Trump's Economy After 18 Months: Resilience Meets Stalled Progress on Jobs, Prices and Housing

Trump’s Economic Scorecard at 18 Months: Shock, Resilience and Stubborn Inflation

A cascade of policy-driven shocks—a sweeping immigration crackdown, higher import tariffs, and an unanticipated war with Iran—has tested the US economy over the first year and a half of Donald Trump’s second term. While growth has not collapsed, the widely promised manufacturing resurgence and rapid return to lower prices have failed to materialise. Instead, the labour force has contracted, inflation has stalled well above the Federal Reserve’s 2% target, and real disposable incomes have flattened, leaving many households more squeezed than when Trump returned to the White House.

The broadest employment data, adjusted for a January 2026 overhaul of population statistics, shows both the labour force and the number of people working have declined since the inauguration. Policy-driven efforts to limit immigration and step up deportations, combined with an ageing native population, have cut the pool of available workers. Meanwhile, payroll figures show fewer manufacturing jobs today than when President Biden left office, despite Trump’s vow to rebuild the factory floor. Government employment has fallen, a priority for the administration, but overall hiring continues to be driven by services—restaurants, bars and healthcare—rather than the industrial renaissance that was promised.

On prices, the story is one of stubborn stickiness. Year-on-year inflation has improved only modestly and remains uncomfortably above the Fed’s target. Tariffs layered onto imported goods, a surge in oil to roughly $100 a barrel after the Middle East conflict erupted in late February, and the voracious demand for materials and labour from the artificial intelligence infrastructure buildout have all combined to keep price pressures broad and rotating through different categories. Some Fed officials now flag the risk of more generalised inflation returning.

Housing affordability, a perennial anxiety for American households, has worsened. Mortgage rates remain elevated and home insurance premiums have climbed alongside home values. Trump himself dismissed recent congressional efforts to improve affordability as a “big yawn”, refusing to sign legislation. The result is that homeownership commands an outsized share of household income, and while the federal government can offer tax credits, the fragmented local land-use and zoning rules that truly govern supply remain beyond its grip.

Where the Promises Meet the Data: Jobs, Prices and the AI Boom

The Labour Market Story: Fewer Workers, Not More Factory Jobs

The administration’s immigration enforcement has produced a mechanically narrower labour force, exactly as one would expect when deportations rise and new workforce entries are curtailed. The experimental BLS series that uses consistent population estimates confirms a decline in both labour force participation and the number of people employed since January 2025. This is not a statistical fluke—it is a direct consequence of policy. Yet the promised manufacturing jobs boom has not compensated. The construction sector has benefited from an AI data-centre investment wave, but manufacturing employment is below its level at the end of the Biden administration. The economy continues to demand services such as hospitality and healthcare, but the structural drag of a shrinking workforce limits the pace of overall job creation and risks stoking wage pressures in tight labour pockets.

Inflation: Stuck Above Target, with New Pressures Arriving

Trump’s campaign pledge to bring prices down always ran against the historical record: broad-based price declines typically accompany deep recessions. Tariffs have added at least a modest layer to import costs, and the spike in oil prices—roughly 50% above pre-conflict levels—has filtered through transport and goods prices. The AI buildout is now adding a fresh demand channel for everything from electrical equipment to skilled workers, which, in a supply-constrained environment, feeds into the overall price picture. The risk that inflation remains sticky or even climbs further is being taken seriously inside the Fed. For businesses, this means financing costs may stay higher for longer, and for consumers it means the baseline erosion of purchasing power is not yet over.

The Disposable Income Squeeze

Consumer spending has held up remarkably well through the shocks, but the broadest measure of household financial firepower—real disposable personal income—has flatlined and even dipped recently. After accounting for taxes and inflation, the money left for housing, food and other essentials is no longer growing. This is not a K-shaped story about inequality alone; it signals a broader stagnation in living standards. If the trend persists, retailers and consumer-facing sectors could see a marked pullback, particularly among middle- and lower-income households who lack the savings buffers of the wealthy.

Housing Affordability: A Federal-Local Tug of War

Low mortgage rates during the pandemic super-charged home prices, and the Fed’s subsequent rate hikes left new borrowers facing decade-high mortgage costs. Meanwhile, rising insurance premiums tied to higher home values and climate risks add to the burden. Trump’s refusal to sign a housing affordability bill highlights the political vacuum: the federal levers are limited, while local zoning rules continue to constrain supply. The affordability crisis thus appears entrenched, and any meaningful relief will likely come only through a combination of lower rates (which the inflation outlook does not yet support) and a local deregulation drive that is politically difficult to orchestrate.

Markets and the AI-Fueled Bond Boom

The S&P 500 has gained roughly 25% since Trump’s inauguration, a respectable but historically unremarkable number—right at the median for first-18-month performances since Reagan. The real structural story is in credit markets: year-to-date corporate bond issuance hit a record $1.52 trillion through June, much of it tied to financing the AI infrastructure push. Tight credit spreads and robust demand suggest investors see corporate balance sheets as healthy and the AI-fuelled investment cycle as durable. Yet if the AI spending fails to translate into productivity gains or revenue streams, today’s debt issuance binge could become tomorrow’s credit headache.

What Businesses and Households Should Watch as the Midterms Loom

For business leaders and investors, the 18-month report card highlights several concrete pressure points and opportunities tied directly to the numbers and policy direction:

• Energy-intensive and trade-exposed businesses should price in persistent cost volatility. With oil hovering near $100 a barrel and tariffs still layered on imports, input costs are unlikely to retreat quickly. Hedging strategies and supply-chain diversification are now operational necessities, not options.
• Labour-dependent sectors should prepare for a tighter worker pool. The combination of deportations and an ageing population is structurally depressing labour supply. Companies reliant on low- and middle-skilled workers may need to accelerate automation or raise wages, even if overall consumer demand softens.
• Watch the Fed’s tone on “generalised inflation” risk. Some officials have begun mentioning it explicitly. A shift in the central bank’s rhetoric—or a further oil price spike—could delay rate cuts, keeping borrowing costs elevated for corporate debt, mortgages, and commercial real estate.
• AI-linked capital deployment is at record pace, but the revenue payoff remains unproven. The $1.52 trillion corporate bond issuance, much of it tied to AI infrastructure, demands careful monitoring of actual earnings from AI-related projects. If the return on invested capital disappoints, the current tight credit spreads could widen sharply, raising financing costs across the technology supply chain.
• The midterm elections three months away inject near-term policy uncertainty. A shift in congressional control could rewrite tariff, immigration or fiscal policies. Businesses with long capital-commitment timelines should assess the resilience of their plans under alternative legislative scenarios.