“Total nonfarm payroll employment rose by 151,000 in February, and the unemployment rate changed little at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment trended up in health care, financial activities, transportation and warehousing, and social assistance. Federal government employment declined.” BLS
The February payroll numbers were somehow comforting because of the looming ‘R’ (recession) fears. There was not the sudden halt in hiring that many economists feared because of Trump's on and off tariff announcements and ‘chainsaw Musk’s” indiscriminate (and mostly illegal) firings of government workers.
Fewer new jobs have been added to payrolls even before Musk’s machinations, as can be seen from the decline in FRED’s payroll formation graph through February before his firings took effect. It’s partly because companies don’t know what to expect. But I will make a prediction that things won’t get better unless Republicans better understand the budget making process.
We know this because the five recessions and record budget deficits since 1980 have all occurred during Republican administrations. That is why most of the Republican-controlled red states are the poorest states, many with no minimum wage of their own.
And there are also real signs that consumers that make up 60 percent of economic growth have exhausted their savings and become more pessimistic.
The real tragedy is that Republicans don’t have to act so callously. The Trump/Musk induced chaos is intentional, since they aren’t bothering to negotiate with anyone—such as congress that created most of the agencies being affected, the employee unions, or even checking with the courts beforehand to see if it is legal.
The Clinton administration did it the right way by negotiating with the parties affected and stringing out the job cuts over years, as I’ve said before, thereby handing off four years of budget surpluses to GW Bush, who promptly wasted them with unpaid tax cuts and the wars on terror.
We also know that Americans have been very lucky with the unemployment rate at or below 4 percent for more than two years. What is confusing consumers and small businesses in particular is why Trump and Musk are so acting so unnecessarily unpredictable with the growing public blowback, confusing everyone as to their motives.
One clue is that both Trump and Musk are autocrats who don’t like to consult with anyone but themselves, hence the yes-men and women they surround themselves with.
But why do Republicans follow so docilely when Musk is cutting spending or eliminating programs in their districts and states? Part of it is an almost complete ignorance of economic principles. For instance, tax cuts only boost the wealthiest incomes if they aren’t paid for—or paid by cutting the social safety net of Medicare and Medicaid that service the poorest.
The unemployment rate crept up to 4.1% in February from 4.0% in the prior month, largely because some 588,000 fewer people said they were employed in February, the U.S. Bureau of Labor Statistics said. That's the biggest one-month decline in 14 months, per MarketWatch’s Jeffry Bartash.
We are nearing the end of this post-pandemic business cycle as well. Morningstar, the rating agency, attributed the hiring slowdown to lower economic growth in general.
“At the industry level, the slowdown in hiring in the past three months has been driven by government (payrolls slowing from 3.4% to 1.6% growth) as well as construction and real estate (payrolls slowing from 3.5% to 1.4%).”
We are now in fact seeing a drop in job formation that is sure to continue—January added just 146,000 jobs, and there is a federal government hiring freeze that will affect state hiring as well.
It’s also not surprising that construction job growth is slowing, as high interest rates are causing a renewed slowdown in housing and as well as nonresidential construction, which shows up in the GDP.
Interest rates are falling again with the growing signs of economic weakness, such as the big drop in first quarter 2025 growth expectations—now down to -2.8 percent, when earlier estimates were as high as + 4 percent GDP growth in Q1.
What’s more, data released Wednesday from the Mortgage Bankers Association showed that mortgage rates hit their lowest levels since early December 2024 when the FHA rate dipped to 6.42%, which in turn led to a 20.4% increase in mortgage applications.
Lower interest rates are really the only event that would continue economic growth this year, and encourage more Federal Reserve rate cutting, but only if Trump’s tariffs don’t give a big bump to import prices and inflation.
Fed Chair Powell wouldn’t hint at the Fed’s future actions in a speech for the U.S. Monetary Policy Forum. “The White House is in the process of implementing significant policy changes in four distinct areas; trade, immigrations, fiscal policy, and regulations…It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy.”
However, the Trump administration is showing woeful ignorance in the four areas Powell spoke about, as well not knowing how to balance or pay down the federal budget.
So, it looks like we could probably muddle through the next four years, as we did during President Trump’s first term; without a discernable economic plan other than more tax cuts. And, whether Musk’s chain saw doesn’t wreak too much havoc on the government bureaucracy that makes everything work.
Harlan Green © 2025
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