The U.S. economic outlook, which showed signs of strength at the beginning of Donald Trump's administration, has deteriorated in recent weeks. According to an article in The New York Times, White House policies have generated instability in the markets, affecting business confidence and economic growth.

When Donald Trump took office, he inherited an economy in apparent good shape. Wages, consumption and corporate profits were on the rise, while unemployment remained low. However, a few weeks into his term, economic indicators have shown a negative trend.

The LIFE Survey Report - January 2025, published by the Consumer Finance Institute of the Federal Reserve Bank of Philadelphia, reveals an increase in concern about job stability, especially among younger employees. According to the report, workers expressed greater concern about their employers' ability to stay in business, with a 4.4 percentage point increase in this concern, reaching 29.7% of respondents. In addition, the fear of layoffs grew by 3.0 percentage points to 30.3%, while the possibility of a new business closure also became a factor of uncertainty (28.9%).

The analysis by age group shows that the youngest employees (18-35 years old) are the most concerned about job stability. In this group, 42.4% fear exposure to illness in the work environment, 42.0% are concerned about possible company closures, and 41.6% anticipate layoffs. Compared to older workers, young people report greater uncertainty, suggesting that this sector of the workforce faces a more volatile and less predictable work environment.

On the other hand, the stock market has experienced significant volatility, and many markets have lost value. For example, the traditional Standard & Poor's 500 index, which expresses the situation of the shares of the 500 most important companies in the industry, hit a 4-month low on the previous Friday when it closed at 5,770.20 points.

The factors that have affected the outlook of economic agents have been the implementation of tariffs, layoffs in the public sector have increased and the discouraging results in inflation that have led the FED to slow down its interest rate cuts for an important period.

At the same time, economic growth forecasts for the first quarter have been revised downward, with some analysts warning about the risk of a recession. Although most economists consider a deep economic downturn scenario unlikely, the impact of Trump's policies is undeniable.

Among the main factors that have generated this uncertainty are the imposition of tariffs and trade retaliation by other countries, layoffs in the government sector, and the implementation of immigration raids affecting key sectors such as construction and hospitality. These actions have reduced consumer and business confidence, generating an environment of economic uncertainty.

According to Donald Rissmiller, chief economist at Strategas, quoted by The New York Time, the U.S. economy, which was initially in a favorable situation, has seen its stability deteriorate due to the lack of clarity and coherence in government policies. “If the economy was starting out in quite good shape, it’s probably in less good shape after what we’ve seen the last few weeks,” the expert told The New York Times.

Impact on Economic Growth

While some sectors have greeted the Republican administration's promises of tax cuts and deregulation with enthusiasm, the execution of these policies has been marked by uncertainty. Announcements and rollbacks on tariffs, federal employee layoffs and an aggressive approach to immigration policy have negatively impacted market perceptions.

Michael R. Strain, an economist at the American Enterprise Institute, told The New York Times that the measures adopted by Trump will not cause an immediate recession, but warns that they could slow economic growth and increase the unemployment rate. In addition, the removal of immigrant workers could make labor more expensive and affect the competitiveness of U.S. companies.

Prolonged Crisis?

Some analysts have likened the impact of these policies to a trickle-down damage. According to Jay Bryson, an economist at Wells Fargo, consulted by The New York Times, no single factor is enough to trigger a recession, but the accumulation of uncertainty could generate a domino effect that affects long-term economic growth.

Tariffs imposed by the Trump administration could reduce GDP growth by one percentage point, while the expulsion of immigrants could have a greater impact on sectors that depend on foreign labor, such as construction and healthcare.

In addition, cuts in the public sector could have a cascading effect on the economy. The reduction of federal and contractor jobs could lead to a decrease in consumption, which would lead companies to cut costs and, consequently, increase unemployment. While under normal circumstances the Federal Reserve could intervene with interest rate cuts to stimulate the economy, tariff-generated inflation may be a check on monetary policy to help in such circumstances.

Although the U.S. economy has proven resilient in recent years, the Trump administration's policies have sown uncertainty in the markets. The combination of tariffs, public sector layoffs and restrictive immigration measures has weakened business confidence and reduced growth expectations.

While some economists consider an immediate recession unlikely, the prolonged uncertainty could have long-term consequences. Reduced immigration could reduce the available labor force, while trade barriers could affect the competitiveness of U.S. businesses. In addition, certain communities, such as veterans and public sector workers, could be especially vulnerable to layoffs and budget cuts.

As the Trump administration moves forward, the key will be whether its policies succeed in generating sustained growth or whether uncertainty will continue to affect the country's economic stability. In an environment where confidence is critical to investment and employment, erratic decisions could be the biggest risk to the U.S. economy in the coming years.