“…while the economy is growing thanks to AI spending, it’s a K-shaped expansion: People who were already affluent are becoming more so, but the less well-off are under severe pressure.” Paul Krugman
The delayed U.S. unemployment report for September was good old news. It showed 119,000 nonfarm payroll jobs were created, though the unemployment rate edged up to 4.4%. But that was before the government shutdown.
And the U.S. had already lost -13,000 nonfarm payroll jobs in June and -4,000 jobs in August. The U.S. economy has averaged just 38,600 new jobs per month through September since Trump announced the April 2 retaliatory tariffs, as employers haven’t been hiring while they wait see what the final tariff rates (and therefore costs) might be.
The October employment report has been canceled because of the government shutdown and the November report will come out late, depriving the Federal Reserve of critical information before its next meeting to decide whether to cut interest rates again. Both reports were postponed by the 43-day government shutdown that lasted from Oct. 1 to Nov. 12.
So the November employment report will be published on Dec. 16 instead of Dec. 5 as originally scheduled, per the BLS. An estimate of employment for October will be included in the November jobs report. It’s thought that up to 100,000 more government jobs may have been lost in October due to firings or attrition.
It is a K-shaped jobs report, as Nobel Laureate Krugman stated. This is why hiring has stagnated at such a low level since April. Jobs are being created in the lower-paying service sector, whereas the industrial sector and governments are losing jobs.
Employment in food services and drinking places continued to trend up in September (+37,000). In September, social assistance employment continued to trend up (+14,000), reflecting continued job growth in individual and family services (+20,000).
Employment in transportation and warehousing declined by 25,000 in September as job losses occurred in warehousing and storage (-11,000) and couriers and messengers (-7,000). Federal government employment continued to decline in September (-3,000) and is down by 97,000 since reaching a peak in January.
That means the more affluent consumers continued to dine out and could afford more health care services, which is now the fastest growing segment of the economy, as I said.
So the economy is k-shaped because just 10 percent of American consumers are keeping the economy from contracting, because they now own more than 50 percent of assets, according the latest Federal Reserve data—in housing, pensions, and financial assets. And the stock market is still booming.
But small businesses that employ the most workers aren’t hiring because more than 90 percent of them are dependent on imported goods that Trump has targeted with his higher tariffs. We won’t see its effect on economic growth until the fourth quarter and beyond.
If employers aren’t hiring, what is causing the predictions for 4 percent GDP growth in Q3? It’s a statistical fluke because imports are deducted from exports and other domestic expenditures to calculate the overall GDP growth rate. And small business importers are buying less at the moment. The Gross Domestic Product measures what is produced domestically, in other words.
This is the k-shaped economy we will have to live with. The NYTimes reports that the unemployment rate for 20-24 year-olds has risen to 9.2 percent. The hiring slowdown means they are competing with more experienced workers for fewer available jobs, at least until the tariff rates have settled.
Interest rates? The Fed is scheduled to cut rates another -0.25 percent in December but what if inflation doesn’t come down? Trump has signaled he wants to continue to lower interest rates regardless of the consequences.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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