The broader U.S. labor market is losing some of its heat. Changing conditions and enforcement Recent data released yesterday with the labor force participation rate dropping 3. Subscribers will have access to the story immediately. Over the course of the past month, the overall participation rate fell from 62.6% to 62.4%. This drop was most pronounced among those 55 and older, as well as among 20–24-year-olds. The prime-age participation rate has held firm at 83.5%. Economists are already forecasting an increase in the unemployment rate to 4.2%. Much of this uptick comes from a deceleration in the growth of labor supply, as noted, in large part due to shifts in immigration patterns that have normally powered this growth in the U.S.
Immigration has recently been a driver of U.S. labor market growth. This is a pattern that’s reversed very suddenly. A significant factor behind today’s labor supply growth slowdown is how changes to our immigration system have worsened the problem. On top of that, President Donald Trump’s tariff policies add to the budgetary pain, with tariffs expected to increase inflation and sicken economic growth. This means the trade-weighted average tariff rate on all U.S. imports has gone up an estimated 5.5 to 6.0 percentage points. This amendment would have a tremendously positive effect across all sectors of the economy.
In the international capital markets, the GBP/USD currency pair fell back into the red territory during the Monday’s European trading session. As investors have flocked to safe-haven assets, gold prices have recently skyrocketed. This increase occurs at a time when concerns are increasing about a global tariff war. These changes highlight the increasing turbulence in global trading relationships and their disturbing repercussions on the U.S. economy.
Even the February jobs report, which acknowledged recent layoffs related to the cryptocurrency DOGE, had little impact. This is all the more remarkable given the backdrop of continued widespread economic anxiety. While labor market readings suggest a steady slowdown in the flow of workers from outside the labor force into employment, there are still positive indicators to consider. The January Job Openings and Labor Turnover Survey (JOLTs) report was strong, with job openings increasing to 7.7 million. Moreover, the number of involuntary layoffs decreased for the fourth month in a row, falling to 1.6 million.
The drop in labor force participation, especially among older and younger workers highlights the demographic trends taking place within the labor force. As these younger and older age groups exit the labor market, employers are put in a bind. They need to reimagine their recruiting approaches to close emerging skills gaps and maintain their productivity edge.
Recent shifts in U.S. immigration policy have critically altered labor supply dynamics. Unlike in past years when immigration served as a major engine of growth in the workforce, these changes represent a historic break. This new change prompts both an exciting and daunting question of how employers will respond to a shrinking talent pool. Businesses will have to find new and more creative ways to draw in employees and keep them.
Ironically, President Trump’s tariffs have thrown a wrench into the prosperity they created. Raising costs for key imported goods due to these new tariffs will only raise inflationary pressures. Even worse, this change would introduce new hurdles for economic growth fortunes. Small businesses are already struggling with skyrocketing input costs. It is mysterious to us how they will navigate these competing pressures whilst retaining competitive pricing and ensuring profitability.
The effects of these tariffs reach far beyond our domestic markets, changing the global trade dynamics and the mood of investors. The ongoing negative movement of the GBP/USD currency pair. At the same time, gold prices soar, further illustrating how trade tensions are affecting trade and international financial markets more broadly. Amid a deteriorating outlook for global economic growth and escalating trade tensions, investors are heading to the safe-haven kettle, directing their monetary assets to gold.