Will Trump derail the US economy?

That's how fast things can change: recession back on the agenda

Many investors had high hopes for a strong upturn following Donald Trump's election as US president. But no sooner had Trump moved into the White House than the market began to fear a recession in the US due to his aggressive and erratic economic policy. When the economic figures turned out not to be so bad after all, the tide turned and many investors wondered whether he might be doing everything right after all. However, last Friday's employment report caused the mood to shift once again, and concerns about a possible recession are back in the foreground.

A sober assessment therefore seems necessary. We had already argued in March that the US economy would weaken but was likely to avoid a recession. In the following, we examine whether the latest developments still support our thesis.

Significant slowdown on the labor market...

The current recession fears were triggered by the labor market report for July published on August 1. Not only was the relatively low increase in employment of only 73,000 in the last month disappointing, but even more shocking was the fact that the fairly decent gains in May and June of 144,000 and 147,000 were revised down to just 19,000 and 14,000, respectively. This has significantly worsened the overall picture. The employment trend is much weaker than expected.

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