Jobs Could Soon Replace Prices as Focus of Anxiety - Greg Ip [View all]

Trump is clearly frustrated by all the talk of an “affordability crisis.” I don’t blame him. As Thursday’s admittedly distorted consumer-price index report showed, inflation simply isn’t behaving badly. But don’t define affordability too narrowly. It means not just the prices we pay, but the means to pay them. We may be focusing too much on the first and not enough on the second.

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Sometimes unemployment rises because a recession is under way. This time, something else is going on. Business leaders I have talked to in recent months are broadly optimistic about growth and pessimistic about hiring, especially their own. As their attitudes percolate down, we could see job security supplant prices in the public’s hierarchy of anxiety

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Trump is clearly frustrated that the public hasn’t rewarded him for a pretty good economy, just as Joe Biden was a year ago when growth, unemployment and inflation were broadly similar. That is because economic anxiety is holistic. People have a nagging feeling that the economy isn’t working for them. That has shown up as anger at the high price of groceries, then the shortage of housing and now health insurance. But part of the equation is the security of your income and that is where the job market comes in.

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The labor market is usually closely linked to the pulse of the overall economy. Yet in its latest survey, the Business Roundtable finds that more chief executives plan to cut than add jobs for the third straight quarter, the lowest three-quarter reading since the 2007-09 recession. One reason for the disconnect between the job market and the broader economy is tariffs. Economists expected them to show up as rising prices for imports. In real life, though, inputs don’t always map neatly to outputs. To cope with higher costs, whether for tariffs, energy, taxes, or health insurance, a business owner looks at all options, which may mean trimming head count instead of raising prices. Maybe it isn’t a coincidence that payroll growth stepped down sharply in the spring, just as Trump’s biggest tariff increases took effect, while the effect on inflation has been muted.

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Trump has locked arms with the AI industry. Politically, that could be a liability. Surveys by the Edelman Trust Institute find users in the U.S. are twice as likely to say they reject as embrace the growing use of AI. By a similar margin, they don’t believe business leaders are being fully honest about the impact on jobs. The conventional wisdom in Washington is that costs will be the dominant issue heading into next fall’s midterm elections. The latest trends on AI and job security hint that the conventional wisdom may have to change.

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