Job market softens during first month of Trump administration

San José, CA – On Friday, March 7, the Department of Labor released its report on the job market in February. This is the first report based on the labor market in the first weeks of the new Trump administration. Overall, the job market looked a little softer; job creation was a bit less, at 151,000 rather than economists’ expectations of 170,000 net new jobs. The unemployment rate also ticked up to 4.1% from 4.0% in January.

The first crack was a drop in the labor force participation rate, meaning that fewer people were working or looking for work. The 0.2% drop, while small, would have increased the unemployment rate by the same percentage, to 4.3% if those who stopped looking for work kept looking.

A second crack was the very large increase in the number of people who reported working part time because they couldn’t find full-time work, which increased by 460,000 people. This number boosted the broadest measure of unemployment, which includes these involuntary part-time workers, along with those who gave up looking and those who want to work, but just didn’t look in February, to 8%. This was the highest level since October of 2021, when the economy was recovering from the 2020 recession.

In the report, the federal government also shed 10,000 jobs in February. The report is based on a survey taken during the second week of the month, which was before Elon Musk and his Department of Government Efficiency (DOGE) took a chainsaw to federal workers. February’s loss, which was the biggest in over three years, is most likely because of the federal government’s hiring freeze that began on day one of the new administration. But the report on March and April is likely to show much larger losses, dragging down future jobs numbers. Besides the direct loss of federal jobs, a roughly equal number of private sector jobs could be lost as Musk’s DOGE canceled payments to many government contractors, including for work already done – a tactic that Trump was infamous for in his business as he tried not to pay contractors for work already completed.

In another warning of future weakness, job cut announcements came to more than 170,000 in February. This was double the rate of a year ago, and the largest amount since July of 2020, right after the recession.

Last but certainly not least, future tariff increases by the Trump administration are coming in hot and heavy for the next month. These include 25% tariffs on aluminum and steel for all countries on March 12. Then in April, the 25% tariff on Mexican and Canadian cars and other products meeting the United States-Mexico-Canada Agreement (USMCA) standards for North American production will go into effect.

On April 2, Trump will get a report on all other countries’ tariff rates, which will be inflated by including non-tariff taxes such as value-added taxes, or VATs. Trump has threatened to match these “tariff” levels, which are all higher than the U.S. which does not use the VAT.

Trump has also threatened, without a date or rate, to impose tariffs on copper, cars, semiconductor chips, medical drugs, and countries with taxes on digital services. The latest is that he has threatened 250% tariffs on Canadian lumber and dairy exports to the United States.

Next week, the monthly report on consumer prices will come out. While most of Trump’s tariffs were not implemented in February, except of a 10% tariff across the board on imports from China, the inflation rate is expected to rise as businesses raise prices in advance of tariffs.

Besides boosting prices, Trump’s tariffs will act as a drag on the economy. The auto industry will be especially hard hit, as the integrated supply chains between Canada, Mexico and the United States start to unravel. Everything that uses aluminum will be hit, with 45% of U.S. aluminum coming from Canada alone. Canada also supplies almost a third of all lumber used in the United States, which will raise costs and slow construction of new homes.

If left unchecked, Trump’s tariff tantrums will go from accelerating the economic decline of the United States to pulling at the very fabric of the globalized U.S. economy.

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