Trump’s One Weird Trick to Wreck the Economy

Federal Reserve Chair Jerome Powell on Wednesday described a “curious balance” in the labor market, in which both supply and demand have sunk “sharply,” thanks to President Donald Trump’s immigration policies and potentially his tariffs.

Asked whether tariffs have created the weakened U.S. job market, Powell said that is “certainly possible.” But while trade policy “may” be affecting the labor market, Powell said, “the change in immigration” is the primary reason “employment is doing what it’s doing.” The change, of course, being Trump’s disruptive mass deportation campaign, which has dramatically decreased the supply of workers.

Amid this decrease in supply, Powell added, “demand for workers has also come down quite sharply,” leading to a “curious balance,” he said, repeating a term he used in a speech last month. “Typically when we say things are in balance that sounds good,” he added. “But in this case, the balance is because both supply and demand have come down quite sharply.”

The situation Powell described, some observers noted, resembles stagflation—the dreaded combination of stagnant economic growth, rising prices, and high unemployment. “‘Curious balance’ … Say the S word Jay,” tweeted Kevin Green, a markets correspondent at the Schwab Network, alongside a crying-laughing emoji.