Fed expects the job market ‘to weaken substantially’ on Trump’s tariffs

Economists and top policymakers at the Federal Reserve see a growing risk of America’s job market weakening because of President Donald Trump’s erratic trade war, according to minutes from the central bank’s latest policy released Wednesday.

Economists and top policymakers at the Federal Reserve see a growing risk of America’s job market weakening because of President Donald Trump’s erratic trade war, according to minutes from the central bank’s latest policy released Wednesday. “The labor market was expected to weaken substantially,” the minutes said, adding that Fed economists at the May 6-7 meeting also revised up their projections for inflation this year and lowered their expectations for economic growth. Fed policymakers also fretted over whether the labor market’s resilience could persist, especially if Trump continues with his haphazard on-again, off-again tariff regime. “Participants assessed that there was a risk that the labor market would weaken in coming months, that considerable uncertainty surrounded the outlook for the labor market, and that outcomes would depend importantly on the evolution of trade policy as well as other government policies,” the minutes said. Earlier this month, Fed officials voted to hold borrowing costs steady for the third consecutive meeting, waiting for clarity on the direction of Trump’s policies and how the US economy will respond to his massive policy shifts. The labor market’s resilience has also allowed Fed officials to stay on hold, since it means they don’t have to step in to provide the economy with some relief through a rate cut. But that could change if it turns out hiring is slowing sharply, or even declining. Some Fed officials noted that “their contacts and business survey respondents reported limiting or pausing hiring because of elevated uncertainty.”