The 2024 election is heating up and if former President Donald Trump manages to retake the White House, it’s bound to shake things up big time for American workers and the larger economy. What kind of changes could be in store for the job market under a second Trump term? We asked a finance expert to weigh in.
David Kass, clinical professor of finance at the University of Maryland Robert H. Smith School of Business, broke down some of the key areas where Trump’s policies could really move the needle on employment.
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Tax Cuts Could Get Another Life
One of the biggest factors that could sway the job landscape is whether Trump tries to extend or make permanent the Tax Cuts and Jobs Act that he signed into law back in 2017.
“This legislation lowered the corporate tax rate from 35% to 21%, and the top personal tax rate from 39.6% to 37% as well as increasing the standard deduction. A Republican led Congress would be likely to move in this direction,” Kass said.
The thinking is that by paying less in taxes, businesses would have more cash on hand to grow and hire more workers. But critics argue the corporate windfalls could just line executive pockets instead of trickling down to average employees.
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More Spending, Higher Inflation Risks
Kass expects Trump would double down on his “America First” policies aimed at restricting immigration and aggressive trade moves against other countries. “His likely program would include reducing immigration and imposing tariffs on our trading partners,” he said.
While limiting immigration could theoretically open up more jobs for American citizens, it could also create labor crunches in immigrant-heavy sectors like agriculture, construction and hospitality. Trump’s trade war threats and tariffs could disrupt supply chains, driving up costs for businesses and consumers alike.
“The overall result would be a widening of the substantial budget deficit and result in additional fiscal stimulus leading to an increase in inflation from the current 2.8% (core PCE-preferred measure of the Federal Reserve),” Kass said.
An inflation spike could eat into consumers’ purchasing power, making it harder for families to make ends meet. The Federal Reserve might have to take the punch bowl away by raising interest rates sharply to wrestle inflation under control — which could put the brakes on hiring and economic growth.
Fed Pressures and the Unemployment Wild Card
Speaking of the Fed, Kass thinks Trump would bring the heat to keep interest rates low in a potential second term.
“Trump has also indicated that he would likely apply pressure on the Federal Reserve to lower interest rates resulting in additional monetary stimulus and further inflation,” he said. “Although inflation is likely to increase, unemployment is likely to remain at historically low levels in the 3 to 4% range.”
Cheaper money could give a short-term sugar high to the economy and job market. But easy money coupled with Trump’s deficit-financed spending could create the perfect storm for out-of-control inflation that ultimately negates any employment gains down the road.
The bottom line is Trump’s policy brew could send the job market in conflicting directions. Some industries might boom thanks to tax cuts and an insular labor pool. But working Americans could eventually get burned by spiking prices, more trade turmoil and the debt hangover from Trump’s free-spending ways.
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This article originally appeared on GOBankingRates.com: I’m an Economist: Here Are My Predictions for the Job Market If Trump Wins the Election
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