It's Almost 2026. How’s the Economy?

0:05Ryan Knutson:It's almost the end of the year, which gets a nerd like me thinking, how did the economy do this year? Fortunately, I know some people who know things. We have a Wall Street Journal economic dream team here, so could each of you introduce yourselves?

0:22Rachel Wolfe:Sure. I'm Jeanne Whalen. I'm an economics reporter for the Wall Street Journal in Chicago.

0:27Jeanne Whalen:I'm Justin Layhart. I'm an economics reporter in New York. I'm Rachel Wolf, an economics reporter focused on consumers and based in New Orleans.

0:37Ryan Knutson:And if you could summarize the state of the economy right now in a single word, what would it be?

0:44Rachel Wolfe:Uncertain. Meh.

0:46Ryan Knutson:Meh. All right, Rachel. Top uncertain and meh. Asymmetrical. off. Based on those answers, uncertain and asymmetrical, I'm starting to get the impression that you guys think it's not such a great economy right now.

1:05Rachel Wolfe:It really depends where you're sitting for older people, for people with more savings who own their homes. It's a great time. The value of their homes has gone way up. The value of their 401ks has really soared incredibly over the last few years. But people on the lower end of the scale, things for them are looking worse. So that's the old, what economists sometimes call the K-shaped economy. So it really depends where you're sitting. And young people in particular are having separate time in the job market. We know that they've been priced out of homeownership. And so we're seeing a lot of frustration, especially among people in their 20s and early 30s.

1:47Jeanne Whalen:It's very, very confusing. It doesn't look like it's a recession right now, but it's not going great guns. And we know that people's views of the economy, you know, generally are really, you know, strikingly bad.

2:03Ryan Knutson:Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Friday, December 19th.

2:16Ryan Knutson:Coming up on the show, a 2025 economy health check.

2:47Jeanne Whalen:Enterprise Suite. The AI native ERP is here from the makers of QuickBooks. Learn more at intuit.com slash ERP. This episode is brought to you by Alexa Plus. Say hello to Alexa Plus and see how Alexa can do more for you. Need tickets to that last minute show? Craving your favorite restaurant? Sit back, relax, and talk naturally. Alexa's on it. Alexa learns your preferences to create a personalized experience. And now Alexa Plus is free with Prime on your Amazon devices like Echo and Fire TV. Learn more at amazon.com slash Alexa Plus.

3:33Ryan Knutson:All right, let's start with tariffs. The Trump administration imposed massive tariffs in the spring and said that it would lead to a manufacturing renaissance. And critics, meanwhile worried that it could lead to increased inflation and slow down the economy. So we are now eight months in from when Trump announced these back in April. Jean, what have the effects actually been so far?

3:55Rachel Wolfe:I mean, the effects have been far more mild so far than many economists and consumers were expecting. I think everyone thought when Trump started really hiking tariffs up very quickly in his term that we were going to have runaway inflation. We were going to have even goods shortages over the summer. What we've actually seen, while the effective tariff rate overall is quite a bit higher now than it was at the beginning of the year, still that hasn't fed through to prices as much as everyone was expecting. Why? Why is that? I mean, there are a lot of theories. One is that, first of all, Trump has rolled back some of the tariffs, right?

4:38Rachel Wolfe:He ratcheted them way up on China and then brought them back down and then ratcheted them up again and brought them back down. The administration has exempted some goods from paying the tariffs, so they're not quite as broad brush as initially feared. And then a lot of companies have found workarounds. They are, instead of importing things directly from China, their Chinese suppliers are sort of rooting them through Southeast Asian countries. So those things have helped keep the effects on price increases down a little bit.

5:11Ryan Knutson:That leads me to my next question, though, which is one of the aims of the Trump administration by imposing these tariffs was to bring jobs back to the U.S. It sounds like by routing goods from China through other countries to kind of get around the tariffs, it's like not probably achieving that objective.

5:29Rachel Wolfe:It's not, no. I have not seen evidence of broad reshoring, not in such enormous quantities that we've seen the revival of U.S. manufacturing in the way that the Trump administration has promised.

5:42Jeanne Whalen:No, I mean, in fact, the U.S. has been losing manufacturing jobs this year.

5:47Ryan Knutson:Still, despite this.

5:49Jeanne Whalen:Despite this. I mean, think about it. I mean, first thing, you can't just like change on a dime and create a factory, right? That takes a long time. and also just the uncertainty about these tariffs. For a company to commit one way or the other to build things out based on tariffs that possibly, you know, in a new administration in three years from now, right, could go away, right? And then where are you? It feels a little bit like the boy who cried wolf. I don't know if President Trump is the boy or economics reporters are the boy for saying it was going to be really bad and then it turned out not to be that bad.

6:32Ryan Knutson:As Jean said a minute ago, economists were worried that tariffs could lead to higher inflation. But as of now, it hasn't had a huge impact. Tariffs did start bumping up inflation over the summer, but the latest numbers from November show that inflation has gone down to 2.7 % from 3 % in September, though that number could be distorted due to the recent government shutdown. And the Fed has actually cut interest rates three times this year, which shows the Fed is less concerned about inflation than it was several years ago. But even though the rate of inflation has slowed, things are still more expensive than they were and consumers are fuming about it.

7:09Jeanne Whalen:People notice the prices of things that go up a lot and they don't notice it so much when they go down, right? So like egg prices went up a ton and then egg prices went down and we were still getting emails from people complaining about the high price of eggs. Right? It's just, you know, once you see it, you just remember it, and it's hard to forget it. The people just, they're so ticked off about prices now.

7:41Ryan Knutson:Another area of confusion in the economy, the labor market. Earlier this week, the government released the latest unemployment rate. It had risen to 4.6%, which is the highest level in about four years. But here again, the data might be off. Last week, Fed Chair Jerome Powell said official statistics could be drastically overstating recent hiring. Payroll jobs averaging 40 ,000 per month since April. We think there's an overstatement in these numbers by about 60 ,000. So that would be negative 20 ,000 per month. The reason they might be overstated is a bit complicated, but it has to do with the way the government gathers the data.

8:25Ryan Knutson:In the labor market right now, which areas are growing and which areas are contracting? Do we have a sense of that?

8:30Jeanne Whalen:It's pretty much healthcare and social assistance is growing, and everything else is kind of dead in the water, shrinking lately.

8:41Ryan Knutson:Hmm. Is there any sort of broad theory as to why things are shrinking? I mean, I've seen a lot of headlines. We've covered this a bit on the podcast, that CEOs are saying, We can be more efficient and, you know, AI is creating all these productivity gains. We don't need so many workers anymore.

8:58Jeanne Whalen:AI isn't necessarily like replacing a lot of jobs already. But I think that a lot of CEOs, you know, believe deeply in what AI could mean for their workforce. And that makes them more willing to let people go and maybe less willing to bring a bunch of people on. because they think, well, you know, any sort of shortages that I might face in the future, well, maybe AI will take care of them. Well, I think we also know that employers are blaming AI for a lot of layoffs that may or may not actually be due to AI.

9:35Ryan Knutson:Rachel, you spend a lot of time talking with employees. How would you say generally they're feeling? There's just kind of been a growing distrust between employees and employers. You see that in the fact that people just don't stay at their jobs for as long as they used to in previous generations. We're also seeing young people are just approaching work really differently from past generations. If they're not planning to have kids, they maybe feel like money takes on a different meaning if you're not worried about paying for a child's college education. And so I think that we're seeing a really big shift in the labor market in general.

10:12all.

10:13Ryan Knutson:Say more about that growing distrust that you mentioned. My colleague Rachel Einstein had a story about kind of the age of anxiety for white-collar workers, for people just a little bit less certain that their job will be there tomorrow, even though unemployment rates are still relatively low. There's just kind of been a breakdown in, I think, the idea of to what do we owe our employers and what do our employers owe us. So it's a little bit of a vibes story. Yeah.

10:45Rachel Wolfe:I mean, it's like things are awful for workers right now. Again, you know, the unemployment rate isn't terrible. But when you compare it to a few years ago, when we were all where the whole market had job offers left and right, where people were getting raises left and right, where everybody was moving and moving up and things look very different now. They've come back down more to earth and are kind of drifting more in a slightly more worrying direction. Just as Risha was saying, it's a vibes thing in the sense that people are comparing things to how it was a few years ago when the job market was on fire.

11:20Ryan Knutson:During the Great Resignation when it seemed like everybody was like, I'm out of here. And then companies were just fighting over the remaining workers.

11:28Jeanne Whalen:I think we should bring up another thing that's going on, which is that, you know, there have been some big layoff announcements, but really, you know, there aren't a lot of layoffs and there's not a lot of hiring. So this low hire, low fire environment does different things for different people. So people who are older, who are comfortable in their job, they're not worried, right, because there's not a lot of firing going on. But people who switch jobs more frequently, so a lot of lower-income people will switch jobs more frequently, they're having a very hard time because you can't switch as often.

12:06Ryan Knutson:Rachel, how is the job market looking for new grads? Yeah. So we know that one of the weakest spots in the job market is recent growth, that while unemployment remains relatively low on the whole, it's really increased among the youngest workers. And that matters because it can set people back long term. It really can affect people's future earnings if they aren't able to get a job out of college, out of high school.

12:39Rachel Wolfe:Yeah, like the experience of looking now, I think, is also discouraging them so much more than would have been the case five years ago. It's not just that there are fewer jobs out there for them to apply for. It's that a lot of the process has been automated. And so I wrote recently about some young people who are experiencing what's called a one-way interview, which I had never heard of. But apparently the company will, you as the applicant, talk to a screen. You talk to a computer that is showing you questions and writing and you answer and record your answers. But there's no human on the other side of the interaction.

13:18Ryan Knutson:But like, does somebody on the other side watch the video? Or does AI summarize it and say, this person had grading? That's a good question.

13:26Rachel Wolfe:I don't know. I assumed someone on the other side, a human, was watching it, but maybe not. I mean, so much of it now is automated that young people think about it as, well, let's just throw out 300 applications today through Indeed and whatever other sites because it's just a game now. And they never have contact with a hiring manager or a human. And so that also feels very soulless and discouraging for them.

13:50Ryan Knutson:But there has been a big, bright spot in the economy.

13:55Rachel Wolfe:Seems nothing can hold back the bulls on Wall Street. U.S. markets setting record after record high.

14:03Ryan Knutson:That's after the break.

14:19This episode is brought to you by Indeed. The right hire can make or break your company, especially if you're a small business. And relying on luck to find that person isn't really the best strategy. But you know what is? Using Indeed Sponsored Jobs. You can use it to boost your job post to make sure it reaches more people with the right talents, certification, location, and more. Sponsored jobs posted directly on Indeed are 95 % more likely to report a hire than non-sponsored jobs. Spend less time searching and more time actually interviewing candidates who check all your boxes. Less stress, less time, more results.