Summary
The first 18 months of President Donald Trump’s second term have been marked by policy moves and geopolitical conflict that together created an uneven economic picture. Measures announced during the 2024 campaign - including a stricter immigration regime and higher import tariffs - have altered labor supply and trade dynamics, while an unanticipated war with Iran pushed oil prices markedly higher and intensified supply-chain concerns. At the same time an investment wave into artificial intelligence data centers has supported construction and corporate financing, even as core indicators that Trump had highlighted - sustained lower consumer prices, a broad manufacturing jobs recovery, and improved affordability for the middle class - have not broadly materialized.
Shocks and the broader resilience
The policy shifts championed by the administration, combined with the outbreak of the U.S.-Israeli war with Iran, have produced notable disruptions. The conflict sent crude oil toward roughly $100 a barrel - about a 50% increase compared with levels prior to the late-February outbreak - adding to overall price pressures. Meanwhile, immigration controls and stepped-up deportations intended to limit unauthorized inflows have reduced the pool of available workers.
Despite these forces, the U.S. economy has displayed a degree of resilience greater than many forecasters expected. Consumer spending has so far held up through the policy changes and the war, and many measures of corporate finance point to strong corporate balance sheets. But resilience has not translated into uniform gains for lower- and middle-income households or into the boom in factory employment that some administration policies were meant to spur.
Labor market data: measurement and reality
The broadest official window into employment is the Bureau of Labor Statistics household survey. Early 2026 revisions to population statistics mean the standard published series is not strictly comparable year to year. Those new population controls produce a sharp drop in reported employment and in the tally of people looking for work in January, a movement tied largely to the newly implemented controls.
To provide continuity, the BLS also publishes an experimental series that applies the new population estimates backward across a five-year span to create a consistent dataset beginning in April 2020. That experimental view shows declines in both the labor force and the number of people working since the president’s return to office, a result that aligns logically with efforts to limit immigration and increase deportations. In addition, an aging native population has contributed to a smaller available workforce, reducing the pool of potential hires for employers.
Who is hiring - and who is not
Promises of a manufacturing renaissance have not yet been borne out in payroll data. While the administration advocated policies it said would revive U.S. manufacturing and bring jobs back to factories, headline payroll reports indicate fewer manufacturing positions now than at the end of former President Joe Biden’s administration. President Biden left the presidency in January 2025.
At the same time, there has been a marked investment surge in artificial intelligence infrastructure. The AI buildout is driving demand for data centers and related construction activity, pushing construction employment higher. Thus, while one sector the administration highlighted - manufacturing - has not recovered to earlier levels, another expanding area tied to technology investment has created jobs and supported economic activity.
Some other shifts in the jobs data do reflect administration priorities. The number of government workers has declined, consistent with aims to reduce the size of public-sector employment. But the broader composition of hiring continues to reflect underlying demographic and consumer preferences in a nation of about 342 million people: high demand for services such as restaurants, bars and healthcare, especially as the population ages, remains a major driver of employment patterns.
Price dynamics and inflation
Inflation was a dominant theme during the 2024 campaign. The pandemic-era price shocks were still a recent memory when the administration took office and the Federal Reserve had already pushed interest rates higher to restrain price growth. The president’s commitment to bringing down prices ran up against structural realities: broad-based declines in U.S. prices historically occur only in severe downturns, and any meaningful reduction in inflation under the current conditions has been modest at best.
Key price indexes show that disinflation has stalled, with inflation still running above the Fed’s 2% target and policymakers uneasy about the risk of a re-acceleration. Several factors have contributed to ongoing price pressure. Import tariffs enacted as part of the administration’s trade posture have added to costs on some goods. The war in the Middle East pushed oil toward $100 a barrel, increasing transportation and energy costs. And the demand pressures from the AI buildout - for equipment, land, and construction - are adding to upward pressure on certain prices.
Economists commonly expect relative price shifts across items, but when a wide set of goods repeatedly rotate into periods of sharp increases, the effect can become generalized inflation. Some Federal Reserve officials view that outcome as a significant near-term risk.
Household incomes and spending power
Consumer spending has remained relatively firm even amid the shocks affecting the economy. Yet the broader measure of household spending power - disposable personal income adjusted for inflation - has stalled and in recent periods has declined. Disposable personal income, which measures income after taxes and includes wage earnings as well as retirement and transfer payments like Social Security, represents the funds households have available to pay for housing, food and other necessities.
The persistence of consumer spending despite flat or falling real disposable incomes raises questions about how long spending can be sustained, particularly if price pressures remain or intensify. The uneven distribution of gains has fueled debate about a so-called K-shaped pattern in which higher-income households and wealthy investors prosper while lower- and middle-income households lag.
Housing affordability and policy limits
Housing affordability has proven a thornier problem than a single policy or program can solve. The administration has shifted in tone about the importance of making housing more affordable; legislation aimed at improving home affordability was recently dismissed by the president as "a big yawn," and the measure has not been signed.
Homeownership has long been held up as a central route to household wealth, but the sector’s dynamics are heavily influenced by credit cycles, interest rates and local land-use rules. Years of ultra-low interest rates and pandemic-driven demand pushed home prices higher. Subsequent Fed rate increases intended to fight inflation drove mortgage rates to much higher levels, exacerbating affordability problems.
Mortgage rates remain elevated, and home insurance premiums - which are influenced in part by higher home values and other costs - continue to add to homeownership expenses. While federal interventions such as tax credits could provide some relief, the supply side of housing remains largely under local control through zoning and land-use regulations, limiting what the federal government can achieve on its own. For now, homeownership still consumes a disproportionate share of household income.
Stock market performance
The president has frequently pointed to record highs in major equity indexes as evidence of policy success. Yet while equity markets have indeed reached new highs during his term, stock prices historically trend upward over time under many administrations. Measured against presidential terms going back to 1981, the market’s performance through the latest 18-month span sits near the historical median.
The S&P 500 has risen roughly 25% during the president’s second term through the referenced period, compared with a median gain of about 24% for the first 18 months of administrations since 1981. That figure also aligns well with the longer-run compound annual growth rate of 9.5% for stocks over comparable presidential-term intervals.
AI-led investment and a corporate bond surge
Perhaps the clearest single driver of recent market strength has been the surge of investment tied to artificial intelligence. AI is currently the largest single driver of the business investment boom supporting GDP growth, with data-center construction and related spending lifting construction employment and capital expenditures.
That investment boom has also been reflected in the corporate debt markets. Year-to-date corporate bond issuance reached $1.52 trillion through the end of June, with a substantial portion of that issuance financing the AI buildout. The pace of issuance has outstripped the post-pandemic corporate bond boom of 2020, and issuance has come alongside tight spreads and robust investor demand.
Together, heavy issuance, narrow spreads, and sustained demand point to a degree of corporate resilience and strong balance sheets among many borrowers. Those conditions help underpin economic activity even as other areas of the economy show signs of strain.
Where things stand going into the campaign season
With the midterm elections a little more than three months away, the economy presents a mixed picture. It has withstood an array of shocks - trade shifts, migration policy changes and a distant but costly war - better than some anticipated. Yet several of the key promises made during the 2024 campaign have not yet translated into broad-based gains for middle-income households: inflation remains above the Fed’s target, manufacturing payrolls have not rebounded to prior levels, real disposable incomes have stalled, and housing affordability remains a pressing issue.
Looking ahead, the balance between the positive signals from corporate finance and AI investment and the risks of renewed inflation, constrained labor supply, and housing stress will shape whether the economy moves from resilience to sustained, inclusive growth.
Key points
- Policy-driven shocks - including immigration restrictions and higher tariffs - and an unexpected war with Iran have altered labor supply and contributed to higher energy prices, yet the economy has shown resilience in consumer spending and corporate finance.
- Investment in AI data centers has driven construction employment and supported a record pace of corporate bond issuance, helping underpin market strength despite weaknesses in manufacturing employment and household purchasing power.
- Inflation remains above the Federal Reserve's 2% target, and disposable personal income adjusted for inflation has stalled or declined, limiting broad-based gains for middle-income households.
Risks and uncertainties
- Inflation could re-accelerate if price pressures from tariffs, oil shocks and AI-driven demand broaden further - a development that would affect consumer goods prices, transportation and energy sectors.
- Labor supply constraints from immigration controls and demographic aging may continue to limit hiring in sectors dependent on a large workforce, notably manufacturing, services, and construction.
- Housing affordability pressures from elevated mortgage rates and insurance costs, combined with local land-use constraints, may persist, impacting households and the residential construction sector.
Note: This article reflects available official data series and public policy actions through the referenced period. Where official measurement methodologies changed, the reporting reflects the adjustments applied by the Bureau of Labor Statistics to create comparable experimental series.