What I predicted in November has sadly come true
I wrote the following tweet back in November just DAYS after Trump won the election. With today’s payroll report and revisions out, I think this explanation makes the most sense and it’s going to be an uphill climb for the administration:
An IMPORTANT note to the incoming Trump administration: The economy is worse than you think.
Jobs will be the key impact.
Here's what happened: the sugar rush of artificially inflated incomes from Covid stimulus has proven a Keynesian nightmare. Incomes increased by 20% creating a false demand signal that retailers and services misinterpreted as a robust booming economy. Inflation followed and now that the govt free money spigot has run dry we are left holding the bag and employers are letting people go.
Gas prices are dropping - for all the wrong reason. Demand is LOW. One govt report indicated that demand will drop to 2019-levels next year.
Here's the market red flags:
Labor Market Weakness: Declining Job Openings: Job openings tumbled by over 400,000 in September 2024 to 7.44 million, the lowest since January 2021. This signals weakening demand for workers.
Low Hiring Rate: While slightly up for three months, the hiring rate remains depressed at around 5.5 million in September 2024, far below healthier levels.
Declining Quits Rate: The quits rate fell to around 3 million, similar to 2015 levels, suggesting workers are hesitant to leave their jobs due to a perceived lack of opportunities.
Rising Layoffs: Layoffs and discharges rose above 1.8 million in September 2024, the highest since January 2023, signaling a potential uptrend in job losses.
Private Payroll Weakness: Private payrolls were under 100,000 in every month except September since May, even reaching close to zero in August (revised).
Weak October Payrolls: A meager increase of 12,000 jobs in October 2024, with private payrolls down 28,000.
Declining Hours Worked: The hours worked index has been flat for four months (since May 2024). The average workweek fell back to a cycle low of 34.2 hours.
These are all signs of a very weak economy and the Trump administration should RESET expectations!
My feeling is the opposite. Trump has turned this around, employers are hiring, people are spending.
October payrolls were affected by the Hurricane and Port Strike. Trumps Tariffs have created uncertainty and are a tax increase on Americans in a weak economy. It hurts manufacturers who require inputs from overseas, and increase the costs for companies to reshore. Its also inflationary although the full effects have not yet been fully felt. His draconian immigration policies have scared off tourists, and the weak dollar caused by policies increasing the deficit/debt and tariffs are also inflationary.