Friday’s jobs report was not good. According to the Bureau of Labor Statistics, employers added just 75,000 workers to their payrolls in May; since March, the economy has averaged about 150,000 new jobs a month. That is much lower than what was happening at the start of this year.
This downward trend isn’t necessarily a reason to worry on its own. For instance, employment growth might slow down if we were getting close to full employment—the point where the vast majority of Americans who want a job have one, and there simply aren’t many people left for businesses to hire. But if that were happening now, you would also expect wage growth to be picking up. As Harvard economist Jason Furman points out, it is not. In fact, average pay growth seems to be softening.
These trends could just be temporary; the jobs report is fickle, and patterns that have been going on for a few months can always reverse themselves. But they are disconcerting, because the most obvious explanation for what might be going on is that the White House has scared the hell out of businesses in recent months by amping up its trade war with China. (The bond markets are certainly suggesting pessimism among investors.) Trump’s tariffs may be directly cooling the economy a bit as well, since they are, after all, a tax on Americans.
Meanwhile, the Trump administration is now on the verge of imposing tariffs on imports from Mexico, unless the Mexican government can convince our president that it will stop migrants from heading to the U.S. border. Mexico has already started cracking down in response. But as of Thursday night, the administration said it still planned to go ahead with 5 percent tariffs starting Monday, which could later grow to be as high as 25 percent. (Trump could still decide to pause this plan over the weekend.)
Using tariffs to punish our southern neighbor over immigration was already a daft scheme before this month’s jobs report came out. It will almost certainly hurt the U.S. auto industry, which relies on its ability to move parts and cars back-and-forth across a supply chain that stretches across the U.S., Canada, and Mexico. It will amount to yet another tax on American households. And it is unclear exactly how much the Mexican government can really do to permanently stem the tide of migrants, given the limited resources at its disposal.
But with the economy looking as if it could be flagging, the idea of slapping a tariff on every single thing the U.S. buys from Mexico is even worse. If our president had any sense at all, there is absolutely no way he’d be going through with this plan. Unfortunately, we’re not that lucky.