President Donald Trump has been back in office long enough for Americans to expect at least glimmers of the economic golden age he promised. Instead, warning signals are flashing.<\/p>\n
They\u2019re now coming from voters as well as from the patchy data available during a record-long government shutdown. The economy is expanding, but reliance on the artificial intelligence boom \u2014 and the stock-market wealth it\u2019s generated \u2014 makes growth look lopsided.\u00a0Play Video<\/p>\n
Democrats trounced Trump\u2019s Republicans last week in elections where cost-of-living anxieties loomed large. Half of the respondents in an October survey by the Harris Poll for Bloomberg News said the economy wasn\u2019t working for them \u2013 up from 41% in February \u2013 and only one-third said their finances were better than a year ago.\u00a0<\/p>\n
To be sure, analysts caution against reading too much into off-year ballots, and many Trump policies have yet to fully kick in. His tax cuts promise to boost business investment, which has already thrived in the race to build data centers \u2014 though there\u2019s also a headwind from Trump\u2019s trade wars, which led many firms to\u00a0freeze<\/a>\u00a0capital spending.<\/p>\n For now, with the job market\u00a0cooling<\/a>, consumer surveys and political polls find that Americans are downbeat about the\u00a0economy<\/a>\u00a0and the president\u2019s handling of it. Democratic candidates who campaigned on pocketbook issues won by big margins in Virginia and New Jersey governors\u2019 races \u2014 tapping the same anxiety over high prices that helped Trump defeat Joe Biden, and that he\u2019d promised to relieve from day one.\u00a0<\/p>\n \u201cThe economy remains resilient on the surface, but it\u2019s increasingly dependent on three narrow, interconnected \u2018A-pillars\u2019: affluent consumers, artificial intelligence-fueled investment and asset price gains,\u201d wrote Gregory Daco, chief economist at EY-Parthenon and president of the National Association for Business Economics. \u201cIf any one of these pillars weakens, the overall structure would become much less stable.\u201d<\/p>\n \u2018Bearing Fruit\u2019<\/p>\n The president and his team acknowledged their overhaul\u00a0wouldn\u2019t bear fruit overnight<\/a>\u00a0\u2013 while also setting expectations for when it would. By the fourth quarter, \u201cyou will feel the power of Donald Trump\u2019s economy,\u201d Commerce Secretary Howard Lutnick told Bloomberg Television back in March.<\/p>\n Now, Treasury Secretary Scott Bessent is shifting that timeline. \u201c2026 is going to be a gangbuster year and Americans will feel it in their pocketbooks,\u201d he told Fox<\/a> Business last week. Trump himself has argued he\u2019s already delivered on his promises, telling reporters \u201cI don\u2019t want to hear about the affordability\u201d because prices are \u201cmuch less.\u201d<\/p>\n On the growth front, what economists see right now is a slowdown capping Trump\u2019s rollercoaster first year. US gross domestic product shrank at the outset \u2014 thanks to a monumental import surge, as firms and consumers rushed to get ahead of tariffs \u2014 and then rebounded fast for a while.<\/p>\n What the White House sees is a \u201cgradual transition\u201d underway between the Biden and Trump economies, according to Pierre Yared, acting chair of the Council of Economic Advisers.<\/p>\n \u201cThe policies of the president are bearing fruit,\u201d Yared said in a telephone interview. He pointed to three main metrics \u2014 overall growth, well-paying jobs, and building secure supply chains in America \u2014 as well as US outperformance over peers like the European Union.<\/p>\n The shutdown has delayed the release of September jobs data and other economic numbers. Alternative sources\u00a0indicate<\/a>\u00a0anemic hiring. Unemployment is low but rising. Companies including Amazon<\/a>.com Inc. and Target<\/a> Corp. are laying off workers. One\u00a0report<\/a>\u00a0shows US firms\u00a0announced<\/a>\u00a0the most job cuts for any October in more than two decades.<\/p>\n Manufacturing in particular, where Trump promised a tariff-led renaissance, has struggled. It\u2019s been in contraction for eight straight months and shed 42,000 jobs since April \u2013 the longest losing streak since the pandemic \u2014 after the president unveiled his global tariffs.<\/p>\n Yared said what matters is the quality of jobs, and he pointed to a pickup in manufacturing productivity this year, as well as higher inflation-adjusted weekly pay in factories, mining and construction \u2013 all priority areas for the administration.<\/p>\n In industries such as manufacturing, construction, agriculture and hospitality, the pool of available labor has shrunk in part because of Trump\u2019s immigration crackdown. After a wave of raids and deportations, monthly border crossings \u2014 which surged under Biden \u2014 have plummeted close to zero.\u00a0<\/p>\n That\u2019s left some employers struggling to find workers, though it also means fewer new jobs are required to keep unemployment steady. Still, the conservative American Enterprise Institute\u00a0estimates<\/a>\u00a0that Trump\u2019s policy shift will trim growth by as much as 0.4 percentage point this year.<\/p>\n Surveys show Americans are worried about the job market \u2014 and the economy overall. RealClearPolitics polling averages for Trump\u2019s approval ratings on the topic have declined sharply since he returned to office in January. Consumer sentiment this month\u00a0plunged<\/a>\u00a0close to the lowest on record.<\/p>\n Tariff Whipsaw\u00a0<\/p>\n Trade has been at the top of Trump\u2019s second-term agenda. The president has followed through on campaign promises to hike import taxes, with the goals of revitalizing manufacturing, erasing deficits with US trading partners, and raising government revenue.\u00a0<\/p>\n The latter is happening: with US tariffs now their highest in roughly a century, the Treasury Department is collecting around $30 billion a month. Trump also touts the investments in the US that companies and trade partners have pledged as a result of his dealmaking.<\/p>\n But his on-and-off approach to imposing the duties \u2013 illustrated again last month when he dialed back charges on Chinese imports \u2013 has caused tremendous uncertainty, with many businesses halting investment and hiring decisions until they see where rates settle.<\/p>\n The Supreme Court may yet have a say in that. At a hearing last week, justices appeared\u00a0skeptical<\/a>\u00a0that Trump had the constitutional\u00a0authority<\/a>\u00a0to impose his country-based tariffs, and a ruling could come by year\u2019s end. Most economists expect the trade war will drag on growth next year, though the hit to consumer prices hasn\u2019t been as big as anticipated.<\/p>\n Stubborn Prices<\/p>\n At 3%, the headline inflation rate is roughly where it was when Trump took office, after prices surged a cumulative 20% under Biden in the pandemic aftermath. Business expectations for prices in the year ahead are holding steady, and the worst fears of consumers appear to have eased in recent months.<\/p>\n Even so, complaints about the cost of living helped Democrats score double-digit wins in the Virginia and New Jersey gubernatorial races. One sore point in both states, and potentially nationwide in next year\u2019s midterm voting, was the climb in electricity prices \u2013 new among America\u2019s hot-button\u00a0political issues<\/a>.<\/p>\n Trump and Bessent put cheaper energy at the heart of their program. They have cited this year\u2019s drop in gasoline costs, and argued deregulation will lower them further. But the administration\u2019s AI push may inflate electric bills because data centers need vast amounts of power. And while the AI giants enjoy tariff exemptions for key equipment, electricity generators aren\u2019t so favored \u2013 raising the risk that capacity will fall behind demand and add to price pressures.\u00a0<\/p>\n \u2018Undeniably Awesome\u2019<\/p>\n One place where AI is definitely lifting prices is America\u2019s stock market. The S&P 500 Index has added some $8 trillion in value this year, overcoming a spring slump triggered by Trump\u2019s tariffs. The so-called \u201cMagnificent Seven\u201d tech giants are driving it. Nvidia<\/a> Corp., the chipmaker at the heart of the AI boom,\u00a0recently\u00a0<\/a>became the world\u2019s first $5 trillion company.<\/p>\n All that new equity wealth has boosted consumer spending, which accounts for about two-thirds of demand in the economy \u2013 but also skewed it toward the rich.\u00a0<\/p>\n Households in the top 10% of the income distribution\u00a0accounted for<\/a>\u00a049.2% of spending in the second quarter, the highest share in data going back to 1989, according to Moody\u2019s Analytics. Meanwhile there are signs that lower-income Americans are cutting back.<\/p>\n It\u2019s left some analysts talking about a \u201cK-shape\u201d economy almost a year into Trump\u2019s second term \u2013 one in which some households and industries thrive while others\u00a0struggle<\/a>.<\/p>\n