Can low unemployment last under Trump?
For a time, not too long ago, it was the central question animating economic forecasts and bets laid by investors in financial markets: Will the U.S. economy avoid a recession?
Now, for many in the business world, that question feels almost passe, part of an earlier, more fretful era of narratives.
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After a superlative run of hovering below 4% for more than two years, the unemployment rate — at 4.2% — has ticked up since last spring. But only by a bit so far; the December reading will come Friday. While hiring has slowed, layoffs remain low by long-term standards.
Inflation, having calmed substantially, is still being eyed warily by the Federal Reserve, which began steeply raising interest rates in 2022 to combat price increases. But at three consecutive meetings in the final months of 2024, the Fed slightly lowered the key interest rate it controls — an attempt to surgically take some pressure off commercial activity and support employment.
Predictions of a downturn, once omnipresent, were mostly absent from the year-ahead forecasts that major financial firms typically send around to clients over the holidays.
Near the start of 2024, Jeremy Barnum, the chief financial officer at JPMorgan Chase, told listeners asking about U.S. economic vitality during a conference call, “Everyone wants to see a problem — but the reality is we aren’t seeing any yet.”
In the opening days of 2025, conditions appear similar: Even as worst-case-scenario fears of an imminent recession with mass layoffs have largely subsided, anxious recalculations of fresh risks by analysts still abound.
President-elect Donald Trump, for instance, continues to threaten that upon taking office, he will institute a worldwide wave of large tariffs — import taxes that many economists worry could spark inflation again if carried out rashly. It is also unclear whether Trump will pursue the maximalist deportation of immigrants living in the country without legal permission and deep cutbacks in border crossings that he often promised while campaigning — a pledge that, if kept, could reduce both hiring and labor supply in several sectors.
Traditionally, streaks of economic growth in America have been subject to relatively predictable sine-wavelike dips: Businesses, after being overly optimistic about conditions, find they may be overextended and pull back on investment and hiring; consumer confidence wanes as finding work gets harder; then, overall spending and production decrease while bankruptcies and unemployment spike. Finally, after debts are squared, sentiment turns brighter, and lending and spending recover, bringing about a new cycle.
But the last time that such a textbook undulation happened was the expansion from 2002 to 2007, which ended in the economic carnage of the financial crisis. Since 2009, the U.S. economy’s only recession was the result of a once-in-a-century pandemic — not from major internal turmoil.
And it was not clear as this decade began that the economy was in immediate danger. In February 2017, right after Trump took office, the unemployment rate was 4.6%. In February 2020, the last month before the pandemic lockdowns, that figure stood at 3.5%.
