US jobs market facing ‘Trump slump’ as tariffs bite

America’s jobs market is bracing for a “Trump slump” as the president’s tariffs and immigration crackdown hammer businesses, economists have warned.

Over the next year, the US economy will add just 690,000 new jobs – 64pc less than the 1.9 million added across 2024 before Donald Trump took office, according to a forecast by Capital Economics.

Bradley Saunders, an economist at the consultancy, said: “Outside of the pandemic, the last time jobs growth was this low over a 12-month period was during the recession caused by the global financial crisis.”

Jobs growth of 690,000 would roughly match the 687,000 recorded more than a decade ago in 2010, when the US economy was still reeling from the credit crunch.

James Knightley, chief international economist at ING, said: “Trump’s policies have contributed to a further deterioration in the labour market that was already underway.

“Certainly the numbers have been coming in much weaker since he’s come into office. His policies have created a big headwind to growth and a big headwind to consumer and business sentiment.

“When you’ve got uncertainty, companies just naturally pull back on their hiring.”

America’s jobs numbers have proved a sore point for Mr Trump. He sacked Erika McEntarfer, the head of the Bureau of Labour Statistics (BLS), at the start of August after the agency published massive downward revisions in the jobs numbers.

Across 2024, monthly jobs growth averaged 161,000. The latest BLS figures showed that from May to July, monthly jobs growth was less than a quarter of this, at just 35,000.

‘Recession territory’

Mr Trump claimed that the numbers were “RIGGED in order to make the Republicans, and ME, look bad”.

But there is clear evidence that Mr Trump’s radical economic agenda is hitting the US economy.

Since Mr Trump won the election in November, the net share of Americans who expect unemployment will rise has nearly quadrupled, rising from 13pc to 49pc, according to the University of Michigan’s sentiment index.

The reading has only been this high in five periods since 1978. The last time was during the global financial crisis.

Mr Knightley said: “Historically, this is consistent with private payrolls falling perhaps 200,000 per month, which is recession territory.”

The index is a key lead indicator for joblessness because it reflects what people can see and feel in their workplaces before it starts showing up in the numbers, Mr Knightley said.

“Workers notice when there is a hiring freeze or when a couple of people are fired and they start to fear broader action is coming, and unfortunately it typically does.”

There were already weaknesses in the US jobs market before Mr Trump swept to power.

Some 90pc of the jobs growth recorded in the US over the past two and a half years has been concentrated in just three sectors: health and education, government, and leisure and hospitality.

This means there were very limited gains in the traditional engines of a healthy economy, such as technology or manufacturing.

But Mr Trump’s key economic policies will now directly hammer these three key engines of jobs growth.

Sweeping government cuts put in place by Mr Trump’s department of government efficiency have also hit federal jobs.

Massive cuts to America’s Medicaid public health insurance programme in Mr Trump’s latest spending bill threaten the healthcare sector, while leisure and hospitality is vulnerable to the slowdown in consumer spending that is already apparent.

Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.