“This is a clear warning sign that the trade war is doing serious damage to the economy,” said one economist.
June wasn’t a great month for the labor market. Economists blame President Donald Trump’s trade war — and warn that if he follows through with his protectionist agenda, he could lead America into a recession.
“This is a clear warning sign that the trade war is doing serious damage to the economy,” said Mark Zandi, chief economist at Moody’s Analytics. “The fingerprints of the trade war are increasingly evident in the data.” Trump’s presidency has been defined by a pledge to support American manufacturers, but the trade war is costing far more jobs than it has added, said one economist.
Economists warned that a race toward tariffs could quickly put any job gains in the rear-view mirror, and could send the American economy barreling into a recession. “If the president continues to pursue the war, certainly if he escalates things, I think recession risks rise,” Zandi said. Wright said this will challenge the Federal Reserve to chart a path forward that threads the needle between inflation and growth without making a mistake. “It actually makes the conversation harder,” he said. “This makes it easier for the Fed to make the case for rate cuts, but I don’t think this is enough on its own.”
For now, job growth remains in positive territory even though both the BLS and ADP reports on job gains turned out to be unpleasant surprises. This gives market observers a measure of hope.
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