More Economic Growth?--Part II

Financial FAQs

“Real gross domestic product (GDP) increased at an annual rate of 1.5 percent in the second quarter of 2026 (April, May, and June), according to the second estimate released today by the U.S. Bureau of Economic Analysis (BEA). In the first quarter, real GDP increased 2.1 percent.” BEA.gov

FREDgdp.

I don’t believe a recession is near, I said last week. The five-year cycle of economic growth begun with the recovery from the Covid-19 pandemic could continue.

For how long? The longest growth cycle to date was during the Obama and Trump I administrations—2009 to 2020 (see above graph). And that was because of the massive government spending to bring U.S. out of the 2008-09 Great Recession.

This is despite Trump’s economic wrecking ball that has reduced nonfarm payroll formation to just 31,000 per month over the past year and canceled or reduced many of President Biden’s bipartisan bills that boosted investment in infrastructure, healthcare, environmental protection, and healthcare services.

And what about the Fed’s rate hike(s)? Barron’s Randall Forsyth reports that interest rate markets believe the Federal Reserve risks causing a recession, or stagflation at least, by raising its Fed Funds rate +0.25 percent one to two more times to fight very stubborn inflation.

That is why economic growth slowed to 2.1 percent and 1.5 percent in Q1 and Q2 this year that the Fed could further damage because of its hawkish rhetoric on inflation.

But something remarkable is happening that could pull Americans away from the precipice. The Atlanta Fed’s GDPNow estimate of third quarter GDP growth is 5.1 percent for the second consecutive month, above most economists’ predictions.

Why? Consumers and governments are on a spending spree, and some $800B is being invested in the construction of A.I. data centers blanketing the country where many Americans don’t want them.

This is while corporations have record profits, which will extend the record stock market run whose prices are already in nosebleed country. The Price-to-Earnings ratio of the S&P 500 is 28 to 1, already far above its long term 15 to 1 historical ratio, according to economist Robert Shiller of irrational exuberance fame.

Trump and Republicans can’t do much more damage to growth. Their policies are failing at almost everything they attempt. Trump’s signature tariffs are illegal and require refunding, which will aid the bottom line of corporations and lower the prices of such as Target and Walmart.

He has failed to win the Iran war, and the world is finding ways to work around the consequent energy shortages. And renewable energy sources are making a comeback.

The Japanese have even agreed to build small nuclear reactors and two huge natural gas energy projects in the Midwest and South.

Consumers haven’t stopped spending, either. Surprisingly, American retail shoppers are out in force again with the 1.2 percent August sales increase. Many consumers seem to be recovering from the shock to energy prices since the beginning of the Iran War.

And maybe payroll hiring will continue to improve with the 166,000 additional hires in August. But the bottom line is the Iran war must end as well, and everyone knows it.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

More Economic Growth Ahead

Financial FAQs

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2026 is 5.1 percent on September 17, unchanged from September 16 after rounding. After this morning’s housing starts release from the US Census Bureau, the nowcast of third-quarter real residential investment growth decreased from -4.3 percent to -4.7 percent.”

GDPNow

This five-year plus cycle of business growth that began after the COVID-19 recession could continue for years. I have become much more upbeat about our economic future.

All signs are pointing to perhaps a large jump in economic growth for several years, despite the geopolitical chaos. Why? Trump and Republican actions may not be as damaging to the world economies from his tariffs and desire to have a second Gilded Age that has created so many robber barons and the massive concentration of wealth.

The massive A.I. investments and stock market highs say that it could continue despite the reordering of world markets amid so much geopolitical uncertainty. This could outweigh the effects from tariffs and the unending Iran war that continue to elevate inflation. Growth isn’t being boosted by just the A.I. build out that is projected to cost some $800B, more than all residential real estate investment.

The manufacturing and service sector activity as measured by the latest Institute of Supply Management indexes are still expanding, causing long-term interest rates to rise as well.

“In August, the Services PMI^® registered 55.4 percent, an increase of 1.3 percentage points compared to July’s figure of 54.1 percent. The Business Activity Index remained in expansion territory in August, increasing 2.6 percentage points to 61.7 percent from July’s reading of 59.1 percent.”

“The Manufacturing PMI^® registered 54.6 percent in August, 1 percentage point below the July figure of 55.6 percent. The overall economy continued in expansion for the 22nd month in a row. (A Manufacturing PMI^® above 47.5 percent, over a period of time, generally indicates an expansion of the overall economy.)”

The Atlanta Fed’s GDPNow estimate of third quarter GDP growth is 5.1 percent for the second consecutive month, above most economists’ predictions. Consumers and governments are on a spending spree, as well as the construction of A.I. data centers that are blanketing the country.

The longest positive growth cycle to date was during the Obama and Trump I administrations—2009 to 2020, slightly eclipsing the 1990’s Clinton era that ended with four years of budget surpluses.

S&P also chimed in with its composite output index growing the fastest in five years. But will it withstand the Federal Reserve rate hike cycle just begun, with maybe a second rate boost this year?

The key to prolonging this business cycle is also the labor market, which has been subpar until now. The August 162,000 total nonfarm payroll employment was a total surprise, given the average monthly gain of just 31,000 over the prior 12 months.

Surprisingly, American shoppers are out in force for the first time this fall after several pauses as they rushed to get ahead of rising prices for the holidays, I said last week.

So corporations must keep hiring, in spite of the looming fear of A.I. robots supplanting many jobs.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Inflation is Here to Stay

Financial FAQs

“The Producer Price Index for final demand was unchanged in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. On an unadjusted basis, the index for final demand increased 4.7 percent for the 12 months ended in July”. BLS

FREDppi

The wholesale PPI is a sign that inflation is too high to raise hopes for any decrease in interest rates anytime soon. And because the PPI measures the cost of raw materials that go into retail products, it foretells how consumer prices will behave in the coming months.

In fact, August PPI also tells us why interest rates are soaring in the bond markets as well that set mortgage rates. It’s why 30-year fixed mortgage rates have risen to 6.67 percent at this writing.

So why are interest rates so high at this time? It’s not only the ongoing wars creating shortages in everything (mainly Iran and Ukraine) but the huge demand for money to build out the AI data centers. Elom Musk’s SpaceX IPO got ahead of the crowd by netting $75 billion, which delayed IPOs for Open A and Anthropic among others.

The IEEE Technology Society predicts that the AI build out will cost $363 to $400 billion. And the investments are mostly borrowed money which is driving up bond yields even higher, crowding out funding for much-needed government programs.

The 10-year Treasury yield is 4.70 percent today, up from its low of 4.1 percent April 3, 2025 (tariff liberation again).

And that’s not all. Once up and running, the amount of water and electrical power needed to operate the data centers drives up electricity prices as well. And global warming will be exacerbated from the excess amounts of heat generated.

Lawrence Berkeley National Laboratory projects U.S. data center electricity demand will grow from 176 TWh in 2023 (about 4.4% of total U.S. electricity) to 325–580 TWh by 2028 (6.7–12% of total U.S. electricity)

Tech financial analysts worry that enthusiasm for AI has turned into a bubble that is reminiscent of the mania around the  Internet’s infrastructure build-out boom from 1998-2000, I have also been saying.  During that time period, telecom network providers spent over $100 billion blanketing the country with fiber optic cables based on the belief that the Internet’s growth would be so explosive that such massive investments were justified.  The “talk of the town” during those years was the “All Optical Network,” with ultra-long haul optical transceiver, photonic switches and optical add/drop multiplexers.  27 years later, it still has not been realized anywhere in the world.

The annual PPI held at 4.7 percent for the past two months, down from 5.5 percent, which is the stratosphere as far as inflation is concerned. The last time it even approached the Fed’s 2 percent target was April 2025, the month Trump began his illegal liberation day tariffs that is now refunding, per the courts.

That’s probably why Q1 2026 GDP growth was just 2.1 percent, and the advance Q2 estimate was 1.5 percent, as I’ve said.

The real lesson(s) from the self-induced geopolitical uncertainty by the Trump administration is that many safeguards are being reduced or eliminated that protect the American economy and American citizens.   

These safeguards include paying down the national debt instead of tax cuts that increase it, funding scientific research instead of reducing it, and expanding public health care. 

Without those safeguards it's just a matter of time before another recession.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Where are the Jobs?

 Financial FAQs

“The number of job openings was little changed at 7.4 million in June, the U.S. Bureau of Labor Statistics reported today. Hires were unchanged at 5.3 million, while total separations changed little at 5.4 million.” BLS

FREDjolts

The job market is shrinking, contributing to the slower economic growth we are seeing this year. For instance, fewer job vacancies are being reported by the Job Openings and Labor Turnover (JOLTS) report, a survey that measures the monthly number of available jobs.

And fewer workers means less will be produced. The JOLTS report also tells us there are more separations–workers leaving the workforce for a variety of reasons than hires.

That’s probably why Q1 2026 GDP growth was just 2.1 percent, and the advance Q2 estimate was 1.5 percent. But there are indications that the AI construction may cause third quarter GDP growth to be higher, as much as 3 per cent with the huge surge in AI spending.

The number of job openings increased in transportation, warehousing, and utilities (+97,000) and in federal government (+39,000). Job openings decreased in wholesale trade (-74,000), nondurable goods manufacturing (-55,000), and mining and logging (-9,000), per the JOLTS report.

The question will be why the reluctance to hire more workers in other sectors? Is it AI? We know that as much as $800 billion is being invested in AI infrastructure and might replace a lot of jobs. So companies may have frozen the number of new hires until they know more about AI’s potential.

What are employers still looking for? The upcoming ‘official’ U.S. unemployment report out in days will also show a shrinking labor force. It’s a huge debate. Firstly, companies have no way yet of measuring what AI may earn on their investments.

“It’s a currency where you have no instinct to know what you are using, and the accounting practices aren’t even there,” said an economist cited by the NYTimes. “The AI stuff is being treated as an investment right now, but it’s a risky investment in case it has no returns.”

It’s not all bad news. The larger, lower paying, service sector economy is still growing. Service companies such as banks, retailers and restaurants expanded last month at an accelerated rate for the sixth month in a row. An index produced by the Institute for Supply Management inched up to 54.1% from 54.0% in the prior month, said MarketWatch’s Jeffry Bartash.

The manufacturing sector is also growing because of the AI buildout. “In July, U.S. manufacturing activity remained in expansion territory, growing at its fastest rate in more than four years,” reports Susan Spence, MBA, Chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee.

But AI is still muddying the job creation picture. It is the sixth year of this expansion, so AI will determine if this is an ongoing boom, or a bust economy. The record DOW and S&P indexes are predicting boom times ahead, but that’s in part because Wall Street and financial markets are counting on the Mideast wars to be settled, Trump to stop levying illegal tariffs, and there are no prolonged energy shortages.

Will that happen? Or do we need a few more election cycles to determine what laws and regulations will govern this emerging economy?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Fitrst Quarter Economic Growth Improves

 Financial FAQs

Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the first quarter of 2026 (January, February, and March), according to the advance estimate released today by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2025, real GDP increased 0.5 percent.

BEA.gov

“The U.S. economy has just powered through shock after shock,” was Fed Chair Powell’s summation of the state of the U.S. economy at his last press conference as Federal Reserve Chairmen.

First quarter 2026 real (inflation adjusted) GDP growth picked up +2.0% in the government’s first estimate, following +0.5% growth in Q4 2025, thanks to the $billions being spent in AI energy center build outs.

Kevin Warsh will take over as the new Fed Chairman in May, so there is speculation that he will push for easier monetary policy as President Trump’s pick for the new Fed Chairman by lowering the Fed’s interest rates and a more hands off management style.

Trump badly needs easy credit to maintain growth because of his economic mismanagement. A barely functioning government is either tied up in congress with the various shutdowns (last fall and current DHS funding), while illegal tariffs have choked supply chains.

Meanwhile, to Powell’s consternation, economic growth is picking up “through shock after shock”, from the Great Recession, COVID-19 pandemic, the 37-day fall government shutdown, tariffs, and the various wars that have caused energy prices to skyrocket.

The AI build out was predicted to boost growth, consumers continued to hold up their end, and government spent more on the Ukraine and Iran wars. The Defense Department reported the Iran war has already cost $25 billion in just the first two months.

And the financial markets continue to rally to new highs, so we are seeing some irrational exuberance, despite the game of chicken by Iran and Trump over the Hormuz Strait blockade. It’s obvious market investors continue to believe that Trump with his TACO policies will find a way to extricate American out of his latest war sooner rather than later.

But it also means $4 plus gas prices and soaring inflation for months to come. Even if the Iran war is settled sooner, predictions are that Middle East energy production won’t be restored to previous levels for at least one year.

The real problem is the Trump administration’s economic mistakes have taken us back to a Cold War economy—more military spending, fewer government social services, while endangering the good faith and credit of the U.S. federal government as the debt continues to balloon.

Something has to give, in other words. The financial markets won’t rally forever on the AI investment bubble, and consumers won’t keep shopping until they drop without an ensuing downturn.

The question is when on so many fronts. When will the wars end? When will enough consumers realize prices won’t come down and elect a congress that will control Trump’s extravagance and greed before he bankrupts the American economy?

When will it be one shock too many that drives us into another recession?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Poor Economic Growth Ahead?

Popular Economics Weekly

First-Quarter GDP Growth Estimate Decreased “On April 7, the GDPNow model estimate for real GDP growth in the first quarter of 2026 is 1.3 percent, down from 1.6 percent on April 2.”

AtlantaFed

More warnings of slowing economic growth are appearing. And now we have a Gulf War that makes predictions more unpredictable. Who knows what’s to come?

The Atlanta Federal Reserve’s GDPNow estimate of first quarter (Q1) 2026 economic growth that is widely followed by economists has plunged from its high of 3 percent, where it had been sitting since January 2026, to 1.3 percent in the latest revision.

Why the surprise drop, since fourth quarter 2025 GDP growth had already plunged from 1.4 percent to 0.7 percent in its latest revision?

Much higher GDP growth in Q2 and Q3 last year showed that financial markets were buying the Trump message that American taxpayers and businesses would start spending more from the Big Beautiful Tax Bill write-offs this spring.

The latest retail sales and a good March unemployment report (+178,000 jobs) had kept up optimism for a better year. There were also hopes that increased business investments—another component of GDP—would create more jobs.

But in fact the opposite is happening. Most business investment is being spent on AI energy centers, which is causing more joblessness, with wholesale job layoffs being announced as a consequence—at the likes of Amazon, which has announced a total of 30,000 job cuts to date.

And we are seeing imports continuing to flood in, far out distancing exports, which increases the trade deficit and brings down our Gross Domestic Product growth, since GDP measures only what is produced or sold in the U.S.

The Wall Street Journal survey says that on average, economists forecast gross domestic product adjusted for inflation to grow 2.1% in the fourth quarter this year from a year earlier. That was down incrementally from 2.2% in January. They expect the unemployment rate will be 4.5% in December, matching their forecast in January, before the war. Last month the unemployment rate was 4.4%.

Economic Growth is difficult to forecast; economists will tell you. And the Atlanta Federal Reserve is one of the few that dare to do it. We don’t even have the final fourth Quarter 2025 revision yet, which has shrunk steadily as I said after a much better looking Q3 of +4.4 percent GDP growth.

Besides job, trade deficit, and business investment data, the GDP includes consumer spending. That number hasn’t faltered as badly. So we should be looking at consumer behavior if we want to know what happens next.

I said last week that retail sales picked up in March, so consumers are shopping again and consumer confidence edged up as well.

There is something else that could improve consumers’ attitudes and hence GDP. Lower inflation would increase the demand for goods and services—but how to achieve it with $4 per gallon gas prices for who knows how long? Lower inflation is possible with AI efficiencies increasing labor productivity and lowering product costs. But it takes time, years, as with past technological innovations.

The just-announced two-week ceasefire could certainly bring down oil and gas prices, if it holds, and Trump will want it to hold given its unpopularity.

The Federal Reserve is hinting it could go up or down on their interest rate decisions this year. But if the labor market continues to shrink the Fed will also want lower interest rates ahead. And any easing of credit conditions (lower cost of borrowing) would be good news for economic growth this year.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What, Another Great Recession?

 Financial FAQs

 “The conflict with Iran has already put fresh stress on the U.S. economy, as businesses are reporting rising prices, fewer orders and a decline in employment. A survey of service-oriented companies — the sector that employs most Americans — fell to an 11-month low of 51.1 in March from 51.7 in the prior month, S&P Global said Tuesday.” MarketWatch

FREDpayrolls

Maybe we shouldn’t be looking at the 1970’s era of stagflation for the kind of economic damage from the Iran War and closing of the Strait of Hormuz to oil shipments. There is a short-term spike in oil prices, though oil from other sources than the Gulf can eventually make up the difference in supplies.

The war’s damage may take longer to materialize but look more like the Great Recession, which we shouldn’t forget was a worldwide recession that occurred in 2008-09, the worst since the Great Depression of the 1930s.

We shouldn’t forget that the Great Recession Bush/Cheney and their oil barons ultimately spawned with the ill-planned invasions of Iraq and Afghanistan was based on lies about the weapons of mass destruction that Saddam Hussein didn’t have.

And now Trump and his Robber Barons are taking the Gilded Age dreams of William Mckinley one step further with lies that Iran is preparing nuclear weapons to justify the ill-prepared war with Iran while aliening the allies that would help them succeed.

This is even though Trump’s just-resigned Counterterrorism czar Joe Kent said Iran posed no imminent threat with nuclear weapons.

The Great Recession was caused by more than the Bush wars on terror, of course. It was caused by putting too many regulation-cutting foxes in the Bush/Cheney hen house that literally resulted in the failure of nonbank banks like Bear Stearns and Lehman Brothers to fail.

Trump is following the same playbook by gutting the government’s regulatory agencies that could prevent the blatant fraud occurring with the Trump administration’s Bitcoin investments that have no regulations or backing with assets.

This time negative GDP growth could come from the faltering labor market, which is frozen in place with almost no net new job creation at all in 2015 as highlighted in the above FRED graph. Fed Chair Powell remarked at his latest press conference that they were torn over whether to cut interest rates or raise them because Trump’s immigrant deportations were causing a labor shortage.

Economic growth ground to a halt as well in 2008, even when Fed Chair Greenspan anxiously began to cut interest rates to prevent the near failure of our banking system.

Powell’s Fed Governors also predicted overall GDP growth of 2.4 percent in 2026, even though Q4 2025 Real GDP growth slowed from 1.4 to just 0.7 percent. So I don’t understand the Fed’s optimism over economic growth.

And history has shown that no job growth will ultimately lead to no economic growth,

The frightening truth is that both Republican administrations have made bad decisions for the same wrong reasons.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Start A War?

 Financial FAQs

“The Producer Price Index for final demand increased 0.7 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.5 percent in January and 0.4 percent in December 2025. (See table A.) On an unadjusted basis, the index for final demand rose 3.4 percent for the 12 months ended in February, the largest 12- month advance since increasing 3.4 percent in February 2025.” BLS.gov

FREDppi

Why start a war when President Trump’s tariffs are already raising the cost of everything? Because “The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money,” Trump said in a post on Truth Social last week.

Who makes a lot of money? Most Americans could be losing a lot of money over the sudden rise in energy prices it is precipitating, but not his family and oil buddies, obviously.

His thoughtless remarks have put him in a bind, which is why he is lashing out at allies and enemies alike because they don’t want to fix the damage it is causing.

Right now it is the boost it has given to wholesale inflation. The Producer Price Index for wholesale goods, imported goods in the main, is climbing again.

And the tariff question is far from settled with the Trump administration required to pay back much of the $1.4 billion in tariffs that were illegal, according to the Supreme Court.

We add to that the resignation of Joe Kent, Trump’s top counter terrorism appointment, who said Trump attacked Iran because Netanyahu told him to, not because of some imminent danger. The former Director of the National Counterterrorism Center said “I cannot in good conscience support the ongoing war in Iran. Iran posed no imminent threat to our nation”.

So with the Strait of Hormuz closed that is choking off 20 percent of the world’s oil supply from going anywhere, the PPI wholesale cost of things is now the highest since February 2025.

This is probably why Fed Chair Powell announcement after Wednesday’s FOMC meeting that there was little chance of more than one rate cut in 2026, and maybe even a rate hike if Trump can’t stop the bombing and find a way to call the bombing campaign a victory. He must also find a way to open the Strait of Hormuz, of course.

The Federal Reserve stuck to its guns that one interest-rate cut this year was likely, but stressed conflict in the Middle East made its forecast uncertain. The Fed voted 11 to 1 to leave its key rate unchanged in the range of 3.5% to 3.75%.

BEA.gov

The Fed Governors also predicted overall GDP growth of 2.4 percent in 2026, even though Q4 2025 Real GDP growth slowed to just 0.7 percent. So I don’t understand the Fed’s optimism over economic growth.

The real culprit behind slowing GDP growth is less consumer spending. Fewer consumers are holding jobs for starters, and essentials like gas and electricity prices are soaring because of the Iran war as well as the tariffs.

So, the Fed wants to lower rates further to encourage more hires but rising inflation is holding them back. And Powell at his press conference said that conditions would have to be much worse for signs of stagflation such as occurred in the 1970s with the OPEC oil embargo.

Powell and the Fed Governors were surprisingly upbeat about our economic future, which is strange when Trump has started a war he never really planned or adequately prepared for.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Stagflation --II?

 Financial FAQs

“The Producer Price Index for final demand increased 0.5 percent in January. Prices for final demand services advanced 0.8 percent, and the index for final demand goods declined 0.3 percent. On an unadjusted basis, the index for final demand rose 2.9 percent for the 12 months ended in January.” BLS.gov

FREDbls

Why shouldn’t President Trump’s new Gulf War repeat the 1970’s Arab Oil Embargo (OPEC) stagflation—slowing economic growth + higher inflation—that caused several recessions and resulted in the double-digit inflation of the era?

Iran has said it is closing the Gulf of Hormuz. It has been producing three million barrels of oil daily, has 24 percent of Middle East oil reserves and 12 percent of world reserves, and 30 percent of the world’s oil supply goes through the Gulf, according to the U.S. Energy Information Administration.

Though oil is not as important and energy source now as it was then, says Paul Krugman in Substack, it will still cause higher energy prices—maybe 10 percent higher or more, according to the experts—and oil and gas prices are still a major factor in the inflation equation.

The Producer Price Index measures wholesale prices for products and services that go into finished products have been rising throughout last year. So it is the first place economists look to see the direction of inflation.

Wholesale inflation is surging in large part because it measures the import prices of the raw materials, such as auto parts, that have been boosted by Trump’s tariffs.

Defense Department Secretary Hegseth was quick to say in the first press conference that the Iran war wouldn’t be a repeat of the Iraq war that would mire US in another long war.

But the 1970’s era of stagflation was caused by more than scarce oil. Labor unions were stronger then and could lobby for higher wages to pay for the higher prices, which in turn kept inflation rising in a wage-price spiral until it reached an eye-watering 14 percent

And we have a similar labor problem today. Workers can lobby for higher wages today because there are fewer of them in the workforce. Trump is deporting many of the undocumented workers that work in construction and agriculture, and many of the rest of the estimated 11 million are hiding rather than going to work. Also AI, CHAT GBT, and the like are causing more layoffs at major employers such as Amazon, for starters, further shrinking our workforce.

The irony is that the massive investments in building out the AI energy centers is already making electricity more expensive as well as putting more white-collar employees out of work.

This means fewer consumers are shopping when 70 percent of GDP growth is generated by American consumers! So, I see slowing economic growth as well.

A declining workforce pushing for higher wages that faces higher oil, gas and electricity prices will put more pressure on inflation, and could lead to the classic wage-price spiral that was the ultimate cause of 1970’s stagflation. This is while Trump is saying the Iran war could last just weeks?

The DOW Index has plunged more than -1100 points at this writing on fears the war will spread throughout the Middle East and beyond.

So, our stock market’s behavior will probably determine how long our TACO President will want to prolong this war.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

A Better Economy for Whom?

 Financial FAQs

“Real gross domestic product (GDP) increased at an annual rate of 4.4 percent in the third quarter of 2025 (July, August, and September), according to the updated estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent.” BEA.gov

FREDgdp

The U.S. economy is growing again. Why, when polls show that a majority of Americans are unhappy with the economy and their standard of living? Because this measure of growth doesn’t answer what every day Americans need.

The U.S. standard measure for overall economic health, Real Domestic Product (GDP), grew in the second and third quarter of 2025, despite the inflation surge from President Trump’s tariffs. In fact, rising inflation is probably boosting growth at the top for major corporations because higher prices usually mean higher profits for businesses, (but not consumers).

Q3 GDP growth increased in part because consumers could continue to spend. Spending was up 3.5 percent. This is despite the higher tariffs on almost all imports entering the U.S, which caused the GDP measure of overall inflation to rise 3.4 percent, which is too high.

GDP growth is soaring at the moment for a chosen few, in other words. But most Americans are unhappy with the high prices and inflation tied to tariffs. They no longer believe Trump’s fiction that exporters or Americans will eat the cost of the price hikes from the tariff taxes.

The Fed’s preferred inflation gauge, known as the Personal Consumption Expenditures (PCE) index, also rose to a yearly rate of 2.8% in November, said the Bureau of Economic Analysis. That was up from 2.7% in October with the 12-month rate of core inflation up to 2.8% in November from 2.7%.

So will consumers continue to spend as much going into the New Year? We already know that most consumers are in a very sour mood. The Conference Board’s latest Consumer Confidence survey headline said it best: Confidence collapsed to lowest point since 2014, surpassing pandemic depths.

“Confidence collapsed in January, as consumer concerns about both the present situation and expectations for the future deepened,” said Dana M Peterson, Chief Economist, The Conference Board. “All five components of the Index deteriorated, driving the overall Index to its lowest level since May 2014 (82.2)—surpassing its COVID-19 pandemic depths.”

That is alarming, needless to say. Year 2014 was when confidence was even lower than even the COVID-19 confidence deaths because it was during the Republican’s “no compromise” government shutdown that was meant to oppose President Obama’s agenda of improving ordinary American lives via such programs as Obamacare. It was for more than 30 days—what was then the longest shut down in history.

Is this a repeat performance should congress not agree on a new budget before the end of February?

Exports also helped to boost growth because they have been increasing as well. This might be because of higher labor productivity, i.e., fewer workers are producing more. Amazon has announced it is planning to lay off 30,000 corporate employees, for instance. AI is already replacing workers in industrial and transportation industries, hence the low hire rate being seen after last October’s government shut down. All eyes will be on the labor market in upcoming months.

With only 50,000 new payroll jobs in November, Americans are frustrated by the difficulty in finding jobs. Some also mentioned more costly healthcare and insurance as well in the Confidence Board survey.

And now the blatant lies of President Trump in his attempt to cover up the murders of American citizens by ICE in Minneapolis is sowing even more chaos. No country can continue to grow for long amid such uncertainty.

The high GDP growth numbers and record Wall Street stock indexes won’t convince most Americans that all is well when they see the opposite with their own eyes. That is not the way to run a country, as I’ve been saying.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Still Flying Blind--Part II

 Financial FAQs

“Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment. And while November's slowdown was broad-based, it was led by a pullback among small businesses.” ADP

wallpaperaccess.com

We know why consumer confidence has plunged to a new post-pandemic low. We have no news of current economic conditions to guide consumers and investors, much less what may happen next, so the U.S. economy is still flying blind.

The November unemployment report comes out on December 16, for instance, (skipping October’s report) after the Fed’s FOMC meet that decides whether another rate cut is appropriate, so we have only the ‘unofficial’ ADP private payrolls report on employment that showed -32,000 private payrolls were lost in November.

The goods sector of the U.S. economy, including Construction and Manufacturing, lost -19,000 jobs. The service sector lost -12,000 overall, though Education, Health and Leisure activities added +46,000 jobs in the sector.

September’s last ‘official’ unemployment report with 119,000 payroll jobs was ok, but that was before the government lock down. And the U.S. economy had averaged just 38,600 new jobs since April and the tariff announcements.

Dr. Nela Richardson Chief Economist, ADP said it best in the survey. Small businesses aren’t hiring because of the uncertain tariffs, since some 90 percent of small businesses import their products that are sold in the U.S.

September retail sales also reported before the shutdown. Retail sales are growing more dependent on a smaller group of consumers. The top 10% of earners in the U.S. accounted for nearly 50% of spending in the second quarter, the highest level it’s been since this data first started being collected in 1989, according to Moody’s Analytics.

And the poor ISM manufacturing index numbers show the manufacturing sector has been contracting for the past nine months.

“A closely followed manufacturing index fell to a four-month low of 48.2% in November from 48.7% in the prior month, the Institute for Supply Management said Monday. Any number below 50% signals contraction,.” MarketWatch

The Federal Reserve will probably lower interest rates another -0.25%, but next year is a rate tossup because of the inflation worries, as almost no tariff agreements have been ratified by congress and signed.

We still have a lot of postponed economic data from the government shutdown, in other words, such as personal consumption and spending data (PCE) that the Fed prefers to measure inflation. We know that annual consumer CPI inflation had jumped to 3% in September, also before the shutdown, and will probably go higher as the tariff costs are passed on to consumers and businesses.

It’s obvious that we are living in uncertain times, and the old Republican playbook of tax cuts combined with DOGE and Project 25 slashing of government benefits are hurting the 90 percent of Americans still living paycheck to paycheck, as I’ve said.

Is that enough to cause a recession, in spite of the stock market’s boost supporting the top 10 percent of Americans that can still afford more than the basic necessities?

It won’t take much to tip US into a recession. The data we need to predict the future will eventually come out. Then we will know if not only the manufacturing sector is contracting—e.g., employment, capital expenditures, and personal income—which are the other major components that determine whether we are in a recession.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Do Trump's Republicans Hate Immigrants?

 Popular Economics Weekly

“The stakes are enormous if Republicans succeed in removing most of the estimated 11 million undocumented worker (only half of which are from Mexico and the Latin countries), and cut legal immigration in half, as they have promised to do. Economic growth will plummet, since it is mainly based on growth of the working age population, as well as labor productivity, which has also fallen since 2000.” Harlan Green Huffington Post

Huffington Post

I wrote in 2017 that for most of the past half-century, adults in the U.S. Baby Boom generation – those born after World War II and before 1965 – have been the main driver of the nation’s expanding workforce. But as this large generation headed into retirement, the increase in the potential labor force would slow markedly, and immigrants will play the primary role in the future growth of the working-age population (though they will remain a minority of it).

Republicans know this. Then why have Republicans and the Trump administration opposed immigration reform when there has never been enough American-born citizens to fill the labor rolls?  America has always had a labor shortage, which is why we have always been a land of immigrants.

A hint to the answer may be in the Gestapo-like tactics of the ICE raids to deport undocumented immigrants that is supposedly because they are supplanting lower-paid jobs that could be held by American citizens. (But that has never been the case, according to various studies that show American citizens won’t take such lower-paying jobs.)

The Republican Party has come to believe that it can only maintain power by preventing minorities from voting. They have suppressed voters in red states by limiting access to polls in minority districts and getting the Supreme Court to nullify parts of the Voting Rights Act that allowed federal government oversight of voting districts to ensure they weren’t over-gerrymandered to not accurately represent the population mix.

And now it is taking a darker turn with Trump’s callup of National Guard Troops to occupy Democratic cities, and threats to call any protests signs of an insurrection. Why have Republicans become so desperate that they now want to rule by decree?

One reason is the total growth of adults in the prime working ages of 25 to 64 over the next decade will be lower than the total in any single decade since the Baby Boomers began pouring into the workforce in the 1960s. The growth rate of working-age adults will also be markedly reduced, according to a PEW Research study.

The latest immigration trends studied by Josh Bivens of the Economic Policy Institute’s (EPI), a labor think tank, echoes the PEW analysis. Future economic growth will suffer if there aren’t enough new immigrants to supplant retiring workers in our adult labor workforce.

“The fast growth of the labor force between 1948 and 2007 and the slowdown since then can be explained by three big demographic changes: the Baby Boom that saw high fertility rates from the late 1940s to the mid-1960s and then a sharply lower fertility rate since, the steady influx of women into the labor force from 1948 until roughly 2000, and population aging that has seen the share of the over-65 population rise rapidly since 2007,” said Bivens.

We know that President Trump has always been racist; calling any immigrants that aren’t from white, Caucasian countries, such as Norway, criminals and the lowest of the low, hence his appeal to White Christian Nationalists.

Withholding funds from states and institutions in the name of suppressing DEI hiring is the Trump administration’s attempt to impoverish Americans in the blue states, as they have done in the red states. Their answer to the smaller workforce is the hope that AI and robots will fill the labor market void.

It is the reason for the huge rally in AI companies that is driving today’s stock market highs, driven by the hope that AI can replace our declining population.

The EPI’s Bivens says the labor force of the U.S.-born population will likely fall each year for the next decade. So what can we do to alleviate the hardships to come because Republicans have no answer for the half of our working population that will be replaced by AI, and already live month-to-month with no excess savings?

The EPI says it can be done with a social safety net that serves all Americans, not just the wealthy. “In addition to policies that prioritize tight labor markets, policies should target the following for adults:

• reductions in opioid use
• reductions in incarceration rates
• improvements in policies that support parents and caregivers
•  substantial improvements in the pay and working conditions of jobs of the future (like caregiving jobs) to attract and retain workers

“Investments in today’s children are crucial for boosting the labor force participation of future generations, such as safety net policies that promote long-term health and educational investments. 

This isn’t a pie-in-the-sky wish list but what can be done today, as it has been done in the past when such autocracies fail, as they always do.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Who Benefits From America's IOU's?

 Financial FAQs

WASHINGTON (AP) — The U.S. government’s gross national debt has surpassed $37 trillion, a record number that highlights the accelerating debt on America’s balance sheet and increased cost pressures on taxpayers. AP

FREDdebtGDP

Trump and his Republicans’ trade war and big, beautiful tax bill resemble a giant Ponzi scheme in several ways that has created the greatest wealth and income inequality in the developed world. 

It is in essence robbing Peter to pay Paul, by using the revenues from the highest tariff rates since the Great Depression, cutting $billions from Medicare, Medicare and Obamacare benefits, Doge-slashing important health and climate research departments as well as foreign aid spending, because Trump must pay down the record national debt that he has declared is a national emergency.

Yet it was generated by generations of mostly Republican tax cuts. President Reagan created the first major national debt in fighting the cold war and Central American contra wars, GW Bush created the first $trillion deficit with his war on terror largely based on fabricated intelligence, and Donald Trump will manage to add some $ 9 trillion to what is now a record $37 trillion from his trade war with almost no understanding or knowledge of foreign trade, as Nobelist Paul Krugman has pointed out several times.

And President Trump just fired the head of the Bureau of Labor Statistics so that he could replace her with someone who will cook the books on inflation and real job numbers.

The history of deficits is portrayed in the above graph of U.S. national debt calculated as a percentage of GDP.

Tump’s original Tax Cuts and Jobs Act (TCJA) had already added $5 trillion to the national debt that peaked at 132.8% as a percentage of GDP in Q1 2020 during the COVID-19 pandemic and it has since dropped to 120% because of the aid bills that the Trump and Biden administrations signed into law boosting economic growth to almost 3% annually.

The White House appeal to the foreign trade court to leave Trump’s tariff war in place is his attempt to keep the Ponzi scheme from imploding, rather than negotiating with congress that has the actual power to make foreign trade agreements.

Executive orders without congressional approval are illegal, unless there is a national emergency. And the soaring national debt could become one, if Trump succeeds in destroying the good faith and credit of the U.S. in renewing the TCJA.

On May 16, Moody’s Ratings downgraded the U.S. credit rating, citing an “inability of the nation to address large and growing deficits.” This downgrade means that for the first time ever, all three major credit ratings agencies have downgraded U.S. credit below their top AAA rating.

Trump is therefore begging an appeals court to allow the tariffs. It could lead to a “GREAT DEPRESSION” Trump said on social media, with Americans “forced from their homes” that will threaten social security and Medicare.

Yet the financial markets aren’t panicking this time, maybe for the wrong reasons, as I said in an earlier column. This is while the Final Demand Producer Price Index has jumped to 3.3% annually, the highest in three years since the COVID-19 induced supply shortages, lessening the chances of Federal Reserve rate cuts.

Wall Street’s over enthusiasm, which was first termed irrational exuberance by Fed Chair Alan Greenspan in the mid-1990s as a warning that stocks were overpriced, has created a new asset bubble much like the dot-com asset bubble, and housing bubble that led to the Great Recession.

And it has led to the greatest income inequality in the developed world which has impoverished Republican-led red states above all, whose citizens are most easily cowed by their policies.

And what will happen when foreign investors, mainly governments, realize a $37 trillion national debt isn’t sustainable indefinitely?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Return of Stagflation

 The Mortgage Corner

“From the same month one year ago, the PCE price index for June increased 2.6 percent. Excluding food and energy, the PCE price index increased 2.8 percent from one year ago.” BEA.gov

FREDpceinflation

President Trump hasn’t succeeded in convincing the Federal Reserve to cut interest rates or fired Chairman Jerome Powell just yet. So he fired the head of the Labor Department’s Bureau of Labor Statistics without cause that published the weak July unemployment report instead.

It is heralding another era of stagflation that has destroyed the wealth of too many Americans.

It now looks like he wants to recreate what happened to two other Republican Presidents—manipulating the data to disguise the fact that looming inflation can be a big problem as it was in the stagflation of the 1970s and housing bubble and Great Recession of 2008 that was the worst economic downturn since the Great Depression.

President Nixon first tried it when combatting the looming oil price-inspired inflation from the Arab Oil Embargo by fixing prices to keep them artificially low, then pushed his Fed Chair Arthur Burns to keep interest rates low in the face of slowing economic growth caused by the OPEC embargo.

It resulted in 14 percent inflation in 1980 that caused then Fed Chair Paul Volcker to raise the Fed Funds rate to 20 percent, resulting in two recessions early in President Reagan’s tenure.

President GW Bush also tried it in 2000 by pushing then Fed Chair Alan Greenspan to keep interest rates low to finance his wars on terror. Greenspan held interest rates too low for too long, which resulted in the housing bubble and Great Recession that followed.

And now Trump is looking for a successor to the Senate-vetted BLS official, Dr. Erika McEntarfer, who will manipulate employment statistics for him. The result will be less trusted unemployment reports, masking the effects of historically high tariffs that will again create product shortages and slow economic growth.

The Labor Department’s unemployment report understated what happened in the past three months, as I said last week. The U.S. economy created 73,000 nonfarm payroll jobs, but just 19,000 and 14,000 payroll jobs in revisions to May and June totals when more data came in (see graph).

The change in total nonfarm payroll employment for May was revised down by 125,000, from +144,000 to +19,000, and the change for June was revised down by 133,000, from +147,000 to +14,000, per the BLS.

Trump’s main reason for wanting to manipulate economic facts? He also wants to hide the damage to the employment numbers from what could be the loss of one million immigrants leaving the adult labor force, many of them running for cover because of the Gestapo tactics of Trump’s Homeland Security masked Storm Troopers breaking into homes and businesses to round up as many undocumented immigrants as possible, as I said last Friday.

It’s really the first indication of the immigrant’s importance in our economy, and why most of July’s hiring was in healthcare (55,000) while government employment lost 12.000 jobs and -87,000 jobs this year.

The next economic shoe to drop will be the changing of the guard at the Federal Reserve. Trump could not bully Fed Chair Powell to lower interest rates sooner, but that will soon change when he appoints a new Fed Chairman.

He will want to politicize the Fed as he is doing to the rest of the federal government when Powell steps down next year, so that he can enact more Republican ‘trickle down’ economic policies first initiated by President Reagan: in particular the tax cuts + deregulation that supposedly increases efficiencies and productivity, but instead increased corporate CEO pay to more than 300 times that of their employees while weakening union collective bargaining laws.

The results of ‘trickle-down’ economics have been frightfully obvious for decades. The Reagan-era creation has succeeded in maximizing profits of the owners of capital and corporate CEOs while suppressing incomes of salaried workers via right to work laws and low minimum wages, mostly in the poorest Republican controlled red states.

It’s why economists are now calling this the second Gilded Age. We are seeing the results—higher inflation and slowing economic growth once again unless a majority of Americans can be convinced to stop the steal of the worst robber baron of all.

Harlan Green © 2023

Follow Harlan Green on: https://twitter.com/HarlanGreen

Second Quarter Growth No Big Deal

 Financial FAQs

“Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2025 (April, May, and June), according to the advance estimate released by the U.S. Bureau of Economic Analysis. In the first quarter, real GDP decreased 0.5 percent.” BEA.gov

BEA.gov

The big jump in second quarter economic growth wasn’t a surprise. Consumers continued to shop but bought fewer imported goods because Trump's tariff wars were already raising prices. Imports are a subtraction in the GDP equation.

It might be a one time jump because consumers are saving more and buying less these days, as I’ve been saying, while waiting to see how much damage the Trump tax cuts and higher tariffs might wreak on the U.S. economy, especially to those it will harm the most.

The two-month GDP average was a 1.3% growth rate. The U.S. economy expanded at a 2.8% rate in 2024 and 2.9% in 2023 under President Biden, which was in large part because of the New Deal legislation that pumped $billions into economic growth and caused higher inflation.

The Fed then raised their interest rates to bring inflation back down to its present mid-2% range, and Republicans took over the congress. The result was Trump initiated his tariff wars and passage of the big beautiful big tax bill that will increase the federal debt by some $4 trillion.

But because at least some of the additional federal debt must be paid for to preserve the no longer great faith and credit of our economy, Trump has raised tariff rates to 15-20 percent, which means raising taxes on U.S. consumers and businesses.

And as any economist will tell you, taxes slow economic growth, regardless of what Trump and his cabinet cronies say. And our economy is slowing. The so-called final sales of consumers and businesses increased just 1.2 % in Q2, and there is no indication that it might pick up as the tariff agreements (i.e., taxes) are finalized.

Inflation has declined because of less spending. Consumers spending as measured by the personal consumption expenditures (PCE) price index in the Q2 GDP report increased just 2.1 percent, compared with an increase of 3.7 percent. Excluding food and energy prices, the PCE price index increased 2.5 percent, compared with an increase of 3.5 percent because consumers bought ahead of the price increases due to the April 2 tariff announcements.

What about those Federal Reserve interest rate cuts that Trump wants? Fed Chair Powell said at his latest press conference after the July FOMC meet that its twin mandates of price stability and maximum growth are still in balance, so there’s no reason to lower interest rates at this time.

The unemployment rate remains stuck at 4.1-4.2 percent because the mandates are in balance. Powell said the Fed would act to lower interest rates sooner—i.e., ease credit conditions--if the unemployment rate were to increase substantially.

The Trump administration’s agenda paints a sordid picture in following a very similar trajectory of the GW Bush administration—with its wars on terror (like Trump’s tariff wars), huge tax cuts for the wealthiest and less regulation (like Trump’s big beautiful bill) fueling what became the Great Recession.

Trump’s tariffs won’t help the very people in the red states that elected him but raise their prices. His cuts to social services harm those in red states in the most need. His DOGE cuts are not only endangering air travel, but disaster relief when the worst storms are also happening in mainly red state territories.

So, its not even the blue states that Trump wants most to harm, but his own MAGA supporters that will suffer the most. It’s what bullies do, prey on the weakest and most vulnerable, especially immigrants and minorities that are least able to protect themselves.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Second Quarter Growth Estimates Decline

 Popular Economics Weekly

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 2.4 percent on July 18, unchanged from July 17 after rounding. After this morning’s housing starts release from the US Census Bureau, the nowcast of second-quarter real residential investment growth decreased from -6.4 percent to -7.0 percent.” Atlanta Federal Reserve Bank

AtlantaFed

The Atlanta Fed’s GDPNow estimate of second quarter growth is why the Federal Reserve may drop interest rates at their September FOMC meeting if estimates for second quarter growth continue to decline (green line in graph). There is hope that the second quarter would look better than Q1’s negative -0.5% shrinkage. But that was based on the premise that there would be actual tariff agreements.

And now Trump is threatening Brazil with 50 percent tariffs over ex-President Bolsanaro’s criminal conviction.

We will see the first official estimate of second quarter economic growth on July 31, but most economists are warning of the uncertainty affecting growth predictions. The DOGE cost-cutting was meant to increase efficiency, but in fact is reducing it by eviscerating programs that only the federal government can do.

Much of it is being cut from scientific research that is the seed corn for the future prosperity and safety of Americans, for instance. There are large cuts in Health & Human Service for future disease cures (medical research), the USEPA in climate research, and even climate forecasting. FEMA cost-cutting made it slow to respond to the Kerrville, Texas flash flood, and unprepared to save more lives.

The Conference Board’s Index of Leading Economic Indicators (LEI) that predicts future growth is also turning negative, despite Republican touts that Trump’s just passed Terrible Tax Bill will boost growth from the many tax breaks and reduced regulations being handed to corporations.

“The US LEI fell further in June,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “For a second month in a row, the stock price rally was the main support of the LEI. But this was not enough to offset still very low consumer expectations, weak new orders in manufacturing, and a third consecutive month of rising initial claims for unemployment insurance.”

Stocks have been rallying of late on the belief that TACO Trump will ultimately relent on many of his tariff threats that would boost inflation and reduce the likelihood of lower interest rates that businesses and consumers have been hoping for.

Consumers will still be the final arbiter of Q2 growth since they make up 70 percent of GDP, and they are now timing the tariff announcements. Retail sales had declined in May but picked up in June when it looked like any tariff hikes would be delayed once more.

Lower tariffs would certainly be better for future growth, since consumers also like it that way.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

First Quarter Growth Revised Lower

 Financial FAQs

“Real gross domestic product (GDP) decreased at an annual rate of -0.5 percent in the first quarter of 2025 (January, February, and March), according to the third estimate released by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2024, real GDP increased 2.4 percent.” BEA.GOV

We won’t know yet if we can stay out of a recession because first quarter GDP was revised downward in its final (third) estimate, but Americans have been stocking up on cheaper imports before the tariffs kick in, just in case.

Real GDP was revised down 0.3 percentage point from the second estimate (-0.2%), primarily because of downward revisions to consumer spending and exports. This was before the April 2 tariffs and retaliatory tariffs hit consumers.

But the final (third) revision of Q1 GDP showed inflation already rising because of the rush to buy before April 2. The price index for gross domestic purchases increased 3.4 percent in the first quarter, a revised +0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 3.7 percent, and the PCE price index excluding food and energy increased 3.5 percent, both +0.1 percentage point higher than previously estimated.

So, what are consumers and businesses to do while waiting for the final outcome of the tariff wars? (If there will be a grand finale, that is.) Trump is using the tariffs to not only pay for the huge deficit that his Big Beautiful Tax bill will create, but as a way to bully other countries to do all manner of things, like get NATO to up its military spending, and China to import more U.S. exports.

The general consensus is that tariffs will ultimately end up being about 10 percent for most countries (30 percent for Chinese imports), up from 4 percent in recent history. The financial markets are rallying again because of Trump’s TACO (Trump Always Chickens Out) negotiating techniques—suddenly raising retaliatory tariffs, then cancelling them. It can’t prevent higher prices, since so much of what we consume is imported.

Things might look brighter for a while, like in the second quarter just coming to a close in June. The Atlanta Fed’s GDPNow estimate of second quarter growth is still holding at 3.4 percent because of continued investment in AI and other high-tech innovations in its most recent Nowcast. But we won’t see the first estimate of second quarter GDP growth until July 30.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 3.4 percent on June 18, down from 3.5 percent on June 17. After this morning’s housing starts report from the US Census Bureau, the nowcast of second-quarter real residential fixed investment growth decreased from -2.8 percent to -4.4 percent.

Higher fixed investment is good for growth, of course, yet we are also seeing increases in weekly initial jobless claims that come close to Great Recession and COVID-19 pandemic numbers. The number of jobless workers collecting longer term unemployment benefits rose by 37,000 to 1.97 million, marking the highest level since November 2021.

That’s because much of the high-tech and AI investment will be replacing White-collar workers. We now must wait until July 30 before Q2 growth numbers come out from the Bureau of Economic Analysis. That’s a long time to wait these days, since so much can happen.

Stocks and bonds are rallying because corporate profits are higher, as well as the hope that TACO Trump won’t level any more retaliatory tariffs. The Foreign Trade Court has said the retaliatory tariffs aren’t legal. So maybe that’s what the markets are betting on—no more tariff increases. Most analysts are predicting the new 10 percent tariff level will shave approximately 1.5 percent from GDP growth this year, however.

Harlan Green © 2025

Follow Harlan on Twitter: https://twittter.com/HarlanGreen

Immigrants Make a Difference

 Popular Economics Weekly

“Total nonfarm payroll employment increased by 139,000 in May, and the unemployment rate was unchanged at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in health care, leisure and hospitality, and social assistance. Federal government continued to lose jobs.” BLS

FREDnonfarmpayrolls

The above FRED graph is the best picture of where the jobs market has been headed over the past two years (May 23-May 25). It’s a slow downward trend that is averaging a monthly gain of 149,000 over the prior 12 months.

But since January 2025 and Donald Trump’s inauguration (last five bars in graph), job growth has averaged just 124,000 per month increases, and Trump’s anti-immigrant policies will continue to harm the job market and economic growth

It's becoming obvious that firms are hiring less because of rising uncertainty caused by the DOGE cuts and Trump’s tariffs. And don’t forget the immigration crackdown that is reducing the number of workers available for those jobs. The Trump administration has trumpeted the ‘removal’ of some 72,000 undocumented immigrants already, and intention to remove more than one million over the next year.

We know what that will do to our workforce. Some 625,000 working adults have dropped out of the adult workforce just in May, which means they stopped even looking for work.

So, it’s difficult to know if the immigration crackdown is causing more to simply stop working as well as the hiring slowdown. We know that immigrants, whether legal or undocumented, have become a major component of our job market with our declining population growth.

According to the Center for Migration Studies, a non-partisan think tank, an estimated 8.3 million unauthorized immigrants contribute to the economy, representing about 5% of all workers. This number has increased since 2019 but is like the 2007 figure. Lawful immigrants make up most of the immigrant workforce at 22.2 million, or 13% of all workers. Many work in construction (1.5 million) and restaurants (1 million), and fewer in Agriculture and farms.

Reducing the number of workers will hurt both our employment picture, as well as future growth, since if the normal one million plus annual influx of immigrants is reduced, it will impact GDP growth as well.

But in wanting so badly to feed red meat to his MAGA followers with the propaganda that immigrants are evil and criminals, employers cannot find the workers they need. There are still more than 7 million job vacancies, according to the Labor Department’s JOLTS report.

This didn’t have to happen, if Trump had allowed the bipartisan immigration bill to pass that Biden had negotiated, which gave a path to citizenship and allowed immigrants to obtain legal work permits.

But the Trump administration isn’t interested in economic growth as much as branding non-European whites as undesirables—even though our Hispanic population, mostly South and Central American, are of white European origin.

It's how autocrats stay in power. President Trump is dividing Americans in artificial ways—whether by economic class, or birth origins—any way he can think up to exacerbate the divisions.

And it will not only shrink the working population, but U.S. economic growth as well.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What's Next?

 Financial FAQs

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 1.1 percent on May 1, down from 2.4 percent on April 30.”

AtFedGDPNow

What’s next for economic growth? Predictions for Q2 are all over the map since the first quarter GDP went negative with -0.3% GDP growth because businesses boosted their imports ahead of future price hikes caused by the tariffs, and imports are subtracted from exports in the Gross Domestic Product calculation.

The Atlanta Fed’s GDPNow Q2 growth estimate of +1.1 percent gives us an idea of what’s to come. It has already fallen sharply from +2.4 percent because of the negative Q1 surprise, as well as the drop in consumer spending (PCE) and real private fixed investment (e.g., factories), all signs of further slowing.

I see stagflation on the economic horizon, rather than an actual recession since wherever the import taxes being negotiated end up to be, it will raise prices. And the service sector of our economy is still expanding, that includes the leisure, healthcare and transportation sectors.

The Institute for Supply Management said that its service-sector PMI rose to 51.6% in April from 50.8% in the prior month in the largest sector of our economy. The measure of new orders rose to 52.3% in April from 50.4 in the prior month. And the measure of prices paid for services for inputs jumped to 65.1 from 60.9 in the prior month, which is the inflation component of stagflation.

However, Q2 growth is uncertain because no one knows what the tariffs will be (i.e., import taxes). If Q2 GDP should also contract it could indicate we are in a recession, since two consecutive quarters of negative GDP growth have been one tell of a recession.

Torsten Slok, Apollo Global’s chief economist interviewed on CNBC’s Squawk Box predicts if the high tariffs that were. put in place earlier this month remain in effect, odds of a two-quarter contraction in economic output stand at 90 percent, with gross domestic product dropping by 4 percentage points.

But Trump knows this so he will probably bring the tariffs down to the 10 percent minimum already being levied on all 180 countries in the world (that include penguin only islands).

Trump has probably calculated this will ultimately bring in enough tax revenues to enable the tax cuts he wants enacted for his Oligarchs. The rest of Americans will suffer, however, as the budget negotiations will demand spending cuts to everything else except the military and immigration services

So we shouldn’t ignore a recession possibility, since China is the elephant in the room, and could derail everything, since it accounts for most of the holiday season imports, for starters. And any manufacturing renaissance will be years in the offing.

Declining Gross Domestic Product growth isn’t the only measure of recession. The National Bureau of Economic Research (NBER), the official caller of recessions, adds several other indicators, such as when nonfarm payrolls, personal incomes, and industrial production have peaked in a business cycle.

The NBER, a board of top economists, makes the recession call by looking at peaks and troughs of business activity. The last recession was caused by the COVID-19 pandemic shutdown and came after the longest post WWII expansion in history, said the NBER.

“The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854.”

And small businesses, who thought Trump would bring some relief from regulations as well as lower prices, do not like what they are seeing, I said last week. The National Federation of Independent Business on Tuesday said its Small Business Optimism Index dropped 3.3 points in March to 97.4, falling just below its 51-year average of 98.

Marketplace, a public radio show, said the U.S. Chamber of Commerce sent a letter to the Trump administration this week saying that tariffs pose “significant risks to U.S. employment” and may soon do “irreparable harm” to many small businesses. 

The Chamber, which represents businesses of all sizes, is asking the administration to lift tariffs on any goods that “cannot be made in the U.S.,” establish a tariff exclusion process and automatically exempt small business importers from tariffs.

The problem is that President Trump believes he can use tariffs to wall us off from our allies and trading partners. But wanna be autocrats, such as Trump, are terrible at running economies. The best examples are Turkey’s President Erdogan or Putin, whose economies still suffer from double-digit inflation.

They make decisions for the wrong reasons, because they don’t have to please everyone, just their Oligarchs. But an era of stagflation as happened in the 1970s could cause as much suffering, so stay tuned. Whether recession or prolonged stagflation, it won’t be pretty.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Whose Economy Is It Now?

 Popular Economics Weekly

“Total nonfarm payroll employment increased by 177,000 in April, and the unemployment rate was unchanged at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in health care, transportation and warehousing, financial activities, and social assistance. Federal government employment declined.”

MarketWatch

Even though the U.S. economy contracted in the first quarter of 2025 for the first time in three years, nonfarm payroll jobs increased 177,000 in April, as employers aren’t yet ready to cut their workforce in the beginning of the second quarter, even though many businesses have stopped ordering from foreign suppliers for the holidays because no tariff agreements have been made or are even in negotiation, especially with China.

The universal April 2 tariff announcements on all 180 countries in the world have already begun to hurt manufacturing, as the manufacturing sector lost 1,000 jobs. Reuters reports the Institute for Supply Management’s manufacturing PMI dropped to a five-month low of 48.7 last month, as tariffs are already raising prices on strained supply chains, keeping prices at the factory gate elevated and encouraging some firms to lay off workers.

Gene Seroka, executive director of the Port of Los Angeles, said Tuesday on CNBC’s “Squawk Box” that he expects incoming cargo volume to slide by more than a third next week compared with the same period in 2024, especially with China that makes of 45 percent of Los Angeles Port imports.

“According to our own port optimizer, which measures the loadings in Asia, we’ll be down just a little bit over 35% next week compared to last year. And it’s a precipitous drop in volume with a number of major American retailers stopping all shipments from China based on the tariffs,” Seroka said.

But the Education/Health sector added 70,000 jobs, Transporting/warehouse added 29,000 jobs, so the service sector is still healthy. There seems to the hope that Trump will have some kind of tariff agreements in 90 days, but with whom and when means domestic production will be affected, since so many US businesses import parts as well as iPhones.

So looking ahead, the employment picture won’t look so good. Reuters also reported that the Labor Department report showed initial claims for state unemployment benefits jumped 18,000 to a seasonally adjusted 241,000 for the week ended April 26. The number of people receiving benefits after an initial week of aid soared 83,000 to a seasonally adjusted 1.916 million during the week ending April 19. Global outplacement firm Challenger, Gray & Christmas said that planned job cuts fell 62 percent to 105,441 last month. Layoffs were, however, 63 percent higher.

It looks like the April unemployment report is a picture of what was, not what is to come. Consumers are also eating out less.

The NYTimes reports McDonald’s among other large food vendors have reported weaker sales in the first three months of the year.

“PepsiCo cut its full-year guidance outlook assuming that demand for its beverages and snacks will soften. Chipotle, the burrito giant, reported that its same-store sales fell for the first time since 2020 in the most recent quarter. Both companies attributed the results to customers’ feeling apprehensive about the economy.”

It will become more difficult to hide the wholesale destruction the Trump administration is about to wreak on the U.S. economy, not only due to the tariffs, but because Trump and Republicans have weakened most of the laws and congressional mandates that affect economic growth, such as by cutting much of the funding for President Biden’s New, New Deal, so that all now depends on the gut instincts of one man who believes he can run the country and the world.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen