Tag Archives: Trump

More Evidence on the Damage Trump’s Policies are Doing to the Economy

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Chart 1

A.  Introduction

On May 28, the Bureau of Economic Analysis (BEA) of the US Department of Commerce released its Second Estimate of GDP for the first quarter of 2026.  Along with it, it released its estimates of Personal Income and Outlays for April 2026.  Together, they provide further evidence on the damage that Trump and his misguided (as well as erratic) policies have done to the US economy.

This note will review some of the figures that came out.  The chart above shows in a longer-term context what has happened to real per capita disposable personal income – perhaps the best measure in the GDP accounts of average real incomes of Americans.  It stagnated in the first year of Trump’s return to the presidency and is now falling in 2026.  It is also now well below what it would have been had it continued to follow the rising trend path of the last 13 years.  The figures will be discussed in the next section below, as well as figures on the divergent paths of what has happened to wages and salaries (stagnant in real terms) in contrast to corporate profits (up by 12.0% in the first quarter of 2026 over the year earlier in nominal terms, and by 8.7% in real terms).

The section that follows will then discuss a few points that can be found in the new GDP estimates.  GDP growth in the first quarter was weak, with a revised estimate that real GDP grew at a 1.6% annual rate in the quarter (down from 2.0% in BEA’s initial estimate released in April).  But this includes the effect of the return to normal levels for a full quarter of government production following the end of the federal government shutdown in the fourth quarter of 2025.  That recovery already happened in mid-November.  The previous post on this blog discussed that impact and how it is measured.  The bounce back to normal levels led to GDP as measured that was 0.6 percentage point higher in the first quarter than otherwise by my calculations (and 1.0 percentage point higher in figures cited by the BEA when discussing the negative impact of the shutdown in the fourth quarter).  Excluding this impact of government workers returning to their offices, GDP growth in the first quarter would have been only 1.0% (using the 0.6% figure) or just 0.6% (using the BEA figure).

Furthermore, more than all of this growth was a consequence of the AI boom.  The contribution to the growth in GDP in the first quarter from private investment in information processing equipment and software totaled 1.4 percentage points in the BEA figures.  That is, after taking into account the impact on measured GDP from government workers returning to their offices for the full quarter and private investments linked to the AI boom, production in the entire rest of the economy fell.  Production in the entire rest of the economy other than AI investments would have led to a fall in GDP at a rate of – 0.3% using the 0.6% figure for the impact of the government shutdown (or at a rate of – 0.7% using the 1.0% figure the BEA cited for the impact of the government shutdown).

On top of this, inflation is now high.  As discussed in Section D below, the upturn in inflation started already in late 2025 / early 2026, i.e. before Trump’s decision to start a war with Iran on February 28.  The resulting jump in fuel prices led to inflation being even higher.

The economy is doing poorly.  Living standards are falling.  Only investments linked to the AI boom are keeping GDP growth positive.

B.  The Impact on Living Standards

Per capita disposable personal income in real terms was stagnant in the first year of Trump’s second presidency and falling in 2026.  It is now well below where it would have been had it continued on the previous upward trend.  The figures are shown in the chart at the top of this post.

The BEA provides an estimate of personal income monthly, and it can be found with its underlying components in Table 2.6 of the NIPA Accounts.  Personal income includes all sources of income accruing to individuals, including from wages and salaries (along with supplements to wages, such as company contributions to health and pension plans), income from unincorporated businesses (sole proprietorships and partnerships – i.e. most small businesses), rental incomes accruing to persons, personal interest income and dividend income, and current transfer receipts (such as from Social Security and Medicare) net of taxes paid for such programs (e.g. Social Security and Medicare taxes).

Personal income minus personal taxes (primarily income taxes) will then be disposable personal income.  The BEA deflates these figures using its estimates of the personal consumption expenditures price index (often referred to – not quite correct technically, but close – as the PCE deflator) to put them in real terms, and divides them by current population levels (with estimates from the Census Bureau) to put them in per capita terms.

Per capita disposable personal income in real terms was close to its long-term trend in January 2025, as Trump took office, and continued close to that trend until April 2025.  But that was the month when Trump announced huge and essentially arbitrary tariffs would be charged on imports on almost every country and region in the world (including an island populated only by penguins and seals).  He called this “Liberation Day”.  Erratic changes in tariffs since then, as well as in other policies (such as the granting of special favors or special penalties to various firms depending on Trump’s whims), have since continued.  Real personal income then came down from its April 2025 peak, stagnated to the end of the year, and fell to just $52,330 in the BEA estimate for April 2026.  This is below where it was when Trump took office, and $750 below where it was in April 2025.  This is in 2017 prices.  In current prices and as of April 2026, real personal income (at an annual rate) is now $980 per person less than it was on “Liberation Day”.

But a more appropriate measure of performance would be relative to where it would have been had it continued to rise as it had under Biden and before.  Compared to what it would have been, the shortfall in living standards by April 2026 came to $1,700 per person in terms of 2017 prices, or $2,200 for every man, woman, and child in the country in current prices.  For a family of four, the reduction in living standards as of April 2026 was $8,800 at an annual rate.  This is not a small amount.  Households could make good use of the higher income they would have had, had it continued to grow as it had under Biden and before.

Furthermore, the gap between what it could have been and what it actually has been under Trump is widening over time.  It is also an average, and hence does not take into account the increases in inequality of recent years.  There has been much discussion of the so-called “K-shaped” economy, where higher-income individuals are doing increasingly well while lower-income individuals are doing poorly.  With growing inequality, the reduction in the overall average real personal incomes under Trump has been especially stark for the lower and middle income classes.

Defenders of Trump might well point out that there was also a substantial dip in real personal incomes in 2022 during the Biden administration.  This is true and is seen in the chart at the top of this post.  It was, however, temporary.  Real personal incomes returned to their previous growth path by the end of that year, and then continued on that path until Trump took office.  The dip was a consequence of the severe disruptions to the US (and indeed world) economy due to the sudden lockdowns due to Covid in 2020 that continued into 2021, and then the time needed to re-establish the regular functioning of supply chains once the production plants and transportation networks could be reopened.  The impact of this on disposable personal incomes in 2020 and 2021 was masked by the numerous (and massive) emergency government support programs under both Trump and Biden – as seen by the sharp upward spikes in personal incomes in those years.  Much of this was saved (stores were often still closed), and the drawdown on such savings could then support purchases in 2022 despite real incomes being temporarily low while supply chains were still not fully functioning.  Real personal income then rapidly recovered, and by late 2022 it was back to its prior trend.

Another indicator in the recently released BEA estimates of the increasing stress that American households are experiencing can be found in the estimates of the personal savings rate.  This is also provided in Table 2.6 of the NIPA accounts.  The personal savings rate is personal savings as a percentage of disposable personal income.  That rate has been falling during Trump’s second term to just 2.6% as of April 2026 – less than half the rate of 5.5% of April 2025.  It is also now well below its recent longer-term average.  Between January 2013 and February 2020 (before the Covid disruptions began), it varied between about 5% and as much as 8%, and averaged 5.9%.

The 2.6% rate is low, and the fact it has been falling is an indication that households are stressed.  Given urgent current needs, they are saving less for retirement and other future objectives.  As with personal income, the BEA can only estimate personal savings as an average over all households.  Thus the 2.6% rate is an average that includes both upper income households who are likely saving a relatively high share of their income and lower and middle income households, who may not now be saving much at all.

At the same time as personal income has been falling, corporate profits have been rising at a fast rate.  The BEA estimates corporate profits only on a quarterly basis, and the initial estimates of these profits are released only with the release of the second estimates of the GDP accounts each quarter (as in the estimates released on May 28).  See specifically Table 6.16D in the NIPA Accounts.  Between the first quarter of 2025 and the first quarter of 2026, corporate profits in all industries rose by 12.0% in nominal terms.  Using the PCE deflator to put this in real terms, the increase was 8.7%.  In contrast, wages and salaries rose by just 3.5% in nominal terms between those two quarters, or 0.4% in real terms using the PCE deflator.  Adjusting also for population growth, the increase was essentially zero (less than 0.1%).

Corporate profits have been going up, and at a rapid pace.  Wages have not.

C.  The Growth in GDP in the First Quarter of 2026

The BEA’s estimate of GDP growth in the first quarter of 2026 was revised down from 2.0% (at an annual rate) in the BEA’s initial (“Advance”) estimate released on April 30 to 1.6% in the Second Estimate released on May 28.  But as noted above, this 1.6% rate includes the impact of the bounce-back to normal levels of federal government production of services for a full calendar quarter.  It had been curtailed during the shutdown that spanned almost one-half of the fourth quarter of 2025, and GDP measures the flow of goods and services provided over a full quarter.  Taking this effect into account, growth in the first quarter of 2026 was even less.

The impact of the government shutdown was discussed in the previous post on this blog.  GDP is the sum total of a flow of goods produced and services provided during a period of time (a calendar quarter here), and the reduction in the provision of those government services in the first half of that quarter meant a reduction in GDP in the quarter.  As discussed in that blog post, the impact (by my calculations from the figures the BEA provided) reduced measured GDP by about 0.6 percentage points (at an annual rate) below what it otherwise would have been.  The BEA, in commentary it provided with its releases of the GDP estimates for the fourth quarter of 2025, indicated the impact was about 1.0 percentage point of GDP.  The reason for the discrepancy is not clear, but one guess would be that some higher official at the BEA or the Department of Commerce took the 0.6% figure and rounded it to 1%, and that someone else started to write this as 1.0%.

With either figure, GDP in the fourth quarter of 2025 was reduced by some amount.  By simple arithmetic, there would then be a bounce-back effect on GDP in the first quarter of 2026 of a similar magnitude, as the government returned to normal operations for the full quarter.  Taking this into account, the rate of growth in GDP in the quarter other than from this return to normal government operations would have been 1.0% rather than the 1.6% reported (or 0.6% rather than 1.6% based on the 1.0% figure for the impact of the shutdown that the BEA cited).

But in addition, GDP growth – such as it was – is more than fully accounted for by the continuing boom in private investments linked to building the data centers, developing the software, and supplying the other equipment needed for the new artificial intelligence (AI) systems.  This AI boom accounts for much of the growth in GDP in 2025, with this continuing into 2026.

While the NIPA sector categories will not match precisely the investments related to the AI boom, a reasonable approximation is the sum of private investments in information processing equipment and in software.  The NIPA accounts provide figures for private investment in these categories, and from this the BEA provides figures (in Table 1.5.2 of the NIPA accounts) of the contribution from the growth of each to the overall growth in real GDP.  For technical reasons (the use of chain-weighted price indices), the sum of the individual contributions to the growth in GDP may differ slightly from the estimated growth in real GDP, but they are well close enough for the purposes here.  Of greater importance is that investments in information processing equipment and in software will be for more than that just for AI, plus there will be AI-linked investments in other categories as well.  These will in part offset each other.

What is clear is that in 2025 and continuing into 2026, there has been a major increase in private investment in these AI-related categories.  Their contribution to the growth in GDP in the BEA calculations (Table 1.5.2 in the NIPA accounts) was an average of a 0.90% point contribution to the GDP growth rate each quarter (at annual rates).  This is triple the average contribution to GDP growth of investments in information processing equipment and in software between the first quarter of 2013 and the last quarter of 2024, when its contribution was on average 0.30% point.

Subtracting from overall GDP growth the contribution of the AI boom, as well as accounting for the impact of the federal government shutdown, yields the contribution to the growth in GDP of the entire rest of the economy:

Contributions to GDP Growth

GDP Growth Contribution of      Info Processing                   + Software Impact of Gov’t Shutdown Contribution of All Else
2025Q1  -0.65%        1.30%     -1.95%
2025Q2   3.84%        0.80%      3.04%
2025Q3   4.38%        0.26%      4.12%
2025Q4   0.48%        0.78%   -0.57%      0.27%
2026Q1   1.62%        1.36%    0.56%     -0.31%

Seasonally adjusted annual rates.

(The figures for the impact of the federal government shutdown (-0.57% of GDP and +0.56% of GDP) have been rounded in the text to 0.6%, and are shown here at two digits of accuracy to be consistent with the rest of the table.  Also, they differ very slightly between the two quarters – 0.57% vs. 0.56% – as the impact is taken as a share of GDP, and GDP is slightly higher in the first quarter of 2026 than what it was in the fourth quarter of 2025.)

Taking into account the impact of the government shutdown and of the boom in AI investments, growth in the rest of the economy was essentially zero over the past half year.  It was relatively high in the second and third quarters of 2025, but was substantially negative in the first quarter.  While the quarter to quarter figures will bounce around (due both to real changes and to statistical noise), the economy – other than for investments related to AI – is clearly weak.  This is consistent with the findings discussed above on the stagnation in real personal incomes in 2025 and its fall in 2026.

Another sign of weakness in the US economy has been a continued decline in private investment in business structures (e.g. office buildings, commercial structures, warehouses) and in residential housing.  See Table 1.1.1 of the NIPA accounts.  Each has declined in real terms in every quarter since Trump took office at the start of 2025, most recently with real investment in business structures falling at an annual rate of 5.4% in the first quarter of 2026 and real investment in residential housing falling at a 6.2% rate in the quarter.  Other than for AI, private investors are wary of committing to investments in the economy.

A proviso on the AI investments should, however, be noted.  The figures above are based on the BEA calculations of what it terms the “contributions to the percent change in real gross domestic product”.  It is, however, a calculation from the demand side measure of GDP, where all the components of demand for GDP (private consumption, private investment, government, and exports less imports) are added up.  This provides an estimate of domestic production during the period, as private investment includes investment in inventory accumulation and changes in inventories act as a balancing item.  Increases in imports are therefore a negative contribution to the growth in GDP in this framework, and the BEA is only able to make an estimate of the change in total imports during the period – not imports that in some way both directly and indirectly provided part of the supply to fill a specific demand.

With imports equal to only about 14% of GDP, the approach is not unreasonable, as 88% of what is used to fulfill the various demands will come from domestic production.  (With imports at 14% of GDP, total supply will be 100 + 14 = 114, and the share domestically supplied will be 100 / 114 = 88%.)

But while the average import share in total supply is 12% ( = 14 / 114), the share is likely substantially higher for the investments linked to the AI boom.  How much higher is not clear.  Many of the semiconductor chips and much of the specialized equipment are imported, but the investments in the data centers supporting AI and in the software used for this will be more than just imports.  The data centers need to be built, the equipment put together, and the centers then connected to power, water, and information networks.  And the software, in contrast to the chips, is primarily from domestic production.

The relatively high share that is imported will matter for the impact such AI investments will have on domestic production rather than direct imports, and GDP is a measure of domestic production.  It is impossible to say how much that impact will be, but it will reduce the “contribution” of such investments to the growth in GDP (as depicted in the table above).  However, even with this, the contribution of the “all else” category to the growth in GDP is likely still to be small – just not as small as the figures indicate.

D.  Inflation is Now High

Inflation is now also a concern.  Table 2.8.4 of the NIPA accounts provides monthly estimates of the price indices estimated by the BEA for personal consumption expenditures – both overall and for the major types of products making up personal consumption.  (Technically these are price indices rather than price deflators, but in practice they are almost always the same within round-off and the terms – price indices or deflators – are often used interchangeably.)  The Fed uses the core PCE deflator (the deflator excluding food and energy) as the primary indicator of inflation that it focuses on, with the objective of keeping it at around 2.0% on an annualized basis.

Monthly changes in the price indices are volatile and often not meaningful, while changes in the indices over year-earlier periods will miss turning points due to the long lag.  Changes over six-month periods are usually a good compromise to show when a turning point has been reached.  And it is clear from this that inflation turned decidedly higher in late 2025 / early 2026:

Chart 2

The overall PCE price index over the six months ending in April 2026 rose at a 4.8% annualized rate.  The core PCE price index rose at a 3.8% pace.  Both of these are now far above the Fed’s 2.0% goal.  And this is not just due to energy prices:  By April, the six-month core PCE price index had risen by a full percentage point from the 2.8% rate of the six-month periods ending in late 2025.  Furthermore, energy prices in the months of January and February 2026 were in fact relatively low and below their levels of the last several months of 2025.  Trump did not launch his war against Iran until February 28, after which energy prices skyrocketed.  This then compounded what was already becoming an inflation problem.

Inflation by itself will not necessarily lead to a reduction in average real personal incomes in the NIPA accounts – the topic of Section B above.  Higher prices mean that the loss of one party is a gain to another.  And the stagnation in real personal incomes began in 2025 well before the recent jump in inflation.  But to the extent the inflated prices end up benefiting corporate entities (such as the big oil companies), average real personal incomes will be reduced as corporate profits go up.  This has likely been an additional factor in the more recent fall in 2026 in the absolute levels of average real personal incomes.

The recent rise in inflation does not in itself account for the slump in living standards under Trump.  The stagnation in real personal incomes was already underway in 2025.  Trump’s misguided policies led to that.  High inflation is now compounding those difficulties.

E.  Conclusion

There is another figure in the recently released NIPA accounts that is of interest as an indicator of what has happened to the living standards of lower-income Americans.  It has in fact had a positive contribution to GDP as mechanically measured.  Included within the goods and services that add up to overall personal consumption expenditures, the BEA has the category labelled “Final consumption expenditures of nonprofit institutions serving households (NPISHs)”.  These are the net expenditures of nonprofit groups serving lower-income households, such as food banks, health clinics, and other providers of similar services.  The “net” is net of any payments they receive from those receiving those services.  Table 2.8.11 in the NIPA accounts shows the percentage change in real expenditures on this consumption category over the same month one year before.

The net consumption of these goods and services provided through nonprofits was 10.6% higher in real terms in April 2026 than what it was in April 2025.  This is major growth (and a contribution to GDP as measured), and is the highest percentage increase since 2022 (when the disruptions of the Covid crisis were being finally resolved).  This need to resort to food banks and other services provided through non-profits is another indication that lower-income households are stressed in this economy, and need to find support somewhere.

This indicator of stress among American households is consistent with the stagnation – and more recent decline – in real personal incomes shown in the chart at the top of this post.  It is also consistent with the fall in the average personal savings to just 2.6% – half of what it was when Trump took office.  When times are difficult, households set aside their savings plans.  It is also consistent with slow growth in GDP outside of investments in the booming AI sector.  And it is consistent with the more recent rise in inflation – affecting some households more than others – where the inflation rate was already going up before Trump chose to bomb Iran and drove up the price of fuels.

Trump’s policies are doing real damage to the economy and to living standards, that are evident in data that cover only a little over a year since he took office in his second term.  But there is no indication that Trump recognizes this and that he intends to change what he has been doing.

The Delayed BLS Employment Report Confirms the Labor Market Weakened Sharply Under Trump

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Chart 1

A.  Introduction

The delayed Employment Situation report of the BLS for November 2025 was released on December 16, 2025.  It includes estimates of the job numbers also for October 2025 – figures that had not been compiled and released before due to the government shutdown.  The new figures confirm that the labor market has weakened substantially this year.

With this new data, this post will compare what happened to employment since Trump took office with its growth during the latter part of the Biden administration.  As seen in the chart above, there has been a dramatic slowdown.  Indeed, outside the health and social assistance sector, there are now fewer jobs in the economy than when Trump took office – 134,000 fewer.  There was still reasonable monthly job growth in the first few months of the Trump administration, as it takes some time before a new administration’s policies will have an impact.  Measured from April 2025 (the month that started with Trump’s “Liberation Day” with the announcement of his so-called “reciprocal tariffs”), the number of jobs in the entire economy other than in health and social assistance fell by 311,000.

These comparisons are based on the change in employment relative to what it was early in Trump’s term – from January and April, respectively.  More meaningful is a comparison to what employment would have been had it continued to grow from January at the pace it had in Biden’s last year in office.  Had that growth continued as it had under Biden, there would have been 1.2 million more jobs in the economy as a whole by November 2025 than in fact there were.

The turnaround from the robust growth in employment under Biden has been remarkable.

This post will focus on the job numbers as well as what has happened to the average wages paid to employees.  Both come from the Current Employment Statistics (CES) survey of the Bureau of Labor Statistics.  The CES data come from a sample of employers reporting to the BLS on the number of workers on their payroll at mid-month and the wages paid.

A follow-up post on this blog will examine the figures in the BLS report that derive from its survey of households – the Current Population Survey (CPS).  Figures on unemployment, characteristics of workers (such as age and race), and related issues can only be identified at the household level and thus come from the CPS.  The survey was not undertaken in October due to the government shutdown – so no estimates will ever be available for October – but the survey resumed in November and figures are now available for that month.  They also show a weakening labor market.

The first section below will look at the growth in total employment under Trump compared to what it was in the latter part of the Biden administration.  Early in the Biden administration (2021 and 2022), employment growth was far higher as the economy recovered from the sharp downturn in the last year of Trump’s first administration during the Covid pandemic.  But even when compared to the more steady growth in an economy already at full employment in the latter part of the Biden administration – as we will do here – Trump’s record is poor.

The section that follows will then examine what happened to the growth in average nominal and real wages of workers on employer payrolls.  While still growing – as they had under Biden – that growth slowed under Trump.  The penultimate section of this post will then look at the assertion made by Trump administration officials that BLS data show employment of native-born Americans soared in 2025.  They are wrong.  As numerous analysts pointed out already last August – when Trump officials first started to make this claim – the officials do not understand how the BLS figures are estimated.  As one of them – Jed Kolko – noted, their mistaken assertions “are a multiple-count data felony”.

A concluding section will compare what the new BLS figures actually show to what a White House press release asserted they show.  While one can expect any White House press release will try to put a favorable spin on newly released figures, the contortions they had to go through here are amusing.  In the end, they could only make up assertions that are simply not true.

As I was finalizing this blog post, the BEA released (on December 23) its first estimate of GDP growth for the third quarter of 2025 (i.e. July to September).  The estimate was of growth in real GDP of 4.3% at an annual rate when measured by the demand components of GDP – the measure that most people focus on.  Real GDP was estimated to have grown at a 2.4% rate when measured by the income components of GDP (with this measure of GDP referred to as Gross Domestic Income, or GDI).  In principle, the two measures (GDP and GDI) should come out exactly the same, as whatever is produced and sold will be someone’s income.  But typically they do not due to measurement error and statistical noise.  The 4.3% growth rate is certainly high, and the highest since the third quarter of 2023 when real GDP grew at a rate of 4.7%.  Estimated inflation in the third quarter of 2025 was also high, with the price index for GDP rising by 3.8% at an annual rate – up from 2.1% in the second quarter and 3.6% in the first, and the highest since 2023.  The core Personal Consumption Expenditures price index (i.e. the price index excluding food and energy items) rose at a rate of 2.9% – an increase from the 2.6% rate in the second quarter and above the Fed’s target rate of 2.0%.

This high rate of real GDP growth (when measured by the demand components of GDP) is especially surprising given the lack of significant growth in employment.  For a proper comparison, one should compare the growth in GDP to the growth in average employment in the third quarter (the average number employed in July to September) over that in the second (the April to June average).  Between those periods, average employment rose by 0.2% (at an annual rate).

No one really knows why this first estimate of GDP growth in the third quarter was so much higher than the growth in employment in that period.  With labor productivity growth of 2% per annum (not far from the long-term average in the US before around 2008), then to get real GDP growth of 4% would require additional employment of about 2% (using rounded figures).  But as noted, employment grew only at a rate of 0.2% in the third quarter.

There are many possible reasons.  I may put up a post on this blog to discuss such issues, and on the new GDP report more broadly.  This current blog post will remain focused on what has happened to employment this year.

B.  Growth in Employment

Chart 1 at the top of this post shows average monthly growth in total employment since May 2023 and in the monthly average outside of the health and social assistance sector.  Growth from the May 2023 date was chosen as the unemployment rate reached a trough in the prior month of just 3.4% of the labor force – the lowest unemployment rate in more than 50 years.  The economy was then at essentially full employment through the end of Biden’s term.  Four-month averages are taken to smooth out the normal month-to-month fluctuation in the figures (due in part simply to statistical noise), with a three-month average for the September to November 2025 figures.

The figures come from the CES survey of employers on the number of employees on their payroll (as of the payroll period that includes the 12th day of each month).  The survey does not include those employed in the farm sector.  Thus the figures are more properly referred to as the “nonfarm payroll”.  But since agriculture employees account only for 0.8% of the labor force (based on CPS numbers), the difference – especially when looking at month-to-month changes in employment – is not significant and is typically ignored.  Of much greater significance is that the nonfarm payrolls also exclude the self-employed in unincorporated enterprises.  The self-employed account for 6.0% of the labor force (based again on CPS data).  One cannot know if they are self-employed by choice or because they cannot find a job on some firm’s payroll.

Employment growth during Biden’s term in office was high.  Total employment grew at a rate of 603,000 per month in 2021 and 380,000 per month in 2022 as the economy recovered rapidly from the downturn in the last year of Trump’s first administration.  But setting this aside and limiting the analysis to job growth during Biden’s term in office from May 2023, employment grew at a good and sustainable pace under Biden.  Total employment grew by 1.3% in 2024, in the last year of Biden’s term.

Employment growth then fell sharply under Trump, especially since May.  This is seen in Chart 1 at the top of this post.  Overall job growth in the economy as a whole fell from 217,000 per month in September to December 2024 under Biden, to 123,000 per month in January to April 2025, just 13,000 per month from May to August, and 22,000 per month from September to November.  And more than all of the growth in 2025 was due to growth in the health and social assistance sector.  Other than in just this one sector, job growth fell from 138,000 per month in September to December 2024 under Biden, to 56,000 per month in January to April 2025, and then to a fall of 48,000 per month from May to August and again a fall of 40,000 per month from September to November.

Trump’s policies of high tariffs and other measures have also failed in their stated aims of raising employment in the manufacturing sectors and in particular in the motor vehicles sector.  Jobs in manufacturing fell by a total of 58,000 between January and November 2025, while jobs in the motor vehicles sector fell by a total of 15,000.

Trump’s press people have also been proud to assert that “100% of the job growth” under Trump “has come in the private sector”.  It is true that job growth – such as it was – was greater in the private sector than in the economy as a whole (i.e. including the public sector).  But the reason is that while the growth in private sector jobs fell in the first ten months of Trump’s term in office by 45% compared to what it was during Biden’s last ten months in office, total employment in the economy as a whole fell by an even greater 68% under Trump:

Chart 2

It is not clear why this is a record one should be proud of.  It is true that public sector jobs – particularly in the federal government – have fallen under Trump.  This was a consequence of the chaotic federal job cuts that Trump empowered Musk and DOGE to force through.  But the federal workers who were dismissed have not been able to transition easily to private employment in a robust job market.  Private employment grew at a far slower pace than it had before.

Another issue to consider is the extent to which Trump’s policies to deport migrants in the US and block new ones from entering the country may account for some share of the reduction in employment in 2025.  There is little doubt that it accounts for some share of the fall, but when one looks at the numbers, it is clear it can only account for a small share of it.  There is also no indication that the reduction in the number of migrants employed led to greater employment of native-born Americans – at least at the aggregate level.  The unemployment rate for native-born Americans rose in 2025.  It did not fall, as it would have if migrants taking jobs had kept native-born Americans from finding employment.

I will address these issues related to migrants in the labor force in the penultimate section below.  But first, we will look at what has been happening to the growth in nominal and real wages under Trump.

C. Nominal and Real Wages

In addition to the employment figures, the CES survey of employers gathers data on the average wages paid by the surveyed firms.  From this the BLS can calculate what has happened to average nominal wages.  Coupled with estimates for inflation (the CPI – also estimated by the BLS), one can then obtain an estimate of what has happened to average real wages.

By definition, such changes need to be measured over some period of time.  Using changes over the same month one year earlier, one has:

Chart 3

Over this period, average nominal wages over the same month in the previous year grew at a pace of between 4.0 and 4.2% in the period leading up to the end of Biden’s term in office.  In more recent months, that growth has slowed to a pace of 3.5% to 3.7%.  The change is not huge, but it is on a declining trend.  The 12-month increase in the CPI has varied more – within a range of 2.4 and 3.0% over the period – going up some over the 12 months ending in January 2025, then declining in the 12 months ending in March to May, and then rising again.  The 12-month increase in real wages – the combination of the changes in nominal wages and in inflation – has since May been on a falling trend.

A few cautions should be noted regarding the recent data.  First, no CPI data was collected for October 2025 due to the government shutdown.  For the calculations here, I assumed the CPI index for October was simply the average of the estimates for September and November.  Second, analysts have noted that the November data for the CPI should be treated cautiously as it may be biased low.  The figure published indicated inflation as measured by the overall CPI was 2.7% over the year-earlier period, when most analysts were expecting an increase of 3.0 or 3.1%.  Two main issues have been highlighted.  First, some specialists on such data believe that inflation in the Shelter component of the CPI (which accounts for 35% of the overall CPI index) may have been underestimated due to an assumption (possibly implicit) of zero inflation in October in the Owners’ Equivalent Rent of Residences component of Shelter (accounting for three-quarters of the Shelter index).  No data had been gathered for October due to the government shutdown, but whatever it may have been was almost certainly not zero.

Second, field data on prices only began to be collected on November 14, when the federal government reopened.  That meant that the November data used to estimate inflation came only from the second half of the month.  That meant that a higher than normal share of the prices would have come from a period when many items are on sale due to the holidays (Black Friday and such).  While seasonal adjustment factors for November would normally take into account the late November sales, they would have undercompensated this year as the historically determined seasonal adjustment factors are estimated for the month as a whole, not just for the second half of the month.  That is, had the BLS been able to collect data over the full month rather than just the second half, the resulting inflation estimate may have been higher.

It is difficult to know how significant these possible biases in the CPI data might have been.  But while we cannot estimate the magnitude, they point in the direction of a higher rate of inflation.  At a higher rate of inflation, real wages in October and November grew by something less than what is shown in Chart 3 above.

But even without such corrections, real wages have not been rising as fast as they were before.  They are still increasing, but at a somewhat slower pace.  That pace has certainly not risen.

D.  The Impact of Immigrants

One factor that will account for a share of the lower employment figures in 2025 (relative to the trend under Biden), will be the reduction in immigrant labor due to Trump’s aggressive policies on migration.  Immigrants resident in the US (often long-time residents in the US) are being deported, while new immigration is being blocked (other than by White South Africans).

A first question is how large an impact this might have.  It is difficult to come up with hard data on this, but perhaps the best estimate can be found in a study published by the American Enterprise Institute (a center-right think tank in Washington, DC).  It came out in July 2025 and is thus a forecast of what net migration may be in the context of Trump’s new policies.  Estimates are provided for 2025 as well as the next several years.

It provides its estimates as a range.  For 2025, it estimates that net migration may be somewhere between net outward migration of 525,000 and net inward migration of 115,000.  That is a broad range, but gives a sense of what the magnitude may be.  One must then make several adjustments.  First, multiplying by 11/12 as November is the 11th month of the year, the range would be (with all figures rounded) net migration of – 480,000 to + 105,000.  Second, these are figures for the total number of migrants, not just those employed.  It will include spouses, children, university students, retirees, and others not seeking employment.  Among adults, the labor force participation rate has been around two-thirds.  Adjusting for children, the share is likely less than half.  Assuming one-half, the range is then – 240,000 to + 52,500, with a mid-point of – 94,000.

That is, with Trump’s policies in place, the net outmigration of workers in 2025 may be on the order of perhaps 100,000, although perhaps up to 240,000 or even a net inmigration of 94,000.  While not trivial, these figures are small compared to the reduction in employment of 1.2 million that one has seen under Trump (through November) compared to what it would have been had employment continued to grow as it had during Biden’s last year in office.  And 100,000 fewer workers is just 0.06% of the US labor force of over 171 million.

Net outmigration of that magnitude – or even several times that magnitude – is too small to have a major impact on the number of native-born American citizens employed.  Further, the unemployment rate of native-born Americans has been rising in 2025 rather than falling – from a rate of 3.8% in November 2024 to a 4.3% rate in November 2025.  This will be discussed further below.

There is thus no evidence at the macro level that employing fewer migrants has led to an observable increase in employment of native-born American citizens.  What has happened instead under Trump’s policies is that some number of migrants – who had been working at jobs and paying their taxes (including Social Security taxes, even though they will not be eligible for Social Security benefits) – will no longer be producing goods and services for the American economy.  That work – at the overall level – is just not being done.

Trump administration officials have nevertheless repeatedly claimed that BLS data can be used to show that the number of native-born Americans employed jumped dramatically in 2025.  They are wrong.  They do not understand how the BLS data are constructed.  Jed Kolko, a senior fellow at the Peterson Institute and who has explained their error in detail, has called those assertions a “multiple-count data felony”.

A full explanation will not be provided here.  It is a technical issue, and a mistake that non-specialists can make if they are unfamiliar with how the BLS estimates are constructed.  Dean Baker provides an easy to follow explanation of the issues here ahd here, while Jed Kolko explains the issues in more detail here and here.

Briefly, the figures often cited (incorrectly) come from the standard Table A-7 of the BLS monthly Employment Situation report.  That table provides figures from the CPS survey of households for native-born citizens and separately for the foreign-born (whether citizen or not) on the adult population, the number in the labor force, the number employed and unemployed, those not in the labor force, and the unemployment rate as well as the employment/population ratio.

The issue arises because the population controls to go from the survey results to the aggregate figures for the adult population as a whole are set annually and then not changed.  These controls for the total adult population (native and foreign-born together) come from the Census Bureau, and it is then forecast to grow at some steady rate from month to month over the year from the figure fixed in January.

There are then two major problems.  One is that when the population control figures are updated each January, the BLS does not go back to revise the CPS estimates (on anything) in the prior year.  Thus the BLS clearly warns people not to make comparisons of figures on totals (such as the number employed) from one year to the next (such as between November 2024 and November 2025).  In contrast, the number employed in prior years in the CES estimates – the nonfarm payroll estimates – are revised each January when the population and other controls are updated.  That is why figures such as those above in Charts 1 and 2 are comparable over time.

The second major issue is that the BLS estimates the number of foreign-born in the adult population from figures obtained through the CPS, and then calculates the number of native-born by subtracting the foreign-born from the estimated population totals.  Thus if the number of foreign born respondents in the CPS household survey goes down in some month (which might happen because those in the household were deported, or were worried they might be deported if they responded honestly and hence decided either not to respond at all or to indicate they were native born – understandable given that the Trump administration has openly violated the confidentiality rules that are supposed to apply to such surveys), then the BLS estimate of the number of foreign-born in the adult population will go down.  And since the totals for the adult population derived from the Census Bureau figures each January are not changed (but rather grow from month to month at some pre-set level), a smaller estimate for the foreign-born population from the CPS responses will lead by simple arithmetic to an increase in the figure provided for the native-born population.

Year-to-year comparisons of the number of native-born Americans in the BLS figures can thus jump around and are not meaningful.  For example, between November 2024 and November 2025 the figure for the adult population of native-born Americans jumped by 5.3 million, or 2.5%.  The year before (November to November) it grew by 346,000, or 0.2%.  And the year before that by 1.9 million, or 0.9%.  In reality, the native-born population of adults in the US does not jump around like that from one year to the next.  As Kolko has said, to make such year-over-year comparisons in these BLS figures is a “multiple-count data felony”.  The error in such comparisons will carry over to comparisons across years in the labor force and employment figures.

As Kolko has noted, the most meaningful way to track what may be happening to the native-born and foreign-born populations in the labor market is to look at their reported unemployment rates.  These rates come directly from the household surveys, are independently determined for each, and will indicate whether employment prospects are improving or worsening.  An issue is that none of the figures in the BLS Table A-7 of its monthly Employment Situation report are seasonally adjusted.  Thus the month-to-month reported changes in the unemployment rates will vary due to seasonal effects.  It is better (although still not ideal) to compare the reported unemployment rate to that of the same month the year before.  And these have been going up in 2025 for native born Americans.  The November 2025 rate was 4.3%, up from 3.9% in Novermber 2024.

A seasonally adjusted series would be more useful to track the trends.  Jed Kolko has calculated an estimate of this for the unemployment rates of the native-born and foreign-born, using standard software for making seasonal adjustments from historical data.  The estimates he has released go through July 2025, and show a rising trend in 2025 (and since mid-2023 in his chart) for the unemployment rate of the native-born labor force.  While there is still a good deal of month-to-month fluctuation in the figures, the trend is basically the same from mid-2023 to mid-2025.  That is, Trump’s aggressive policies on immigrants have not affected this trend.

Trump administration officials continue to claim that the BLS data show that the employment of native-born Americans soared in 2025.  Despite analysts pointing out already last August the error in making such year-to-year comparisons in the BLS CPS data, Trump administration officials continue to make this mistake.  It would be understandable that originally they may have misunderstood the basis of the BLS figures.  It is a technical issue, and non-specialists would likely not be aware of it.  But by failing to correct their understanding of the issue once it was pointed out to them, their continued and repeated claims (most recently for the November figures) can only be viewed as moving from misunderstanding to misrepresentation to outright lying.

E.  Summary and Conclusion

The labor market has weakened substantially this year.  Employment had been growing at a good pace under Biden.  But in the first ten months of Trump’s second term in office, the country ended up with 1.2 million fewer jobs than there would have been had they grown at the pace achieved during Biden’s last year in office.  And if one excludes just the growth in employment in the health and social assistance sector, there were 134,000 fewer employed by November than there were in January, and 311,000 fewer compared to the number that were in April.

Trump’s deportations and other aggressive policies on migrants likely accounted for some share of this drop in employment.  But the fall in employment under Trump (relative to what it would have been had it continued to grow as under Biden) has been far more than can be accounted for by fewer migrants being employed.  And there is no evidence that fewer migrants being employed led to more native-born Americans being employed.  The unemployment rate of native-born Americans has gone up under Trump.  Furthermore, the growth in nominal and in real wages has diminished under Trump.  Deporting migrants did not lead to higher wages for those remaining.

Trump’s White House claims otherwise.  The White House press release issued on the day the BLS Employment Situation report for November was released opened by saying (in bold in the original):

“The strong jobs report shows how President Trump is fixing the damage caused by Joe Biden and creating a strong, America First economy in record time. Since President Trump took office, 100% of the job growth has come in the private sector and among native-born Americans — exactly where it should be. Workers’ wages are rising, prices are falling, trillions of dollars in investments are pouring into our country, and the American economy is primed to boom in 2026.”
— White House Press Secretary Karoline Leavitt

Breaking this down by phrase, with then what has in fact happened:

The strong jobs report shows how President Trump is fixing the damage caused by Joe Biden and creating a strong, America First economy in record time.:  Not true.  Job growth was substantial under Biden, and this growth then collapsed under Trump.  By November, there were 1.2 million fewer jobs under Trump than there would have been had growth continued at the pace it had in the last year of Biden’s term.

Since President Trump took office, 100% of the job growth has come in the private sector:  The growth in private sector jobs was 45% less in the first ten months of Trump’s second term in office than it was in the last ten months of Biden’s term in office.  Private job growth was greater than job growth in the economy as a whole (including the public sector) only because that growth fell by an even greater 68% under Trump.  This is not a record to be proud of.

and among native-born Americans — exactly where it should be.:  As explained in Section D above, this conclusion is based on a mistaken understanding of how the BLS figures on employment of the native-born and the foreign-born are estimated.  Such year-to-year comparisons are not meaningful.  What we do know from the BLS figures is that the unemployment rate of the native-born labor force has gone up in 2025.

Workers’ wages are rising,:  They are rising at a slower rate than they were during the Biden administration.

prices are falling,:  No.  Prices are rising.

trillions of dollars in investments are pouring into our country,:  While not something addressed in the BLS report, this reference is to promises made by various countries – as part of their trade negotiations with the Trump administration – to increase their investment into the US.  Figures “promised” range up to $1.4 trillion (by the United Arab Emirates), $1.2 trillion (by Qatar), and $1.0 trillion (by Japan), along with promises from other nations as well.  The investments would largely be made by private firms from the respective countries, even though it is not clear how public officials can commit their private firms to make investments of the magnitude promised.  The time frames are also not always clear.

There is no evidence that such investment is “pouring into” the US.  They are certainly not “pouring into” new fixed investments being made.  Total private fixed investment expenditures in the US from all sources (almost entirely domestic) were only $126 billion higher in the first three-quarters of 2025 than they were in the last quarter of 2024.  This is far from “trillions” even if it were entirely by foreign investors (which it was not).  Unless the vision is that foreign investors will displace domestic American investors – and take over control of the American economy – foreign investment of such magnitude will never happen.

Nor is it something most would want.  Recall the worries in the late 1980s (such as depicted in the popular book and movie Rising Sun) that Japanese investment would soon take ownership and control over significant assets in the US.  Recall also the concerns that arose after Japanese investors had purchased existing assets such as Rockefeller Center, Columbia Records, and the Pebble Beach Golf Course.

If anything close to the scale of investments by foreign firms the Trump White House is citing eventually materialize, the Japanese investment in the late 1980s will look puny.

Furthermore, for such foreign investment into the US to materialize on anything close to the scale the Trump White House is claiming, the trade deficit of the US would have to increase sharply.  This is the exact opposite of the claim that the negotiated trade agreements will lead the US trade deficit to go down.  Foreign investors will only be able to get the dollars to make the additional investments in the US if the US imports more from others.  This illustrates the confusion and lack of coherence in the Trump administration’s trade policies.

The discussion is, however, academic.  There will never be anything close to an increase in foreign investment into the US at the scale being claimed.

and the American economy is primed to boom in 2026.:  That remains to be seen.

Not a Good Jobs Report – And Firing the Messenger Will Not Help

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Chart 1

Update – August 5, 2025:  In the initial version of this post, I mistakenly said that businesses are required by law to participate in the Current Employment Statistics (CES) survey of the Bureau of Labor Statistics (BLS) – the survey that the BLS jobs numbers are based upon.  This is not correct.  While participation is required in certain states under state laws, there is no federal law on this.  The post below has been corrected to reflect this and has added material on the participation rates.  

On August 1, the Bureau of Labor Statistics (BLS) released its estimate of net job growth in July.  The news was not good.  Net job growth in July was just 73,000, where growth in the number of jobs in health care and social assistance alone came to 73,300.  That is, net job growth for everything else was essentially zero, indeed negative.

But more surprising and concerning than the disappointing growth in July, the updated BLS estimate of total job growth in May was reduced by 120,000 to just 5,000, while the estimate for June was reduced by 133,000 to just 14,000.  The initial job growth estimates for May and June were a healthy 139,000 and 147,000, respectively.  Now, both figures are close to nothing.

Revisions to the monthly job estimates are both automatic and routine.  The BLS always revises the estimates for the most recent two months as each new monthly report is released, as it updates its estimates based on more complete data sent to it by employers who are covered in its Current Employment Statistics (CES) survey.  The CES sample includes approximately 121,000 businesses and government agencies at approximately 631,000 individual worksites – covering a total of about one-third of all nonfarm payroll jobs.  The BLS estimates then rely on timely reporting from these employers.

Participation by employers who have agreed to take part in the survey is high.  While not mandated by federal law (although it is in certain states by state law), approximately 94 to 95% who have agreed to be part of the survey then respond by the time of the final release of the employment estimates (based on response rates over the past year).  But not all respond immediately, and some cannot.

The figures reported are of the number employed by the establishment at some point during the payroll period that covers the 12th day of each month.  These are reported along with figures on the compensation paid by the firm (in dollars) and the total hours worked (and separately the total overtime hours worked).  The firm will not know what these will be until the payroll period is over.  If the payroll period is one week, or even usually two weeks, the firm should be able to file its report (which is normally done online) in time for its data to be included in the initial estimate of employment that the BLS issues each month.  But if the payroll period is for the full month, then by definition the BLS will not have that firm’s data in time for its initial employment estimate of that month.  The BLS thus issues a revised estimate the next month, and then also the following month, as further data arrives.  This is all standard.

The BLS does, however, arrive at an estimate each month for total employment – despite still having only partial reports from its survey – by imputing values for the missing data based on past patterns and relationships.  On average those initial estimates are very good, with the later revisions sometimes higher and sometimes lower.  The average revision since 1979 has been less than 0.01% of the number employed.  In absolute value terms (i.e. in terms of just the revisions themselves, not whether they were positive or negative), the average revision was a still very small 0.05%.

The BLS thus updates its job estimates for any given month at the time of its next monthly report and then again at the time of the monthly report after that, based on the more complete reports it has received by then.  There is also an annual revision of the monthly figures, issued each January, based on updated control totals for overall employment and its composition broken down by such factors as the size of the firm, the sector, and so on.  These control totals are obtained from periodic census information.  The process followed for that annual revision was described in an August 2024 post on this blog.

All this is standard and routine, and follows a methodology that was developed years ago.  Furthermore, it is automated and done by computer, with only a cursory review of the numbers by staff at the end.  The BLS is also fully transparent on the revisions it makes.  One can find on this webpage on the BLS site all the monthly revisions (from both the initial estimate to the second, and from the second to the third), month-by-month, back to January 1979.

Trump paid no attention to this.  Faced with the reality of disappointing jobs numbers for the last several months, Trump decided that the best course of action was to shoot the messenger.  He fired the well-respected and professional head of the BLS, Dr. Erika McEntarfer, asserting (with a clear lack of understanding) that McEntarfer was somehow manipulating the numbers for political reasons.  Trump had also asserted in August 2024 that the BLS under Commissioner McEntarfer had manipulated the annual revision of the benchmark control totals released at that time (which happened also to be a downward revision).  The control totals are released every August, prior to the detailed sectoral and monthly figures then released in the coming January.  See my August 2024 blog post on that episode.

Trump also does not understand that the revisions – while significant – are far from unprecedented in size.  The chart at the top of this post shows the revisions to the monthly figures (defined as the difference between the third estimate and the first, with the sole exception for the June 2025 estimate which is between the second estimate and the first), as a share of the overall number employed in the economy.  It is shown as a share of total employment in order to make meaningful comparisons over time, as there are now 80% more employed in the US than there were in 1979.  The figures for May and June 2025 are shown in red at the far right in the chart, although the red may be hard to see.

The first thing to note from the chart is how small the revisions mostly are, especially over the last quarter century.  Unless there are major economic disruptions underway or soon to be underway (such as from the Covid crisis in 2020 and the recovery from it in 2021, from the 2008/09 Great Recession, and earlier in the years at the end of the Carter presidency and the first term of Reagan, when the economy went through two separate recessions), the range of the revisions is almost always well less than +/- 0.1% of the number employed.  This is extremely small.  Keep in mind that the BLS arrives at its estimates of total employment each month from a zero base, where it asks its (rather large) sample of business establishments how many people they currently employ.  The estimates are not based on a survey asking, for example, what the change in employment at their establishment may have been.

The May and June 2025 revisions were reductions in estimated employment of 0.075% and 0.083% of total employment, respectively.  These were major revisions, but certainly far from unprecedented.  Plotting the revisions onto a histogram with bins of 0.05%, we have:

Chart 2

The May and June revisions fit into the -0.10% to -0.05% bin.  There were a total of 37 monthly cases that fit in that group in the 558 months from January 1979 to June 2025, and there were also 27 monthly cases where the reductions were greater.  That is, revisions similar in magnitude to, or greater than, those in May and June have happened in about 11% of the monthly cases since 1979.

There is no evidence that the BLS or its head Erika McEntarfer somehow manipulated these estimates to arrive at figures that Trump did not like.  Indeed, it would probably be impossible, given how automated the process is.  That does not mean, however, that a new Trump appointee to head the BLS would not be able, over time, to redesign the process in order to give Trump something closer to the numbers he wants.  This will need to be watched closely.

Until recently, the first groups that would be advised of any changes in its methodology that the BLS was considering would have been two advisory panels of outside professionals.  The panels were made up of individuals from universities, research institutes, and private businesses, who were impartial professionals and were not paid (other than for travel expenses).  Those panels – the BLS Technical Advisory Committee and the BLS Data Users Advisory Committee – were, however, dismissed in mid-March by the then new Trump administration.

There were concerns when the panels were dissolved that the Trump administration had plans to politicize the process by which basic economic data is gathered, with the aim of ensuring only flattering figures are released.  The firing of the Commissioner of the BLS appears to be a further step in that process.