New Jobs Tumble in the Face of Tariff Wars and Gov't Firings

The recent ADP payroll report hobbled in like it had been knee-capped (barely half of the expected results, which were already diminished). Only a net of 78,000 new jobs were added, whereas 148,000 had been expected among surveyed economists. That was the economy’s biggest miss below expectations in two years.

The number is much lower than the previous month’s and is considered recessionary since it takes around 150,000 net new jobs to hold the unemployment level where it is. That number is largely what it takes to keep even with population growth flowing into the labor market.

Since February was too early for the Trump Tariffs to have had any direct impact because they hadn’t been implemented yet, it is highly likely that DOGE’s big swoosh of government layoffs coupled with the threat of new tariff impacts on businesses struck some fear in companies, causing them to suddenly put their hiring on hold or slow it way down in anticipation of what is coming.

Trump had already imposed and then removed tariffs in a single day, early last month, and whether they were reinstated this Month depended on Canada and Mexico. No doubt many companies decided to hold off on hiring until they could see better how all of this was going to tumble out. Few people like to fire people, other than Trump, who made a name for himself on The Apprentice with his signature phrase, “You’re fired,” seemingly said with a certain amount of relish. Therefore, companies don’t want to risk hiring people they may have to turn around and fire if business slows.

This labor report provides a perfect example of what I said about chaos by itself coming with its own costs. Start churning things up on a daily basis, and stock markets start to tremble, and businesses start to downshift for worst-case scenarios. More evidence of that came when stocks soared because Trump did as I anticipated he might and immediately started to talk about ways in which he may start to back down a little with some exceptions to his tariffs if he can get what he wants out of Canada and Mexico.

Of course, these tariffs are not even about the tariffs other nations charge the US. Trump has said they are primarily about border enforcement to keep drugs, especially fentanyl, out of America. Given that less than 1% of fentanyl entering the US illegally sneaks its way across the Canadian border, that seems like a concocted excuse for switching to his new tariff-based revenue system, which he strongly desires. Most fentanyl comes across the Mexico border or flies in with US citizens.

However, if he really plans to switch the US away from income tax and back to the old tariff system that used to fund the government, it is a little odd for him to be already offering the hope of exceptions to his new revenue source only a day after the new tariffs went into effect. Why diminish the highly needed revenue streams that he claims other countries pay for?

Maybe this is just more of the unpredictability Trump loves to create to keep everyone off balance and to keep himself in the press every day. Always keep them guessing. Always keep them talking. However, “always keep them guessing” makes it hard for people to invest with any confidence and hard to plan how they should develop their businesses. Is it a good time to hire, or should they wait until there is an abundant number of people clamoring for jobs so wages start to fall? This is all part of the collateral costs that will inevitably materialize from an environment of economic chaos and endless conflict.

Perhaps Trump just started to wobble when he saw how rapidly his former pet, the stock market, which was also his former badge of success, was faltering, so he needed to say something to prop it back up. Of course, the always delirious stock market sucked up any hope it could get wind of and soared. If, however, Trump follows through with his tariff pledges and stays with his usual style of being erratic by design, the market could get head-slammed to the floor again soon or next week.

I think Trump will knock investors’ brains loose if he doesn’t simply give up on his new tax scheme and take the win by claiming some trivial gain was all he wanted, such as some minor window dressing from Canada on border security to stem that massive flow of fentanyl flooding across the Canadian border.

Canadian PM Trudeau said he’s not going to negotiate piecemeal on tariffs with Trump, claiming he won’t remove any of Canada’s retaliatory tariffs until Trump removes all of the tariffs he just imposed. Then Canada will remove all of the ones it just imposed. Perhaps he believes he is calling Trump’s bluff.

Other Canadian leaders agreed:

“We’re not interested in meeting in the middle and having some reduced tariff. Canada wants the tariffs removed,” Canadian Finance Minister Dominic LeBlanc told the Canadian Broadcasting Corporation.

Ontario Premier Doug Ford, the leader of Canada’s most populous province, agreed.

“Zero tariffs or nothing. This attack was not started by our country. This was started by President Trump. He decided to declare an economic war against our country and our province, and we’re going to hold strong,” Ford said.

It looks like Trump may be pressed to watch his stock market crash or turn tail and back down completely on his tariff revenue scheme with some bone thrown to him that he will claim is the victory he was looking for.

(Due to work schedule conflicts, I didn’t have time to follow through with my list of the brightest points in Trump’s speech to Congress along with my commentary; so, I’ll have to do that on Friday since The Deeper Diver is already published for this week, leaving me time then. For now, a short rundown of the main economic story of the day late in the day shall have to suffice.)