If you zoom out, the US economy has been undisputedly resilient, pretty much ever since the global financial crisis in 2008.
The last few years have been more controversial however. Technical recessions, vibecessions, high inflation, low inflation. Investors have seen it all.
The market is both going to crash or continue going past all-time-highs. Depends on who you ask.
Based purely on data, Donald Trump inherited a strong economy. The President himself speaks confidently about America getting rich off tariffs and a manufacturing boom unlike any other.
But the gap between the hard data and the political story is now wide enough that investors are asking: is Trump’s economy really built on substance, or just vibes?
What the latest data really show
The US economy added just 22,000 jobs in August, far below expectations of 75,000. June payrolls were revised to show a net loss of 13,000 jobs, the first monthly drop since 2020.
In total, the US economy has created about 598,000 jobs so far in 2025, roughly half the 1.14 million recorded in the same period of 2024.
Unemployment rose to 4.3% in August, the highest in nearly four years. The prime-age employment rate remains strong by historical standards, but it has slipped from its 2024 highs. Wages are still rising at 3.7% year-on-year, but average weekly hours worked have fallen, which points to weaker output growth.
The labor market is cooling across the board. Job openings dropped to 7.18 million in July, their lowest since last September. Initial claims for unemployment benefits climbed to 237,000 at the end of August.
A Challenger report showed US companies announcing almost 86,000 job cuts in August, the largest for that month since 2008 outside of the pandemic.
Although these are not recession numbers, they are not consistent with an economy expanding at speed. Instead, the US economy looks stuck near stall speed, with companies reluctant to add workers and more people out of jobs for longer stretches.
Why factories are shrinking, not booming
Manufacturing is central to Trump’s economic pitch. He promised in his inaugural address that America would be a manufacturing nation once again. But factory payrolls tell a different story.
Manufacturing employment fell by 12,000 in uAugust, the fourth consecutive monthly decline and the longest stretch of losses since 2020. Over the past year, factories have cut close to 80,000 jobs.
The Institute for Supply Management’s survey shows US manufacturing activity has been contracting since March. About 69% of manufacturing GDP is in contraction, according to the group’s chair.
Major companies such as John Deere report higher input costs from tariffs on steel and aluminum.
The White House points to pledged investments from Apple, AbbVie, and Ford as proof of a coming renaissance. Officials argue that jobs will follow once factories are built.
But announcements are not payrolls. The lag between breaking ground and hiring can be long, and uncertainty created by shifting tariffs and ongoing legal challenges is delaying capital spending. For now, the “factory boom” is more visible in press releases than in headcounts.
The role of tariffs and immigration
The slowdown is not simply cyclical. Trump’s economic policies are feeding into both supply and demand.
Trump’s policies have pushed the average US tariff rate to its highest since the 1930s. These measures raise costs for manufacturers, disrupt supply chains, and deter hiring.
At the same time, courts have ruled that many of these duties are illegal, keeping trade policy in limbo and businesses hesitant to commit.
Immigration policy adds another layer. Crackdowns and raids have cut into labor supply in sectors ranging from agriculture to auto manufacturing. Native-born unemployment has also been rising, suggesting the damage is not limited to undocumented workers.
The combination of tighter supply chains and fewer available workers has raised costs and constrained production.
Government employment is also shrinking. Federal payrolls fell by 15,000 in August and are down 97,000 this year after spending cuts. State and local government job openings, a normally stable source of employment, have also declined.
These acyclical areas had been a cushion for the job market. Their weakening removes a key support.
Can the Fed offset policy-driven shocks?
The Federal Reserve faces a difficult test. Inflation has eased from its 2022 peaks but remains above the 2% target, running closer to 2.5%.
Market expectations suggest inflation will stay above target for the next five years.
Ordinarily, slowing job growth would push the Fed to cut rates. Indeed, financial markets are pricing in a quarter-point cut at the September meeting, with more to follow.
But the nature of the slowdown complicates the case. If the problem is weak demand, lower rates can boost spending and hiring. If the problem is supply shocks, due to tariffs raising costs and immigration cuts reducing labor, then easing policy risks stoking inflation without fixing the bottlenecks.
Some Fed officials are already warning that the labor market has softened more quickly than expected. Christopher Waller, a governor, said “when the labor market turns bad, it turns bad fast.”
Yet others fear repeating the 1970s, when monetary stimulus in the face of supply shocks left inflation entrenched.
Investors should not assume that rate cuts will deliver a manufacturing revival. Cuts may stabilize demand and support markets in the short run, but they will not undo tariffs or rebuild supply chains.
Is this really just vibes?
Objectively, Trump’s economy is not really in freefall. Growth has been slow but positive.
Prime-age employment remains high, and wages are still rising. But the weakness is broadening. Job creation is running at half last year’s pace, factories are shedding workers, job openings are drying up, and even healthcare and social assistance are slowing.
The administration’s narrative of an industrial revival rests on capital spending announcements that have yet to translate into hiring. Until plants are built and workers are employed, the “boom” is more a political message than an economic reality.
Investors betting on a resurgence of US manufacturing should distinguish between announced projects and operational facilities.
The key insight is that this slowdown looks policy-driven. Tariffs and immigration restrictions are acting as supply shocks. They are holding back production, raising costs, and keeping inflation sticky. Fiscal cuts to federal employment and uncertainty over trade law compound the effect.
The takeaway for investors is that Trump’s economy is less about near-term numbers and more about long-term execution.
Key factors to watch will be whether corporate pledges move from paper to payrolls, or whether manufacturing surveys turn from contraction to growth.
The US economy remains resilient, but resilience has limits. Until policy shifts or investments materialize into real jobs, Trump’s economy is not “just vibes”, but the vibes are running far ahead of the verifiable data.
The post Is Trump’s economy just vibes? Data vs narrative appeared first on Invezz