America’s labour market is bracing for a sharp slowdown as President Donald Trump’s economic policies take their toll, with economists warning of a looming “Trump slump”.
Jobs growth in the US is set to collapse by almost two-thirds this year, according to forecasts from Capital Economics. The consultancy expects just 690,000 new jobs to be created over the next 12 months – 64 per cent fewer than the 1.9 million added across 2024, before Mr Trump entered the White House.
Bradley Saunders, economist at Capital Economics, said: “Outside of the pandemic, the last time jobs growth was this low over a 12-month period was during the recession caused by the global financial crisis.”
The figures mark a steep deterioration for the world’s largest economy. Growth of 690,000 jobs would put the market on par with 2010, when the US was still reeling from the fallout of the credit crunch.
Economists point to the combined effect of Mr Trump’s tariffs, his immigration crackdown and sweeping government cuts. These policies, they argue, have created uncertainty for employers, weakened sentiment, and triggered a slowdown in hiring.
James Knightley, chief international economist at ING, said: “Trump’s policies have contributed to a further deterioration in the labour market that was already underway. The numbers have been much weaker since he’s come into office. His policies have created a big headwind to growth and a big headwind to consumer and business sentiment. When you’ve got uncertainty, companies just naturally pull back on their hiring.”
The slowdown has already shown up in official data. Across 2024, monthly jobs growth averaged 161,000. But from May to July this year, that figure collapsed to just 35,000 – less than a quarter of last year’s pace.
The jobs numbers have become a sensitive issue for Mr Trump. Earlier this month, he sacked Erika McEntarfer, head of the Bureau of Labour Statistics (BLS), after the agency published significant downward revisions to previous jobs figures.
Mr Trump dismissed the data as “RIGGED in order to make the Republicans, and ME, look bad”, but economists point to mounting evidence that his radical agenda is weighing heavily on the economy.
Since his election win in November, the share of Americans expecting unemployment to rise has surged from 13 per cent to 49 per cent, according to the University of Michigan’s closely watched sentiment index. Such pessimism has not been seen since the global financial crisis.
Mr Knightley added: “Historically, this is consistent with private payrolls falling perhaps 200,000 per month, which is recession territory. Workers notice when there is a hiring freeze or when a couple of people are fired, and they start to fear broader action is coming – and unfortunately, it typically does.”
The slowdown is also exposing imbalances in America’s labour market. Over the past two and a half years, 90 per cent of all jobs growth has been concentrated in just three areas: healthcare and education, government, and leisure and hospitality.
This has left traditional engines of growth such as manufacturing and technology struggling to create meaningful employment. Now, economists warn, even those sectors that had been propping up job creation are coming under direct pressure from Mr Trump’s policies.
Cuts to Medicaid in the president’s latest spending bill threaten the healthcare industry, while budget reductions under his department of government efficiency are squeezing federal employment. Leisure and hospitality – one of the few areas of resilience – is already being undermined by a slowdown in consumer spending.
With growth faltering and confidence slipping, the risk of the US sliding towards recession is becoming harder to ignore. For businesses and workers alike, the promise of an economic revival under Trump’s presidency is increasingly being tested against the reality of a shrinking jobs market.
