The Recession Door Opens |
Photograph by Nathaniel St. Clair
This past week was punctuated by a perfect storm of negative US economic reports and events. Together they mean the door to recession in the US has now opened—quite contrary to all of Trump’s hype that the US economy is doing great.
The reports in question are the July jobs report lasts Friday and the advanced (preliminary) US GDP report for the 2nd quarter (April-June) released a few days before. The events associated with these reports were (1)Trump’s announcement imposing widespread tariff hikes ranging from 15% to 41% on more than 40 countries, with even higher tariffs previously announced on China, Russia, Mexico, Canada as well as ‘across the board’ global tariffs steel, aluminum, copper and other commodities; (2) and The Federal Reserve bank’s decision to keep US interest rates at current levels for at least another six weeks.
If last week’s 2nd quarter GDP data unlocked the door to recession, then last Friday’s Jobs data kicked it wide open. And Trump’s tariffs coming behind threaten to blow it off its hinges.
The Jobs Data Tsunami
It’s generally acknowledged that jobs are a lagging indicator of the condition of the US economy. If so, the July Jobs report shows that there’s no more lag. Jobs have caught up and Friday’s August 1, 2025 report shows Labor Market conditions in the US economy are now flashing red.
According to the US Labor Department’s Establishment Survey (CES) only 73,000 net new jobs were created in July. Moreover, this number is likely to be downward revised, since the July jobs report also revised its previous May and June reports downward big time: for May, the jobs created were reduced from an initially reported 144,000 jobs created that month to only 19,000 in fact: for June, the revision was from 147,000 to 14,000. So when July is similarly revised, it’s highly likely the 73,000 will be reduced dramatically as well. This will mean the total jobs created over the past three months will be barely 50,000!
It’s generally acknowledged the economy has 125,000 new workers entering the labor force and economy every month. The economy must therefore create that many jobs every month just to absorb new entrants, mostly youths seeking jobs for the first time. Only 50,000 created means more than 300,000 are entering the ranks of the unemployed not gainful employment.
The US Labor Department has a second jobs survey to the CES, which covers mostly large companies. The second survey is called the Current Population Survey or CPS. It covers more small and medium sized businesses as well as unemployment levels the CES does not report. The CPS report on Friday showed that new entrants’ unemployment rise by 275,000 in July.
The plight of new workers seeking employment is not the only negative indicator of a rapidly deteriorating US labor market this summer. Here’s some other telling job indicators:
The general level of employment in July fell by -260,000. It would have been an even greater decline had the level of part time employment not also risen by 433,000 as well. No doubt many companies converted their full time employed workers to part time in lieu of laying them off. Conversion of full time to part time typically occurs with the onset of early stages of recession.
Beyond just July, the CPS revealed that since May 1 the Employment level for the US economy in general declined by -863,000.
The unemployment rate, also indicated by the CPS only, remains at approximately 8% for the entire US labor force of 170 million—not the ‘official unemployment rate of 4.2% one consistently reported by the mainstream media and hyped by politicians. The 8% includes the 50 million plus part time, temp, discouraged, independent contractor, gig and similar job categories that the ‘official’ 4.2% excludes.
The 8% means there’s roughly 14 million US........