Surprise! The American economy, which had been the envy of the world last summer, is now seeing some noticeable signs of stagnation. The jobs report yesterday was not only weak, but the revisions downwards were striking. The expectation was 115,000 new jobs, but the Bureau of Labor Statistics estimates it was 73,000. While that's notable, the real news was that - having access to more data - they revised downwards their previous estimates. The May estimate was 144,000 and the new number is 19,000; June was 147,000 and now is 14,000. If that trend holds, the July number should be revised down to negative job growth.
In some ways, the declining job growth is completely to be expected. Yes, tariffs have created a great deal of instability into the economy, so why would an employer expand her workforce when she might be looking at layoffs by the fall? Or if he's having to eat tariffs under the assumption they will be transitory, that means cutting back on wages by not hiring. Additionally, deportations have to depress economic activity, especially in the trades. Again, less aggregate demand. Throw in anecdotes of a decline in tourism and it would make sense that the only sector to see job growth is health care providers.
Inflation, meanwhile, is a bit on the warm side at 2.7 - 2.9. That's not high, though it also means prices are still rising from the already inflated prices of the post-Covid supply crunch, so it feels like high. Additionally, if you really are seeing around 2.8 inflation during a possible contraction in hiring: well, hello stagflation.
So, yeah, a bad report.
More noteworthy than the bad report, though, is that Trump immediately fired the head of BLS for producing the report.
This is basic Dictator 101 stuff. Any news that reflects badly on Dear Leader is to be suppressed and the best way to suppress it is to fire the experts who produce the bad news and replace them with toadies who will produce shiny, happy news. The problem, obviously, is that modern economies run on accurate news, not good news. On a fundamental level, markets are exchanging information before they are exchanging goods and services. The information moves first, and if Trump destroys some of the accuracy of the information, that will distort markets.
If - as most economists believe - the softening economy is caused by the uncertainty of Trump's tariffs, adding uncertainty about governmental economic statistics, which were the gold standard, is simply injecting a lot more uncertainty into the markets.
The logic of TACO is that Trump did respond to bad news, like market crashes, and he changed course. If you censor the ability of people to get bad news, he won't course correct. That means any effort to count on him making a better decision in the face of contrary evidence is increasingly doomed.
This is exactly the reason why dictatorships fail. The question for us is the degree to which he drags us all down with him.
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