BEYOND THE NUMBERS
A Weakening Economy, and a Drastically Cut Economic Support System
Concerns are reportedly growing over the state of the U.S. economy, so it’s worth checking in on its health. The answer is mixed: some positives as it now stands, but also enough warning signs over its trajectory. The economy has weakened relative to last year, and two major culprits are the Trump Administration’s haphazard tariff regime and its cruel immigration policy.
Making matters worse, if a recession were to occur, millions fewer people will have access to health and economic security programs that are vital in times of hardship, due to the deep programmatic cuts enacted in the harmful Republican megabill this summer.
This economic assessment is based on data available through the first half of the year and recent end-of-year projections from the Congressional Budget Office (CBO), which also cites tariffs and deportations as economic drags.
The economy was in relatively good shape at the end of 2024 — basically on par with pre-pandemic years, albeit with elevated inflation, according to the standard macroeconomic indicators (see graph). Real GDP growth during 2024 and the five-year pre-pandemic period were both around 2.5 percent. The unemployment rate and non-farm payroll employment were both better in 2024 than in the pre-pandemic period. Finally inflation, defined here as a set of prices paid by consumers as measured by both the consumer price index (CPI-U) and the personal consumption expenditures (PCE) price index, exceeded that from the pre-pandemic period but was down significantly from the global inflation spike in 2022-2023 coming out of the pandemic.
Now let’s look at the first half of 2025. GDP growth was positive and consumer spending, at least overall, remained healthy. But real GDP growth was lower, and the labor market, as measured by the monthly number of jobs added or lost (nonfarm payroll), was weaker than in 2024. While inflation was slightly lower than in 2024, the downward trend stalled and is moving in the wrong direction.
Many domestic and international factors affect the economy, but the most dramatic changes this year have been the Trump Administration’s economic policies — most notably its tariff and immigration policies. (For the rest of this year, CBO has projected the economic effects of the recently enacted Republican megabill and found them modest relative to the tariff and immigration changes.)
In February 2025, the Administration kicked off a tariff scheme that’s both costly and chaotic. Upon President Trump’s second inauguration the effective tariff rate was 2.4 percent. As of the end of October it’s up over 17 percent, a nine-fold increase. The result is an extra $1.2 trillion in costs to companies, one recent study found, with most of those costs being passed on to consumers.
Compounding these costs is the regime’s uncertainty. The President’s actions will range from threats of much higher tariffs on the one hand and 90-day pauses for certain countries on the other. Businesses tried to anticipate the tariff regime by buying imported goods and building up their inventories before the tariffs kicked in, so they would not need to pass higher costs on to consumers for at least some period of time. However, businesses are struggling with how to adapt to the constant uncertainty and incoherent implementation.
Another major initiative of this Administration is its harsh and violent immigration policy. To say nothing of the human costs, people who are immigrants have been important for the economy, particularly as a driver of labor force growth. Immigrants are a large part of several sectors like construction, home health care, child care, and agriculture.
Research has shown that deportations are already starting to hit industries that have a higher concentration of immigrants. For example, employment in the agriculture industry fell by 155,000 between March 2025 and July 2025. For comparison, during the similar period in 2024, agriculture employment rose by 49,000. CBO has found that immigration has positive impacts on economic growth and on fiscal balance, for instance through increased tax collections.
The Federal Reserve has responded to these economic conditions by lowering interest rates during both its September and October meetings, even though inflation remains above its target level. This shows concern about where the economy is headed and a desire to avoid a sharper downturn, which causes both short-term damage and scarring effects on people’s longer-term economic health.
These concerns also put a spotlight on the need for robust economic security programs like the Supplemental Nutrition Assistance Program (SNAP) and Medicaid. When the economy is weak, more people lose their jobs, which often means they lose health coverage and have a harder time affording groceries. Medicaid and SNAP help cushion this blow for families. They also provide a boost to the economy overall, helping speed the recovery.
But the harmful Republican megabill slashed these programs, which will make recovery from a downturn more difficult, for families and the economy overall. The megabill’s shifting of costs onto states will create further problems during a recession. In a recession, states struggle with falling revenues and meeting those higher costs will be difficult. This in turn can lead states to make cuts which can make a recession deeper and longer.
