Trump economy at 18 months is a tale of shocks, resilience, and signs of stalled progress

The first 18 months of 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.

It has also seen 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 materialise, with the midterm elections a little more than three months away.

Resilient, yes, but the economy has also stalled in many of the areas where Trump said that mass deportations of undocumented people and higher import taxes would trigger a boom, with the US-Israeli war against Iran intensifying some key risks.

US jobs

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.

But the agency does use the new population estimates for an experimental series that looks back five years to create a consistent data set beginning in April 2020.

That data also shows declines in both the labour 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.

Who’s hiring

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 centres 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 is hard to reshape what an economy of 342 million people demands. It is a society that likes restaurants and bars. And it is one that is getting older and in need of more healthcare services. Changes in hiring reflect that dynamic.

US prices

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 generalised inflation.

Some Fed officials see that scenario as an imminent risk.

US incomes

Setting aside debate about whether a “K”-shaped 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 is 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 is left over after taxes and covers wages as well as things like payments from the Social Security pension programme – 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 politicians 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 US 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.

AI bond boom

The AI sector has been a major driver of the market gains since Trump returned to the White House.

But AI – currently the single largest driver of the business investment boom supporting GDP growth – is moving more than just the stock market.

Year-to-date corporate bond issuance of $1.52 trillion to the end of June – a big chunk of it to finance the AI buildout – is on a record pace, surpassing the post-pandemic boom in 2020.

Strong issuance combined with tight spreads and robust demand points to a resilient economy and solid corporate balance sheets.