How could the labor market trends under Trump's second term affect the FED?
Labor market shifts under Trump's second term may influence FED policy These trends suggest that while employment is increasing, the economy may be 'squeezing' workers, which is a key indicator of underlying economic pressure. Justin Wolfers, an economist who provides analysis on these outcomes, notes that real wages are falling faster than prices are rising. The Federal Reserve (FED) monitors these indicators—including wage trends and unemployment levels—to assess overall economic health and determine if monetary policy adjustments are needed to maintain stability.
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How it reaches FED
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Since Donald Trump's second inauguration in January 2025, the U.S. economy has added 468,000 payroll jobs, according to Justin Wolfers' analysis. These jobs have been overwhelmingly filled by women, who accounted for 86% of the additions. Wolfers noted that the job market is being supported by hiring in private education and health services, where women outnumber men by more than 3-to-1.
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Economist Justin Wolfers uses these figures to argue that an economy with job growth can still feel like it is 'squeezing' people because a job is not the same thing as a raise. This assessment of wage stagnation and economic strain is a critical input for assessing the overall health of the U.S. economy.
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The facts so far
As reported. Each one links to where it comes from.
- Since January 2025, nearly a million jobs have been created in health care and social assistance.bostonglobe.com, alternet.org
- The jobless rate among men was 4.3 percent, 0.3 percentage point higher than for women.bostonglobe.com
- Real wages are still falling, with prices far outpacing paycheck wages.alternet.org
Why it matters
The labor market is central to the Federal Reserve's mandate, which includes promoting maximum employment and stable prices. If the data shows that job growth is occurring but real wages are falling, it signals that inflation or cost-of-living pressures are significant, even if unemployment numbers appear healthy. This combination of strong job numbers and wage stagnation presents a complex challenge for the FED in determining the appropriate course of action.
Furthermore, the shift in the job market toward services, which are traditionally female-dominated, reflects a fundamental structural change in the U.S. economy. The FED must account for these long-term shifts—such as the increasing reliance on health care and elder care—when modeling future economic growth and setting policy, rather than focusing solely on historical manufacturing trends.
What we don't know yet
- Will the gap in unemployment rates between men and women widen further?
- How will the continued shift toward services affect overall productivity growth?
Is this still moving?
- Reports
- 3
- Developments
- 4
- Repetition
- 67%
What would change this answer
— Other considerations
Beyond this explainer
Questions worth asking
Ideas the web ties closely to this story that the explainer doesn't mention. These are prompts for your own research: Brind hasn't answered them.
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About Chair Jerome Powell
Given the complex challenge of falling real wages and structural shifts, how might the FED Chair approach balancing employment goals with price stability?
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About Jerome Powell
Considering the data showing strong job growth alongside falling real wages, what specific policy tools might Jerome Powell use to address cost-of-living pressures?
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About Maintain An Accommodative Stance
If the labor market continues to show wage stagnation despite increasing employment, would the FED be pressured to maintain an accommodative stance or tighten policy?
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Reporting
- bostonglobe.comOct 5
- alternet.orgSep 4
- nypost.comAug 6
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Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.