Tariff fears took their toll on stocks Friday with the Dow falling 444 points by end of day after President Donald Trump announced reciprocal tariffs against any nation that imposes retaliation tariffs against the US for the tariffs Trump has just announced. In other words, this year’s tariff wars are already looping into a second cycle even though we’re less than a month into the Donald’s second term. This week’s tariff loop comes on top of the cycles of tariffs that were initiated in Trump’s first term, which continued under Biden. Friday’s market losses wiped out the entire gains from earlier in the week.
Prior to Trump’s latest tariff volley, reports on US jobs and consumer sentiment over inflation showed significant troubles starting to form. While one article in the barely conscious, mainstream media claimed the job deterioration was not enough to matter for some time, given that unemployment actually dropped from 4.1% to 4.0%, even as new jobs declined, I beg to differ strongly. As usual, I don’t think some of these financial writers could figure out how to open a soup can with a can opener if they were starving.
Even with the drop in new jobs and the simultaneous and seemingly contradictory decline in the unemployment rate, wages rose. The difference in direction between new jobs and unemployment can be attributed to the simple fact that the unemployment rate is calculated over a longer time frame, so does not move as quickly as weekly jobs reports. What that means is that the unemployment drop is the outlier because the monthly drops in new jobs will quickly stack up to turn that back around. The mainstream press should have been able to figure that out.
CNBC reported,
Nonfarm payrolls climbed by a seasonally adjusted 143,000 for the month, down from an upwardly revised 307,000 in December and below the 169,000 forecast from Dow Jones.
That was a fairly good-sized miss, but more importantly, it cleared away any notion that the 307k reported for December was a meaningful improvement in the labor market. There was not only no follow-through in that direction, but a very stark reversal.
Even more importantly, because it proves my point, something happened that I said about a week ago you could certainly expect. All the jobs reported by the Biden administration during an election year, suddenly got revised down … by well over half a million! Proving the whole thing was the electioneered construct that I said it was all year long.
That came as no surprise once Biden was out of the picture—as I told you to expect to see it—but I’m sure you had already figured that out for yourself, as well, and didn’t need my help to see it. Consider what I offered just reinforcement to what you had likely already figured out. The numbers were always cooked to try to make the Biden Admin. look good for the campaign trail.
(If you want granular detail on the employment report, you can find it HERE. My goal with this Deeper Dive it to focus on the broad sweep and what it means for my 2025 economic precisions.)
Rhapsody in the blues
Then we have this odyssey continuing to play through:
Respondents to the University of Michigan’s consumer sentiment index also said they expect inflation to rise to 4.3% by year’s end, more than double the Fed’s target.
The cries over inflation are far from over. Consumers are starting to expect the pinch will get worse again.
The changes in jobs by themselves may appear not to be all that consequential, given that the unemployment rate has actually gone down after putting in the start of what looked last year like it was about to be a parabolic rise, but that may have been due to December’s 307k anomaly. Now we see the bigger picture is consequential for jobs, and we see once again that the inflation fight is far from over.
This is the economic background reality for the absolutely massive changes now happening in the world of tariffs, coupled with the colossal government shutdowns being carried out by DOGE with abandon and with nearly no government input. Elon Musk is acting like he is the supreme dictator over all things governmental with Trump’s imprimatur over all that his henchman is doing.
Where I am going with what may have just appeared to be a rant is actually to a logical projection: The Trump cuts to government were not yet in those sinking job numbers and certainly were not at all in the lowering unemployment rate because applications take longer than a week to get accepted by any state unemployment office and added to the unemployment roll. The cuts have been sweeping, so the coming unemployment rise will be, too.
Unemployment can be expected to put in a big upturn quickly as all those government workers join the roll call, but something equally important to realize is that that the rise in unemployment will be much higher than just the cuts in government employees. As big swaths of government payments are shut down at the Treasury by Musk & Men and even entire government agencies running contracts are shut down, contractors are already orchestrating their own shutdowns.
Private-sector employers and nonprofits are starting to lay off workers as a result of the Trump administration’s sweeping cuts and funding freezes, unleashing a wave of job losses that economists say could pick up steam in the coming weeks, threatening the broader labor market.
(MSN)
Not a single job lost is connected to this week’s net new jobs or unemployment numbers; so expect a huge change in the next few weeks. Because so much mystery surrounds DOGE and how it is making its decisions, and each decision hits as an unannounced surprise (and maybe it has to in order to keep agencies from shredding all their misdoings), there is no way to know the scale or impact of what has already happened, much less what is coming. One can hope Elon, being a smart man, figured all of this out months in advance, but it looks more like Musk and his madcap crew unvetted surgeons are performing limb-amputation surgery using bombs, instead of scalpels and bone saws.
Here is an example to show how nobody knows what is coming and how the effects might be surprisingly detrimental to many people who had no idea anything like this was coming so no time at all to prepare:
So far, the fallout includes rescinded contracting jobs in Fayetteville, North Carolina, and Austin; layoffs at an independent-living facility in West Virginia that relies on federal funding to pay staffers; and furloughs at after-school programs in Maine and community health centers in Virginia facing federal funding delays.
“Having funding yanked so quickly means government contracts are at risk, health research is on hold, and millions of employees are getting conflicting messages about their jobs,” said Harry Holzer, a professor at Georgetown University and former Labor Department chief economist. “We don’t know where this is going to end up, but we can’t dismiss its effects on the economy.”
If Musk and his Mighty “Big Balls” Men (as one of his teen-age geeks calls himself) are being smarter than things look, maybe the economic damage will be moderated; but their acts look like a wrecking ball swinging through the entire US economy. When contractors don’t get paid because payment systems get shut down systemically, not by line item, then they start laying off workers because they are concerned they won’t be able to make payroll.
When entire agencies go down, perhaps all the contracts they controlled go down with them. Will that be for a month or two until DOGE can sort out what it wants to keep going from what it really meant to shut down, or will it take months to sort it out, or will they turn any of it back on? No one outside of DOGE knows. I’m not sure even DOGE knows at this point.
So, we’re not just talking the loss of tens of thousands or maybe hundreds of thousands of government workers, all going on unemployment, but also the loss of hundreds of thousands of employees who work for government contractors. Then you have mass deportations, which will open up jobs for some of those displaced workers, but probably not in regions where they live or not at anywhere near the pay they have built their household budgets around.
On top of that, when you deport hundreds of thousands of cheap laborers, you have no idea what entire production lines (or crop harvests) might have to be shut down due to lack of sufficient labor because you cannot possibly find enough replacement employees or increase salaries and, hence, prices enough to get all the replacement employees you need in time to avoid shutdowns. Beyond that point, no one can have any idea how shutdowns in the first tier of production lines will impact other producers who are dependent on essential parts from the lines that just went down, causing those secondary producers to shut down. (Anyone remember supply-chain problems?) Even the producers have no idea what is coming. Since it’s all happening by surprise daily, they don’t know who will get hit with the deportations first.
The White House has warned that additional public-sector layoffs are “likely” if enough of the 2.3 million-person federal workforce doesn’t leave voluntarily. As of Wednesday evening, some 40,000 federal workers had agreed to resign, though a federal judge on Thursday paused the deadline for the buyout program. A hearing on the matter is set for Monday.
Trump has said he is looking to get, at least, 220,000 government-job terminations. Beyond that number, there is just no way to know if the repercussions from these massive shutdowns all over the place will spread though the private sector to become only moderately greater than the original number of government employees who get terminated or will become massively greater than the number or government employees terminated because you cannot calculate, with so many variables, what the collateral damage to supply lines and service people will be from all the government cuts that happened in just one week. Yet, it would be a ludicrous flight of fancy to believe the wholesale government cuts will not play through the private sector in some equally significant ways. And there are clearly more government cuts to come.
Again, as an example:
In the meantime, government contractors are scrapping projects and announcing layoffs. Chemonics International, an international development firm based in D.C., has furloughed more than 600 U.S. workers and cut hours for an additional 300 employees as a result of the government’s “stop-work order” for USAID-funded projects. A spokeswoman for the company said it is still waiting for millions of dollars in funding from invoices filed as far back as November. Another firm, DAI Global in Bethesda, Maryland, has furloughed nearly 400 of its workers, accounting for roughly 70 percent of its American workforce.
Multiply that a thousand times over to encompass all the business contracts with all agencies that are being stopped or seriously rolled back, and it can suddenly swell up to be an enormous number of layoffs. BUT WE DON’T KNOW.
The fact is that we have a society that has built up enormously around government contracts. It might be wise to cut out the belly fat with a lot of forethought like a skilled, carefully planned abdominal surgery and not with an atom bomb. I don’t know if you can do it that thoughtfully and still be able to accomplish anything, government being as entrenched and corrupt as it is. Surprise attack may be the only way, but just KNOW that the present approach will have far-reaching negative impacts that you have to expect, and they are going to be coming from directions you don’t expect.
For example:
Sarah Nichols was furloughed from her job at an economic development consultancy last week, after its contracts with USAID were put on hold. The 29-year-old filed for unemployment on Tuesday and is making plans to move back in with her parents after her lease expires this month. But even that feels rocky: Both of her parents work for the federal government and are worried about losing their jobs, too.
Does her situation represent mere hundreds of people, or is it this:
“My LinkedIn feed is just thousands of people in the industry who have been laid off or furloughed.”
We don’t know. They don’t know! That is, the people being fired have no idea where to turn that will be crash-safe. Just like this woman’s parents, they don’ know what is coming down next! New pink slips will be arriving en mass next week. So, I’d warn, “Get ready for this to become a lot worse than even the Donald knows because there is a domino effect here that I doubt anyone has done the math on.”
If Donald and his prophets were right in a recent article I wrote where Don and the prophets of his good fortune said God saved Trump’s life because God has chosen him, I’m still not so sure God hasn’t chosen him to become the greatest wrecking ball America has ever seen, and I have no idea if that is to make America great again or for its ultimate judgment. After all, equally many have been the self-proclaimed prophets who claimed America’s judgement was nye.
That works both ways. I’m equally not sure, once the destruction is all over, it won’t be mostly liberal institutions that went down that were sucking the life out of America to give its life energy to every other “more deserving nation” than us, and then we’ll rebuild from the rubble and have that recouped energy to work with. There are no clear reconstruction plans presented so far.
“I’m applying for jobs, but if I want to do something in education or public health that’s federally funded, it’s like, ‘Am I going to get this job and then just laid off again?’”
Probably. You don’t know. Right now it all looks like chaos. While I feel that many of the things that are falling deserved to fall (like USAID), I have no idea how many good things went down with those institutions that we don’t want destroyed, and I have no idea how many contractors will fall with them and how many subcontractors will fall alongside the contractors and how many service companies that provide lunches, uniforms, whatever to those hundreds of thousand employees might also shut down along with the companies that serve them. There is simply no way of knowing where the last domino falls in this kind of broad destruction.
I’m not sure Elon knows either. In fact, I doubt he does. When he hit Twitter like a wrecking ball, it never did recover (so far) to its former financial greatness. He did manage to turn it into a huge megaphone for certain voices. While it deserved to be bashed due to all its censorship, I don’t believe Elon had any idea the backlash he’d face from advertisers. He hadn’t thought that through. It still remains to be seen if X survives, but I THINK it will. I THINK America will, too, but I’m far from certain.
In the rest of this Deeper Dive, for paying subscribers only (link below), I am going to lay out some clear repercussions that I AM CERTAIN OF as my economic predictions for 2025.
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