortgage and housing market will continue to garner well-deserved attention. Recently, the interest rate on a 30-year fixed-rate mortgage increased to 6.93%, the highest level since July 2024. Mortgage rates tend to rise and fall in tandem with yields on government bonds, which have jumped partly due to potentially inflationary proposals from the incoming Trump administration.

Households will continue to be squeezed by inflation on the consumer side and high mortgage rates on the investment side. Though mortgage rates and interest rates in general are still expected to decline this year, the unpredictability of the incoming administration along with rising household debt defaults make this expectation dubious. Additionally, household credit card balances increased 8.1% in the third quarter of 2024, indicating a deepening dependence on debt-fueled consumption.

Black unemployment will be a key indicator to watch if the new administration carries through on their threats of large-scale tariffs and deportations. As with previous recessions and economic downturns, the expected impact of those policies could first be seen in dramatic spikes in Black unemployment rates.

Joseph Dean is NCRC’s Junior Racial Economic Research Specialist.

Photo by Roger Marks via Flickr.

Analysis of Topline Figures in the December BLS Report

The economy added 229,000 jobs in November, a major rebound from the previous month’s measly 12,000. The unemployment rate inched up to 4.2%. While still historically low, the slight increase in joblessness signals a stagnating economy. 

The biggest gainers were: health care (+54,000), leisure and hospitality (+53,000), and government (+20,000). Notably, retail trade lost 28,000 jobs in November after losing 4,000 in October. 

This decline is striking considering that it is the holiday shopping season. However, shifting holiday sales strategies, earlier retail hiring, and changes to the retail labor force may explain the dismal retail trade job numbers. Nevertheless, any changes in consumer spending this holiday season will serve as an indicator of the future of the US economy. 

The private sector added 194,000 jobs, over twice as much as the three-month moving average of October. Part of the gains came from the end of the Boeing strike, with about 33,000 workers returning to their job sites. This means roughly 30,000 jobs are not necessarily “new” gains (and were not “new” job losses in the BLS data released prior to the strike’s end). 

The Black unemployment rate reached its highest level since early 2022 at 6.4%. Joblessness for Black women jumped by more than a full percentage point to 6%. More than a quarter-million Black workers lost jobs last month even though the overall economy performed well. The Black jobless rate has reached 6.4% two previous times. The last time was in March 2024. The rate has since remained elevated.  

Rising Mortgage Rates

While mortgage rates have remained high throughout 2024, their rise in recent months has attracted considerable media attention. That is because rates continued to climb even as the Federal Reserve cut its key interest rate by 75 basis points since September. It is thought that the federal funds rate and mortgage rates move in tandem, though this relationship is both relatively new and needs to be better understood. 

Many factors determine mortgage rates, including the interest rates on US treasury bills. Mortgage rates more closely follow the 10-year Treasury bond yields. Treasury yields rise for many reasons but the rise over the last several months has been attributed to bond market expectations that the incoming Trump administration’s economic plans will increase the federal deficit and be inflationary.

Since late November, the 30-year mortgage rate has decreased slightly to 6.69%. While historically high, this is below the 7% mark, which is believed to be a crucial threshold beyond which demand for mortgages drops precipitously.

Declining Private Sector Jobs Growth

Private sector job growth slowed continuously across 2024. From its autumn 2021 peak of 700,000, the 3-month moving average has declined to barely 130,000 in November 2024. Some moderation in the labor market is to be expected after a strong recovery from the pandemic. That natural trend, however, does not wholly explain a simultaneous decline in the employment diffusion index. This is a measure of overall job gains utilizing a scale of 0 to 100 where job gains measured at greater than 50 indicate that the majority of industries in that category added jobs. 

According to this metric, certain sectors like retail are having trouble adding jobs given their lower placement on this scale. Though most sectors gained jobs over the past year, the information and manufacturing industries did not. In line with this development, the manufacturing sector’s diffusion index has declined to a record low of 32 this year.  

Government and construction are particularly noteworthy sectors for job growth across the year. Construction employment has shown remarkable growth for an interest rate-sensitive industry in a high-rate environment. Private residential construction has been strong in 2024 and October witnessed the largest monthly increase in single-family construction since February. However, the incoming Trump administration’s mass deportation plan may undermine the strong employment figures of the construction sector. 

Undocumented immigrants make up a sizable share of construction laborers. We may already be seeing signs that anticipation of the deportation plan is curtailing construction hiring. The industry added just 2,000 and 10,000 jobs in October and November, respectively – far below the average of 18,000 over the last 12 months. 

Over the same period that private sector job gains have diminished, the government sector’s share of total employment has steadily increased, reaching its highest level since the end of 2021. During some months of 2024, the government sector accounted for anywhere between 25% to 50% of total net job gains. 

Inflation

While inflation has decreased dramatically since its peak during the summer of 2022, households continue to experience hardships related to high prices. Just as inflation has changed over the years, so has the composition of inflation. Over the last couple of decades, imports and declining manufacturing costs have blunted the rise of goods inflation. The shift in the price of services, however, looks quite different.

The chart above shows the personal consumption expenditures price index, which measures the prices people are paying for goods and services. Goods accounted for the majority of unusually high inflation in 2022 and 2023. But this year saw a return of services driving inflation.

 The bulk of services are in the shelter, transportation, and medical care industries. Shelter costs have been above their historical norm since 2022. Transportation service costs are up 8.2% year-over-year as airline fares and rising car insurance costs eat into household budgets. The latter has risen by 14% over the last year alone. Despite the combination of high car prices and insurance costs, sales of new cars and trucks reached the highest level in over 3 years last month, a sign that consumer spending remains robust. 

Although 2024 has been a solid year for the US labor market overall, some weaknesses could spell a reversal of fortunes in 2025. Among these are declining private sector job growth and elevated mortgage rates. The strength of the economy will be tested as the incoming Trump administration will likely pursue policies that may expose the true fragility of the economy.

Joseph Dean is NCRC’s Junior Racial Economic Research Specialist.

Photo by axelas via Flickr.

Analysis of Topline Figures in the October BLS Report

The October jobs report was abysmal with only 12,000 jobs added. The low figures were due mainly to Hurricane Milton and ongoing labor strikes. The unemployment rate remained unchanged at 4.1%.

The biggest job gains were in healthcare (+52,000) and government (+40,000) accounting for the vast majority of gross gains. Most sectors declined including professional and business services shedding almost 50,000 temporary jobs. The government sector accounted for all net jobs growth with the private sector shedding over 28,000 jobs overall. 

The lackluster job figures highlight other weaknesses that can be seen throughout the economy. The BLS revised August and September’s job gains downward by over 100,000. This is particularly concerning as August’s downward revision of 81,000 jobs was larger than the 78,000 jobs gain in the final count. Additionally, household debt and debt delinquencies continue to rise, putting pressure on family finances.

While the government created nearly all jobs last month and has consistently added them over the year, that public-sector well may soon dry up. Local and state governments rushed to spend down COVID-related federal funding before the fiscal year ended at the end of September. Going forward, with federal stimulus unlikely given the incoming administration’s promises to gut federal agencies, the government sector may be unable to keep the labor market afloat. 

On November 7, the Federal Reserve cut interest rates by 25 basis points, continuing their bid to fight inflation while stimulating the economy. The Fed is seen as a politically independent actor. However, Donald Trump believes the Fed should be subject to more political oversight. In response to whether he was worried about being fired by incoming President Trump, Fed Chairman Jerome Powell said “No,” citing the illegality of firing a Fed chairman. Powell may be correct on the legal question regarding his sacking but the incoming president has a knack for violating the law.

The Return of President Trump: Austerity, Antagonism & Erratic Policymaking

The election of Donald Trump for another term as president has sent a shockwave across domestic and international politics. Known for being unpredictable, Trump campaigned on promises to round up and deport immigrants, enact sweeping import tariffs and make deep cuts to social services and federal government employment.

Perhaps the most controversial Trump proposal is the large-scale deportation of undocumented immigrants, something he has promised will commence on the first day of his presidency. There are an estimated 11 million persons residing in the United States without ‘proper authorization.’ Many have fled dire economic straits, particularly from Venezuela, where over a quarter of the population has left over the last decade. 

Immigrants, documented or not, play a vital role in the economy. They have largely kept the labor force growing while many baby boomers are retiring. Undocumented immigrants perform some of the most backbreaking and least desirable jobs in the economy. They watch the privileged children of upper-class households, tend suburban lawns, collect the nation’s trash and work the fields where America grows its food. 

The large-scale deportation of this population will cause labor costs to rise and the labor pool to shrink. The construction, food service and farming industries will be most impacted. Beyond economic costs, the social effects of the deportation plan would be devastating. Latinos will be significantly harmed by the deportation scheme as 1 out of every 4 Latino children has at least one parent who is an undocumented immigrant. Black immigrants likely will be specifically targeted. This fear has already caused many Haitian migrants to leave Springfield, Ohio, where candidate Trump falsely accused them of eating residents’ pets. In a sign of the rising Sinophobia gripping the country, one of the first groups the Trump administration plans to deport is undocumented Chinese immigrants, specifically young men.

Those who believe that the potential economic costs of the deportation plan will discourage the Trump administration from executing the deportations misunderstand the logic of white supremacy. Believe it or not, the deportation plan has been described as a solution to the housing crisis. The right wing has argued that illegal immigrants are to blame for the shortage of housing in the United States and that removing them would “free up” housing for “deserving Americans.” 

Housing scholars say the impact of immigration is complex but marginal. Most undocumented immigrants are renters rather than owners. They tend to live in overcrowded conditions where families frequently double up under one roof – conditions few other Americans would envy.

Most of the blame for the shortage of 4.5 million homes in fact lies with restrictive zoning laws that benefit existing wealthier and Whiter householders. Those same restrictive policies and the artificial housing scarcity they create also happen to be the conditions that allowed the next president to build an international brand in real estate.

The second major plank of President-elect’s economic plan is across-the-board import tariffs. Additionally, in response to the loss of the United States manufacturing advantage to China (and other competitors), a specific 60% tariff would be placed on Chinese imports.

There is a consensus among economists that tariffs are not an effective way of reviving US industry. The Econ 101 argument for them is to protect strategic infant industries so that they can gain experience and market share to become competitive with imports over time. However, Trump’s tariffs are not limited to key strategic sectors but are applied to all goods coming into the country.

Trump’s tariffs would almost certainly raise prices at all levels of the country’s supply chain leading to inflation for consumer goods. Most analyses estimate a .5% to 1.5% reduction in GDP throughout Trump’s presidency from the tariffs alone – before stacking on the above-referenced economic harms of mass deportation. 

Import-dependent companies have been sounding the alarm about the detrimental effects of the tariffs on their operations. Some companies are looking for legal loopholes to bypass the tariffs. Some are increasing inventory and building up stockpiles now in anticipation of heightened costs in the future.

There are several contradictions inherent in Trump’s economic plan. The deportation scheme may appease the large segment of White voters weary of losing their demographic majority. But it would face severe backlash from key business sectors that historically trend conservative. Farmers and construction companies have expressed apprehension about the plan. Both the deportation plan and the tariffs would likely raise prices, which goes against his voters’ expectations that Trump would lower the cost of living. 

There are geopolitical contradictions as well. Left-leaning governments such as Mexico, Colombia and Brazil may be unwilling to cooperate with the Trump administration on his deportation scheme. The tariff plan would include a special tariff on goods imported from Mexico. Mexico could retaliate with its own tariffs, creating a cascade of economic warfare measures between the US and its second-largest trading partner. 

The tariff and the deportation plans of the incoming Trump administration are a tall order with complex legal, logistical and geostrategic problems. Opponents of the mass deportation roundup scheme are preparing for the courtroom equivalent of a guerilla war. Others are preparing to demonstrate in the streets. If the incoming Trump administration chooses to pursue mass deportations and tariffs, it will face major resistance on multiple fronts.

Joseph Dean is NCRC’s Junior Racial Economic Research Specialist.

Photo by Renee Silverman via Flickr.

Analysis of Topline Figures in the September BLS Report

A staggering 245,000 jobs were added in September, smashing the consensus estimate by more than 100,000. The unemployment rate ticked down a tenth of a percentage point to 4.1%. In terms of October surprises, this BLS report is a positive one for an economy rocked by political and economic uncertainty.

In a surprising twist, this month’s biggest job gains occurred in the food and beverage industry which added 69,000 jobs, far above its 12-month average of 14,000. The rest of the largest gainers were healthcare (+45,000), government (+31,000) and construction (+25,000). The diffusion index, a measure of how widespread job creation is, indicated robust jobs growth as a majority of industries gained jobs.

Construction, Race, and Immigration

One industry that has consistently added jobs over the last few years is construction. The pandemic was a massive shock to the real estate sector as work-from-home and COVID restrictions weighed heavily on businesses, tenants and the construction industry in particular. The economy-wide supply chain crisis has been particularly pronounced in construction, where high input prices still have construction costs 40% higher than pre-pandemic levels. 

Despite these setbacks, construction hiring had one of the strongest recoveries of any major industry. While overall job levels across the whole economy are now 4.5% above their pre-pandemic levels, construction’s bounceback was far greater. As of the September report, the number of construction jobs is now 9% higher than in early 2020. This is impressive because construction has been more adversely affected by labor shortages than most industries.

For example, 94% of construction firms reported difficulties filling positions for craft workers. 54% reported that projects had been delayed because they or their sub-contractors experienced shortages of workers.

This may explain the relatively robust number of job openings for construction work. Job openings in September jumped significantly, by over 300,000 relative to the -62,000 experienced over the last 12 months. The gains were led by the construction industry adding 138,000 jobs openings. 

Hard-line immigration policies are one of the causes of the construction labor shortage as the industry employs a large number of immigrant and migrant labor. Furthermore, there is a racial component to both the anti-immigrant policies and the nature of construction work as a third of construction workers are Latino.

Construction laborers can be exposed to dangerous working conditions in an industry known for its links to corruption and organized crime. As the nation celebrates Latino Heritage Month  we should not forget the hardships faced by Latino workers. The intersection of immigration, race and power was on full display when in March a boat crashed into the Francis Scott Key Bridge near Baltimore, sending eight construction workers into the cold Patapsco River, which ultimately claimed six of their lives. 

All of these construction workers were Latino and most were immigrants. The boat’s Singaporean owners have been sued by the Justice Department for negligence because they allege the company's aggressive cost-saving measures led to the disaster. 

The economy is reeling from the effects of companies carrying out excessive cost-saving measures. Such practices have caused planes to fall from the sky and trains carrying dangerous chemicals to derail. It is one of the root causes of some of the major labor strikes this year including the strike of 10,000 hotel workers and the AT&T strike of 17,000 workers, both in September. 

Economic Woes, October Surprises, and Economic Storms

Last month’s analysis posed the question of whether the economy is under some kind of recession watch, i.e. whether economic conditions were favorable to a recession. Manufacturers are increasingly stating that conditions are not just favorable to a recession but that the economy is already in one.

For example, business activity among New York manufacturers increased for the first time in almost a year while new orders and shipments declined into negative territory in the Philadelphia area. The manufacturing composite index for the fifth district, covering DC, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia, recorded its worst level since 2020. 

The Kansas City Fed noted that factory activity in the area had dropped to its lowest level since September 2020. One manufacturer in the district summed up the current pessimism of the industry pretty well, saying that “[w]e continue to believe that domestic industrial manufacturing is, and has been, in a recession for quite some time.”

Soft signals in manufacturing contrast with the labor market resiliency we’ve noted in this series over the past year. But while the labor market has remained a bright spot for the economy, laborers are growing more bearish on their economic fortunes too. 

In September, consumer sentiment had its biggest drop since 2021 as consumers became more pessimistic about the labor market, business conditions and future income growth. The top concern among households remains prices. October could see a spike in oil prices as war in the Middle East could seize up the world’s oil supply just weeks before the US election. October could very well bring a massive surprise to the economy despite the strong September jobs report. November’s job report will show whether this month's jobs gains are a new trend for the economy or an abnormality.

Joseph Dean is NCRC's Racial Economic Junior Research Specialist.

The biggest labor market news of August was the massive downward revision of job gains in 2023. News of the revision caused stock prices to fall and placed greater scrutiny on the August jobs report.

Each year the job estimates are benchmarked to unemployment insurance records to align the survey with population totals. This year’s benchmark found that the private sector jobs gains were overstated by 818,000 jobs between March 2023 and March 2024. This revision, while 5 times as large as normal, is not surprising. As we reported in a previous update, the private sector lost jobs in Q3 2023. 

Like this month’s jobs report, recent economic releases were mixed including the job opening and labor turnover report. The ratio of job openings to unemployed workers fell below its 2019 average, indicating an increasingly negative labor market for those seeking employment. Inflation slowed to a post-pandemic low of 2.5% in August. This is mixed news because categories important to households, such as shelter and transportation remain elevated.  

Black Workers and Economic Trends

The economy going into the final stretch of 2024 is excellent by historical standards, especially for Black workers. The annual Black unemployment rate between 1972 to 2022 averaged 11.6%. In August it was 6.1%. The employment rate of prime-age Black workers (25- to 54-year-olds) remains at a historic high. 

The overall sweetness of the economy masks the sour taste many households are experiencing as consumers. 37% of Black households reported having at least “some” difficulty paying for their usual expenses. Lingering high prices weigh heavily on Black consumers with over two-thirds concerned that prices will rise over the next 6 months. Finally, housing affordability remains a paramount challenge as over 21% of Black renters are behind on their rent payments. 

As workers, Black people are typically the first to be fired and the last to be hired. As noted in the last RJE update, the Black male unemployment rate has been rising over the last several months. In August the trend reversed back down from 6.6% to 5.9%, bringing the overall rate down 0.2 percentage points to 6.1%. However, the Black male employment to population ratio dropped a whole percentage point, reversing gains made earlier in the year. An uptick in Black workers receiving pink slips may be an indication that a recession is imminent. It is too early to say definitively if Black unemployment is rising, a question that only this year’s remaining jobs reports can answer. 

On top of elevated prices, high interest rates have made purchasing a home more difficult for many households. This is especially true for Black households, who are highly dependent on homes to build and maintain wealth. In fact, NCRC analysis found that home equity accounted for two-thirds of the wealth gains from 2019 to 2022. If mortgage rates remain elevated then hopes of boosting Black homeownership may not be achievable.

Economic Storms May Lie Ahead

Two kinds of notices regarding tornadoes are issued to the public. A tornado warning is issued whenever a tornado has been spotted by radar or storm chasers. A tornado watch is issued if a tornado is not present but conditions are favorable to producing them. 

Like the weather, the economy develops extreme events of its own. Extended periods of relative calm can turn turbulent fast. Many have been asking: Is an economic storm coming? Are conditions favorable for a recession? Should one issue a sort of recession watch?

Some would say so and cite shaky consumer confidence as one sign of economic weakness. Consumption is the largest component of US GDP and the backbone of the US economy. When households expect economic conditions to worsen, many, especially low-income households, will reduce or cut certain discretionary spending. Additionally, they may delay large purchases or substitute premium products with less expensive goods.

Though the Conference Board’s consumer confidence survey found consumer confidence improved slightly, consumers are altering their spending habits. This has been echoed by business figures like Home Depot’s CEO who stated that consumers are delaying larger projects especially ones that require financing due to high borrowing costs. AirBnb reported that lead time, the time between when a reservation is made and the start of the trip, has been declining. This was received by analysts as a sign of souring consumer sentiment about the future, as they are less inclined to book trips far in advance. 

As for household finances, the NY Fed’s quarterly report on household debt and credit found that credit card balances are at a record high and 48% higher than in Q1 of 2021. But delinquency rates have stabilized after rising in 2023, and the Fed states that much of the debt consumers hold is “high quality”. Additionally, their Labor Market Survey found that 4.4% of respondents expected to be unemployed within the next 4 months. 4% is not a large figure but it is the highest reading on record and a 36% increase from the previous quarter. 

However, Americans are also holding on to credit card debt longer as 60% of cardholders reported carrying a balance for over a year, up from 50% in 2021. The combination of high inflation and high interest rates has eroded savings and made repayment more difficult. Because of this 17% of Americans state they are worried about being unable to pay the minimum monthly payment within the next six months. 

Consumers are not the only ones bearish about the current and future state of the economy.

The Dallas Fed’s Texas Manufacturing Outlook Survey showed that Texas manufacturers remained bearish on business conditions and consumer demand. Textile product mills reported that uncertainty was high and “we are very unsure how the next quarter will go.” Chemical manufacturers reported increased turbulence in the market. It was a food manufacturer that provided the bluntest response: “We are preparing for the (emphasis mine) recession.” It appears some in the business community are prepared to issue a recession watch.

The August report will not assuage fears of a recession. Is there evidence that a recession is imminent? The short answer would be no- unemployment remains low and overall consumer spending remains robust. The picture is at best mixed. For example, manufacturing activity has been declining since March while the services industry has remained steady.  This may explain the anxious comments made by Texas manufacturers. 

All eyes are now on the Federal Reserve which is widely expected to announce an interest rate cut at its September meeting in response to these and other recent bits of economic news. A recession watch may be premature but a rate cut is not as the economy is increasingly in need of stimulus of some kind.

Joseph Dean is NCRC's Racial Economic Junior Research Specialist.

Analysis of Topline Figures in the July BLS Report

The economy added 114,000 jobs in July, a remarkable slowdown from the 12-month average of 215,000. The July jobs gains were also more concentrated than usual. The diffusion index, a measure of how widely spread job gains are throughout the economy, dipped below 50 for the first time since the start of the pandemic, indicating that there were more industries losing jobs than gaining them.

The industries with the largest job gains were: healthcare (+55,000), construction (+25,000), government (+17,000), and transportation and warehousing (+14,000). Construction has remained surprisingly strong considering rising costs and the industry’s high sensitivity to interest rates, which are still near historic highs. In fact, after private education and health services, construction has produced the second-highest number of private sector jobs over the last 12 months. 

Additionally, the government has increasingly been an important backstop to the labor market. If we exclude the public sector, the economy added a dismal 97,000 jobs in July, below the three-month average of 146,000. Declining private sector job creation is a worrying trend that signals weaknesses in the labor market.

The unemployment rate rose in July from 4.1% to 4.3%, the highest level since October 2021. The majority of the rise was due to an increase in people entering the labor force but unable to find work. Recent increases in the rate – whether the 0.2 percentage point increase last month or the increases over the last 3, 6, or 12 months – have all been statistically significant. 

Perhaps the most widely reported aspect of the report was that it triggered what’s called the Sahm Rule, which holds that a recession may be imminent when the unemployment rate rises a half-percentage point too quickly. This was likely part of what prompted the global sell-off in financial markets over the weekend following the report’s release. 

The originator of the rule, Claudia Sahm, however, believes that we are not in immediate danger of a recession because consumer spending and job gains have been solid. Since the July jobs report and subsequent market shock, other, positive indicators suggest Sahm may be right to doubt her own rule at this time. Retail sales data came in stronger than expected, inflation slowed, and the number of people filing new unemployment insurance claims dropped.

Nevertheless, many have complained that the Federal Reserve has not been proactive enough in cutting rates which they say could have avoided the (minor) panic.

Job Shifts By Race

Though the overall Black unemployment rate was unchanged in July from June, the Black male unemployment rate increased from 6.1% to 6.6%, the highest level since the start of 2022. Although monthly changes can be erratic, the rate has remained elevated now for several months. However, in a welcoming sign, Black men are increasingly participating in the labor force at a rate approaching their pre-Great Recession levels.

The unemployment rate for Hispanic women has risen to its highest level since early 2022. However, it should be noted that the figures are erratic because the Hispanic data by sex is not seasonally adjusted. Additionally, the overall Hispanic unemployment rate remains near historic lows.

Interestingly the White unemployment rate has drifted upward to levels not seen since mid-2021. Similar to the overall unemployment rate, the 0.6 percentage point increase over the last 12 months has been statistically significant. The overall male unemployment rate has also drifted upward over the last several months. 

Data released at the end of July showed that job openings were largely unchanged but continued the long-term decline to pre-pandemic levels. Hiring fell quite dramatically to its lowest level since March 2020 at the start of the pandemic. 

As a consolation prize, layoffs have remained largely unchanged, meaning workers with jobs have been able to keep them even though fewer workers are getting new ones. Furthermore, the ratio of unemployed people to job openings has remained at its pre-pandemic low for the last 5 months.

We previously mentioned the long-term decline in job creation and the latest quarterly data for Q4 of 2023 confirms this trend: While the 201,000 jobs created in Q4 reversed a worrisome contraction from the prior quarter,  2023 ended with private sector jobs slowing considerably. A bright spot is that establishment births, a close proxy to new businesses, have remained well above pre-pandemic levels throughout 2022 and 2023, indicating that despite rising costs, business formation has remained robust.

Taken together, the recent releases from the BLS paint a picture of an economy approaching a sort of crossroads. As the minor panic that followed the July jobs data release has subsided many wonder if we are headed toward a recession. 

Others believe the economy remains robust with the recent slowdown being a return to its long-term normal functioning. Households, too, seem to be of two minds: The consumer confidence survey for July found many are concerned about the present situation even though they still remain upbeat about their own future prospects. 

The Federal Reserve believes recent labor market weaknesses may give rise to a cut in interest rates however officials remain confident that the economy is not “falling off a cliff.” In July, inflation dipped below 3% for the first time since early 2021, further increasing the likelihood of a rate cut. Nevertheless, August’s jobs report will be closely watched to see if present trends continue.

Joseph Dean is NCRC's Racial Economic Junior Research Specialist.
Photo by Renee Silverman via Flickr.

Analysis of Topline Figures in the June BLS Report

The economy added 206,000 jobs in June, a decent pick-up and above the consensus but the good news stops there. The unemployment rate rose to 4.1% – still near historic lows, but also the highest level since late 2021. That uptick in unemployment also continues an unwelcome trend: This is the third straight monthly rise in the jobless rate and indicates a cooling labor market. The 3-month moving average of monthly job gains has slowed to a 17-month low. Additionally, the BLS revised the April and May jobs gains down by 100,000.  

Another key job-market indicator – the number of people turning to the unemployment insurance (UI) system they’d previously paid into through payroll taxes – is also souring. Weekly initial jobless claims – which imperfectly track job losses in tighter time increments than other Department of Labor data – approached a one-year high in June. Continuing UI claims – which imperfectly track how difficult people are finding it to get a new job when they lose one – soared to the highest level since the end of 2021. 

The Black unemployment rate increased to 6.3%. Though the unemployment rate of Black workers fluctuates month to month, 3-month moving averages that smooth out that noise are nearly a full percentage point higher than the 3-month moving average a year prior.

The unemployment rate for Asian workers increased a whole percentage point to its highest level since October 2021. Typically the Asian unemployment rate is lower than that of their White counterparts, but June defied that trend. White unemployment stood at 3.5%, significantly lower than the 4.1% rate for Asian workers.

Where raw unemployment rates measure how those actively seeking work are faring, a separate metric called the “labor force participation rate” (LFPR) gauges what proportion of a group’s total population are either working or seeking work. Here, June’s numbers are less gloomy: Hispanic LFPR inched up to its highest level since before the pandemic, while the Hispanic unemployment rate remained largely unchanged from May.

The industries with the largest job gains were government (+70,000), health care (+49,000) and construction (+27,000). The government sector’s gains in June were above its average monthly gain of 49,000 over the last 12 months. The public sector has played an ever-increasing role in buoying jobs gains as the government sector has now risen to its highest share of total employment since the end of 2021. 

Overall the June jobs report solidifies the consensus that the labor market is cooling. Over the next couple of months if the trends in Black and Asian unemployment continue then the outlook for the future will grow increasingly negative.

There are worrying details in the job data. But where does the economy stand in the wider picture beyond the state of the labor market? Unemployment is only one area of the economy households care about. They also have a particular interest in inflation – defined as the changes in prices for essential goods purchased with income generated in the labor market. Together, labor statistics and inflation data hint at how easy or hard families are finding it to bring money in, and how easy or hard they’re finding it to obtain dignity (let alone luxury) with that money.

Inflation and Market Concentration

The rising prices Americans are paying for everyday items are top of mind for many households, while pundits bemoan their inability to appreciate the drop in inflation from its peak in the summer of 2022. As this disconnect between the political class and the people continues, another debate among economists and policy analysts rages about the role of corporate power and market concentration in driving inflation.

One of the many effects of the inflationary panic of 2022 was a reevaluation of the idea that corporate profits and market concentration could cause or help contribute to inflation. The Federal Reserve Bank of Kansas City found corporate profits significantly contributed to inflation in the early half of 2021. The Federal Trade Commission’s recent report on food supply chains and the coronavirus pandemic found that prices at food and beverage retailers rose much faster than total cost over the course of the pandemic shock, suggesting some retailers were not simply raising prices to cover costs. 

What is interesting about the Fed’s report is that while they rule out monopoly power as an explanation of inflation they point to firms anticipating cost increases as the source of inflation. This is noteworthy because inflation is typically blamed on workers, and for a similar reason. Traditional economics refers to a “wage-price spiral,” in which workers respond to cost of living increases by demanding higher wages, causing employer firms to raise prices leading to more inflation. 

The recent reevaluation of inflation drivers from the Kansas City Fed suggests that firms squeezing their customers in this same way are doing so not to cover a real growth in payroll but rather a predicted spike in supply and shipping costs. This is a very different story about inflation than the one in most economics textbooks – a story of corporate greed and price gouging that snowballs from suppliers and logistics firms through to end users – and the new story has some interesting corroborations.

The phenomenon of ‘shrinkflation’, or when a company downsizes a product without downsizing the price, made rounds on social media before the New York Times and even the President gave legitimacy to the concerns of households. Food is one of the more visible components of inflation and thus many acts of shrinkflation were recorded in supermarkets and grocery stores. The FTC report details how large grocery retailers took advantage of their market power to engage in practices like shrinkflation to boost their profits at the expense of consumers and smaller retailers. The report hints at the decades of mergers and corporate concentration, leaving a food industry dominated by a very small number of corporations. Instead of competing for customers by containing prices or providing better goods and services, these conglomerates take almost the opposite approach: They compete for stock investors who shop around for higher profit margins rather than for families who shop around for the best deals to fit their tight budgets.

The cost of shelter is the largest component of the consumer price index, comprising roughly a third, and has consistently been a major contributor to monthly changes in inflation. Given the underlying data source it is highly likely the increases in shelter costs we are seeing now could be representative of price changes a year ago. Regardless, housing affordability remains the paramount issue on people's minds – and here, too, market concentration plays a role.

In October 2022, a lawsuit was filed against the company RealPage, a producer of software used to set rental prices. Tenants alleged that nine of the nation’s biggest property managers had conspired to inflate rents by forming a cartel. After backing from the Department of Justice, they were joined by similar suits that would be eventually consolidated into a sprawling class action lawsuit. 

The sheer scale of the potential number of renters affected over the years could be in the millions. For example in the District of Columbia's suit against RealPage, the city’s 14 largest landlords listed as defendants own roughly 50,000 units alone. Given the racialized nature of rental burdens, RealPage and its gang of wealthy property owners probably disproportionately fleeced minorities and underserved communities and further entrenched the racial wealth gap and the homeownership gap.

RealPage is but one example of how market concentration can raise housing costs. The rapid rise in corporate landlords and the concentration in rental housing stock are another. While housing is and always will be a more diverse marketplace than the food industry used in the examples above, tools like RealPage facilitate the same end outcome: Instead of the virtuous competition traditional economics predicts, in which landlords fight each other to provide the best thing for the lowest price and the consumer benefits, a nefarious near-opposite pattern emerges.

The combination of housing unaffordability, inflation and a historically-strong-but-softening job market help explain the general economic pessimism weighing heavily on households.

Joseph Dean is NCRC's Racial Economic Junior Research Specialist.

Photo by atramos on Flickr.