Consumer confidence in the American economy is reversing course amidst significant policy changes from the Trump administration. Recent measures, including massive tariffs on the country's three biggest trading partners, have heightened business uncertainty. The administration's shock-and-awe approach also features a reduction in the federal workforce and promises of mass deportations of undocumented immigrants. This climate of volatility, especially concerning trade, is leading businesses to reconsider hiring new workers.
New data from the Federal Reserve Bank of New York reveals that surveyed businesses anticipate rising costs and inflation by 2025. This expectation accompanies a notable shift in consumer behavior. Consumer sentiment has plummeted, inflation expectations are on the rise, and overall spending has decreased for the first time in nearly two years. Such developments signal apprehension among consumers, who are typically pivotal drivers of economic activity.
Private-sector employment saw an estimated increase of 77,000 jobs in February, according to payroll giant ADP. However, this figure reflects slower growth in contrast to previous months. Pay gains for workers who remained with their employers held steady at 4.7%, while those who switched jobs experienced a slight decrease, with gains easing to 6.7%. These statistics underscore an atmosphere of caution and restraint within the labor market.
"Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month," said Nela Richardson, chief economist at ADP.
The Trump administration’s frenetic policy changes are contributing to increased hesitancy among U.S. businesses regarding workforce expansion. The combination of aggressive trade tariffs and broader economic policy adjustments is prompting companies to reassess their strategies amid an unpredictable economic landscape.