Trump Economy Is a Tale of Shocks, Resilience, and Signs of Stalled Progress

US President Donald Trump greets crowd at a rally at Wheeler High School north of Atlanta (dpa) 
US President Donald Trump greets crowd at a rally at Wheeler High School north of Atlanta (dpa) 
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Trump Economy Is a Tale of Shocks, Resilience, and Signs of Stalled Progress

US President Donald Trump greets crowd at a rally at Wheeler High School north of Atlanta (dpa) 
US President Donald Trump greets crowd at a rally at Wheeler High School north of Atlanta (dpa) 

The first 18 months of US President Donald Trump's second term in the White House have seen a series of policy-driven economic shocks, highlighted by the immigration crackdown and higher tariffs that he promised during his 2024 campaign, and an unanticipated war with Iran that has boosted the price of oil and threatened global supply chains.

While the US economy overall has withstood the policy changes and Middle East war better than many economists expected, Trump's vow to lower prices, boost factory jobs, and improve life for the middle class has yet to materialize, with the ‌midterm elections a little more than three months away, according to Reuters.

Stalled Labor Force

Between tougher immigration and an aging resident population, there are fewer people available for work. Household surveys also show a recent decline in the number of people working.

The broadest measure of employment comes from the Bureau of Labor Statistics' household survey. Changes in population statistics in early 2026 mean BLS's published data is not strictly comparable from year to year, showing a sharp drop in employment and the number of people looking for jobs in January largely due to the new controls.

That data also shows declines in both the labor force and number of people working since Trump's return to office, a logical development given the efforts to limit immigration and increase deportations. Coupled with an aging native population, fewer people are available to fill jobs.

Decline in Manufacturing Jobs

Trump said his policies would lead to a US manufacturing revival, with ⁠jobs to follow. There has been an investment boom — in artificial intelligence data centers whose impact on output and jobs remains to be seen.

The AI investment has pushed construction employment higher. But payroll reports show fewer manufacturing jobs than at the end of former President Joe Biden's administration. Biden left the presidency in January 2025.

Some of Trump's priorities are reflected in the jobs data, such as the drop in the number of government workers.

But it's hard to reshape what an economy of 342 million people demands. It's a society that likes restaurants and bars. And it's one that is getting older and in need of more healthcare services.

Changes in hiring reflect that dynamic.

Inflation Hinders Trump’s Promises

Inflation was a major campaign theme in 2024, with anger over the COVID-19 pandemic price shock still fresh even as price pressures eased while the Federal Reserve raised interest rates.

But Trump's promise to lower prices was never realistic. Historically, US prices on a broad basis only fall during dire economic times.

Lowering inflation is possible, but any improvement under Trump has been modest. The most closely watched price indexes show progress stalling, with inflation still above the Fed's 2% target, and policymakers concerned about the risks of it moving higher.

Import tariffs added to the price hikes to some degree; oil's surge to around $100 a barrel, about 50% more than where it traded before the war in the Middle East began in late February, added to the pressure; and now the demands from the AI buildout are doing the same.

Economists expect relative price shifts. In any given period, certain goods will increase relative to others.

But when the increases are big and broad enough, and different items keep rotating through the price-increase cycle, the result is more generalized inflation.

Some Fed officials see that scenario as an imminent risk.

US Spending Resists Shocks

Setting aside debate about whether the US income ‌distribution, in which the wealthy ⁠and highest earners prosper while lower- and middle-income households fare less well, is fair or sustainable, consumer spending has held up throughout the various Trump-era shocks.

But it's unclear how long that trend can continue given that the broadest measure of household spending power — disposable personal income adjusted for inflation — has stalled out and even declined recently.

Disposable personal income is what's left over after taxes and covers wages as well as things like payments from the Social Security pension program — in effect the money left in a person's pocket to pay for housing, food and other goods and services.

Affordability

Trump has veered from promising to make life more affordable to dismissing that objective as unimportant, calling recently enacted congressional legislation aimed at improving home affordability “a big yawn” and refusing to sign it.

Housing is a difficult issue. Presidents have held out homeownership as a touchstone of individual wealth and success for Americans, but lawmakers have curbed credit standards when markets got frothy and caused a ⁠global financial crisis.

After years of ultra-low interest rates, the pandemic added further fuel to the US housing market — driving up home prices — and then Fed rate hikes meant to curb inflation made affordability worse by pushing mortgage rates to new highs.

Mortgage rates remain elevated, as do home insurance premiums that are linked to higher home values and other relevant costs.

The federal government can do only so much about housing supply. Extending tax credits or similar policies can help, but the sector remains under the control of local governments and their patchwork of land-use and zoning rules.

The bottom line, however, is that homeownership continues to command an outsized share of household income.

The Stock Market

Trump has long been fixated on the performance of the US stock market, with the president touting major indexes' recent record highs as evidence of his policy successes.

The fact is, though, stocks tend to rise over time regardless of who is president, and most modern US leaders have seen record equity prices during their terms.

The market's performance since January 2025 ranks right in the middle of the pack when measured against presidents going back to Ronald Reagan. The S&P 500 index has gained roughly 25% during Trump's second term versus a median gain of about 24% over the first ⁠18 months of presidential terms dating back to 1981. That performance still measures up well against the overall compound annual growth rate of 9.5% for stocks in that period.

 

 



Oil Falls but on Track for 8% Weekly Gain on Supply Concerns; US Diesel Hits Record High

WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)
WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)
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Oil Falls but on Track for 8% Weekly Gain on Supply Concerns; US Diesel Hits Record High

WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)
WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

Oil prices fell on Friday but remained on course for a weekly gain of more than 8% while US diesel prices hit a record high as attacks along Middle East shipping routes stoked concerns about prolonged supply disruptions.

Brent crude futures were down $3.45, or 3.21%, to $104.18 a barrel at 1132 GMT.

US West Texas Intermediate crude fell $2.96, or 2.89%, to $99.52 a barrel. Both benchmarks hit their highest levels since mid-May earlier in the session.

The benchmarks reversed early gains after the Financial Times reported that foreign ministers in the Middle East are trying to work out a temporary deal with Iran to manage shipping through the Strait of Hormuz.

Brent and WTI rose more than 6% on Thursday after an escalation in shipping attacks in the region.

"Some headlines of possible new talks in the Middle East are weighing moderately on oil prices today," said UBS energy analyst Giovanni Staunovo. "I keep seeing near-term risks to the upside for oil prices, but we should expect ongoing high price volatility too."

In a further potentially significant development for Riyadh, satellite imagery showed smoke on Thursday in the vicinity of Saudi Arabia's East-West Pipeline, which has become a vital means for the kingdom to divert its crude exports away from Hormuz.

Saudi Arabia's crude supply fell by 2.3 million barrels per day on the month to 6 million bpd in August, the lowest level in more than three decades, the International Energy Agency said on Friday, citing attacks on Saudi energy facilities.

Adding to concerns over regional oil flows, Yemen's Iran-aligned Houthis on Friday reached the island of Perim in the Bab el-Mandeb Strait, four Yemeni government sources told Reuters, potentially tightening their grip on one of the world's vital shipping routes.

Iran said it had attacked 10 ships near the Strait of Hormuz on Wednesday, after the US hit five Iranian oil tankers. Iran's Islamic Revolutionary Guard Corps said it would escalate its response to any further attacks.

Vessel transits at the Strait of Hormuz fell to seven on Thursday from 11 the previous day, preliminary ship-tracking data showed on Friday.

The strait handled about 125 commodity vessels and one-fifth of global daily oil and liquefied natural gas supplies before the Iran war began in late February.

Meanwhile, two European Central Bank policymakers opened the door on Friday to further interest rate increases if a war-fuelled rise in energy prices continues and pushes up other prices in the euro zone.

SUPPLY DISRUPTIONS LIFT FUEL PRICES

Oil supply disruptions due to the Iran war, along with Ukrainian attacks on Russia's refineries, pushed the US national average diesel price past $6 a gallon for the first time on Thursday, according to price tracker GasBuddy.

"Refined products, particularly diesel, are feeling a one-two punch right now," said Tim Waterer, chief market analyst at KCM Trade.

"As long as both the Gulf shipping constraints and Russian refining outages remain in play, diesel and other refined products are likely to show a higher upside tendency than the broader crude market," he added.

Commerzbank raised its year-end Brent crude forecast to $85 a barrel from $75, while increasing its diesel forecast to $1,200 a ton from $950 and its jet fuel forecast to $1,230 a ton from $980.


Gold Gains on Softer Oil; US Inflation Data in Focus

A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/
A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/
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Gold Gains on Softer Oil; US Inflation Data in Focus

A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/
A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/

Gold prices rose on Friday, but were headed for a weekly loss, as oil slipped from multi-month highs and assuaged some inflationary concerns, as investors awaited key US economic data for clues on the Federal Reserve's monetary policy path.

Spot gold rose 0.6% to $4,339.46 per ounce by 1105 GMT. It was down nearly 3% for the week so far.

Prices fell on Thursday after the US Producer Price Index data showed prices increased in line with expectations in August amid a rebound in the cost of energy products.

US gold futures dropped 0.6% to $4,381.30.

The precious metal is benefiting from "softer oil prices on hopes a Monday meeting between GCC ministers and Iran can yield some results regarding the passage of oil through the Strait," said Ole Hansen, head of commodity strategy at Saxo Bank. "In addition, buyers once again emerged ahead of a key support area around $4,300," said Hansen.

Oil prices were set to end the week above $100 a barrel.

Higher oil prices stoke inflation fears and bolster expectations of the Fed raising interest rates. While gold is typically seen as an inflation hedge, higher interest rates diminish the appeal of non-yielding bullion.

Traders are now pricing in a 67% chance of a rate hike at the central bank's policy meeting next week, up from 62% before the data, according to the CME FedWatch Tool. The US consumer price inflation report is due at 1230 GMT.

Elsewhere, gold demand in India was subdued this week as volatile prices discouraged buyers, while investment demand remained strong in top consumer China.

Among other metals, spot silver rose 0.4% to $63.80 per ounce, but was down 3% for the week.

Platinum climbed 0.9% to $1,792.07 and palladium gained 2.4% to $1,312.90. However, both metals were on track for a weekly loss.


France Lowers Growth Forecast, Will Miss Deficit Target

French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq
French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq
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France Lowers Growth Forecast, Will Miss Deficit Target

French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq
French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq

France's economy will grow less than expected this year and the government will miss its budget deficit target, Finance Minister Roland Lescure said on Friday.

The downgraded outlook complicates the government's task of getting its 2027 budget passed in the coming months in a deeply divided parliament, where parties have hardened their positions before an April-May two-round presidential election.

Lescure told journalists he was lowering the government's 2026 economic growth forecast to 0.5% from 0.7% previously, but stuck with a ⁠projection of 1.0% ⁠for next year.

"This year has been marked by extreme crises involving four different types of shocks," Lescure told reporters, according to Reuters.

Slower growth will make it more difficult for the government to trim its fiscal budget deficit as planned to 5.0% of economic output this year.

"The ⁠reality is that the budget was built on a 5% assumption. And the reality is that, today, 5% is no longer an option," Lescure said.

The minister did not give a new deficit target.

The economic fallout from the war in the Middle East and summer heatwaves and drought that hit agriculture output have dragged down growth and put the government's fiscal targets out of reach.

"I think it is reasonable to say that economic ⁠uncertainty has ⁠never been greater than it is today," Lescure said. "We are operating under tight budgetary constraints; there is no more fat to trim."

Further complicating the picture, French borrowing rates have surged in recent weeks as investors have identified France as one of the weaker links in a global bond selloff due to its weak public finances and serial slippage on its deficit-reduction plans.

Lescure stressed that France had no difficulties in issuing debt, but acknowledged that it now cost more.