The Economy Is Looking "Very Shaky" | Anna Wong, Bloomberg

Unemployment rate likely to surge through 2025

The last time today's expert was on the program back in July, she was concerned about rising unemployment.

Is she still as worried about it as we prepare to enter a new year with a new Administration taking over?

To find out, we have the good fortune to talk today with Dr Anna Wong, Chief U.S. Economist for Bloomberg Economics. Prior to her current role, Anna also worked at the Federal Reserve Board, the White House Council of Economics Advisers, and the U.S. Treasury.

The punchline is that, yes, Anna still expects the unemployment rate to surge higher throughout 2025. That forecast, plus a number of other structural issues we discuss in this interview, makes today’s economy look “very shaky” to her.

For all the details, click here or on the video below:

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Adam’s Notes: Dr Anna Wong (recorded 11.25.24)

EXECUTIVE SUMMARY:

• The U.S. election significantly influenced market movements, with anticipation of Trump’s policies driving notable changes. Inflation expectations rose due to projected fiscal policies, and 10-year Treasury yields increased by 80 basis points between September and November. The market's focus is shifting from election outcomes to the specifics of economic policies under new leadership, including the potential impacts of personnel like nominated Treasury Secretary Scott Bessent.

• Anna projectes a significant increase in tariffs, including a rise in U.S. tariffs on Chinese imports from 12% to 36% by 2026 and an overall increase in U.S. tariffs from 3% to 8%. She highlights that targeted tariffs on intermediate and capital goods, rather than consumer goods, historically mitigated inflationary impacts. While tariffs may generate government revenue, they are expected to negatively affect firm profits and employment, with broader disinflationary effects anticipated by 2026.

• Labor market data shows ongoing cooling, with significant downward revisions expected to non-farm payrolls—around 800,000 jobs for the year ending Q1 2024, and perhaps 1.2 million jobs for the year ending Q2 2024. Recent QCEW data indicates accelerating weakness, with downward revisions potentially averaging 100,000 jobs per month in 2024. These trends suggest structural weaknesses, with real unemployment figures masked by temporary election-related hiring and data distortions.

• The recent surge in government hiring, particularly for election-related roles, temporarily bolstered employment data. This hiring, described as one of the fastest paces since the 1990s, is expected to reverse after the election cycle, potentially increasing unemployment in early 2025 as temporary workers and outgoing administration staff exit the workforce.

• The Trump administration plans to stimulate growth by reducing government spending, deregulating industries, and using tariff revenue to offset tax cuts. However, Anna warns of