Chart 1
Regardless of its other problems, the U.S. economy has always been a powerful engine of job creation. The 1970s, for example, were a time of stagflation and deep pessimism. Nonetheless, the nation gained almost 20 million jobs over the course of that decade.
Since Donald Trump returned to the White House, however, job growth has slowed to a crawl. Granted, it’s nothing like the plunge in employment that took place in 2020, as Covid shut much of the economy down. And a couple of strong job reports earlier this year encouraged some observers to believe that the worst of the Trump II job drought might be over.
But the most recent Employment Situation report from the Bureau of Labor Statistics estimated that employment actually fell in July, while simultaneously revising the estimates for earlier months down. Thus July’s report confirmed the now widespread view among economists that the Trump-era job slowdown isn’t a blip. It’s now clear that America has entered a new, possibly permanent era of stagnant employment.
Why is this happening? And why does it matter? As I’ll explain in this primer, long-run job creation is driven by growth in the supply of labor. U.S. labor supply growth has been slowing for some time, because Baby Boomers have been aging out of the work force. However, the rate of job growth has suddenly fallen further due to Trump’s harsh crackdown on immigrants. So it’s fair to call the onset of America’s current employment stagnation the “Trump Stall”.
Is this slowdown in employment growth necessarily a bad thing? There are fewer U.S. jobs than past trends would have predicted, but there are also fewer workers seeking jobs. So why is this a problem?
Well, it is indeed a problem. One reason is that America’s responsibilities — to ensure national security, to take care of retirees, maintain public infrastructure and provide healthcare — remain the same, but there will now be fewer workers, paying less taxes, than previously expected to meet those responsibilities. Moreover, foreign-born workers bring distinct skills and are willing to do jobs native-born workers shun, such as emptying bedpans and picking fruit. Removing them from the U.S. economy will leave the rest of us poorer and with a lower quality of life.
So for both the short run and the long run welfare of Americans, it’s important to understand the origins and consequences of the stalling of the American job machine. Beyond the paywall I will address the following:
1. Measuring the Trump Stall
2. The long-run drivers of job growth
3. Understanding the Trump Stall
4. Why the Trump Stall is harmful
5. The Trump Stall in context
