Financial FAQs
“Despite the strong economic growth we saw in the second quarter, this month's release further validates what we've been seeing in the labor market, that U.S. employers have been cautious with hiring. ADP
That’s one way to characterize the U.S. Economy. But it’s Trump and his Republicans’ economy now, no matter what happens next. The government shutdown that began on October 1 will have little effect on economic growth, regardless of who is blamed for it, according to most economists.
ADP, a private payrolls processor, reported September was the third month in a row that businesses eliminated jobs. Small and medium-sized companies lost jobs, while companies with more than 500 employees gained 33,000 jobs, mostly in healthcare and education.
It is the only employment report we may have for a while, since the Labor Department says that September’s official US unemployment report will be postponed because of the government shutdown.
The decline in job availability is beginning to affect consumers, reports the Conference Board’s Consumer Confidence Survey:
“Consumer confidence weakened in September, declining to the lowest level since April 2025,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “Consumers’ assessment of business conditions was much less positive than in recent months, while their appraisal of current job availability fell for the ninth straight month to reach a new multiyear low.”
It’s no wonder the Federal Reserve finally cut interest rates two weeks ago for the first time since last December, and two more cuts are scheduled for this year.
The government shutdown will make things even worse, since employees will be either furloughed, or must work without pay in its most essential functions like the military, social security, Medicare, and Medicaid.
About 750,000 federal employees could be furloughed every day, according to a Congressional Budget Office estimate out Tuesday, cited my MarketWatch’s Victor Reklaitis. “The number of furloughed employees could vary by the day because some agencies might furlough more employees the longer a shutdown persists and others might recall some initially furloughed employees,” the CBO said.
Yet inflation continues to rise with the latest Personal Consumption Expenditures (PCE) core index reporting a 2.9% inflation rate, up from its low of 2.4% in the spring.
And the manufacturing sector has been contracting for seven months, reports the Institute for Supply Management (ISM). The index of future sales orders has declined in seven of the last eight months.
“We believe we are in a stagflation period where prices are up but orders are down due to tariff policy, and, again, customers are not willing to pay the higher prices, so they are just not buying,” said one executive in the transportation sector, also cited by MarketWatch.
So, the stagflation term is rearing its ugly head once again. What a time for another government shutdown as happened during Trump and Republicans first term! It lasted 37 days and this one will create even more uncertainty with the looming tariffs.
Guess what that means for more stagflation? Fewer jobs mean consumers have less purchasing power. They have continued buying until now because most tariffs are still being negotiated, hence the current effective tariff rate is still in the teens.
But sooner or later Trump will reach agreement on the tariffs, since they still must be ratified by congress.
The Trump administration has really little room to maneuver to keep the U.S. economy from shrinking. It has added an average of just 25,000 new jobs a month from May through August after the benchmark revisions, marking the weakest four-month stretch since 2010, ignoring the COVID-19 era.
We don’t need another prolonged government shutdown or another Great Recession, in other words. Nobody wins.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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