US job growth even weaker than we thought, but Wisconsin may be revised to the good side

We had seen job growth slow down for much of 2025 and some of 2026, but we got new information this week that shows it was probably even slower than we knew.

The Bureau of Labor Statistics released its annual preliminary benchmark revision on Friday, estimating that total nonfarm employment for the year through March 2026 was overstated by 79,000, or 0.1%.

The revision to total private employment was larger, at negative 178,000, also 0.1%, according to the BLS. A final benchmark revision will be incorporated into official estimates when the January 2027 Employment Situation report is published in February 2027. Official establishment survey estimates are not updated based on the preliminary figures.

Economists surveyed by Bloomberg had expected payrolls to be revised up by 183,000, according to Bloomberg. Prior to Friday's report, official data showed that employers had posted a net gain of 211,000 jobs over the 12 months ending in March on a non-seasonally adjusted basis, working out to roughly 17,600 per month. The preliminary revision puts average monthly job growth closer to 11,000.

The markdown in private payrolls was driven by softness in sectors including retail trade, education and health services, manufacturing, and business services. Employment in transportation and warehousing, information, financial activities, and construction increased, while government payrolls were also revised higher.

This came in conjunction with the release of the Q1 figures for the Quarterly Census of Employment and Wages (QCEW), the more comprehensive survey of employers that is done well after the monthly jobs reports come in.

It also means that year-over-year job growth in America continued to slide at the start of 2026, dropping below 100,000 by March.

And as UW-Madison's Menzie Chinn mentions, manufacturing jobs being revised down by 67,000 means that the sector kept shedding jobs in the first three months of the year. And that puts into question the rebound in manufacturing jobs that has been reported over the last several months.

But Wisconsin fared quite well in this QCEW report, and our job situation is likely to be better when the official benchmark revisions for late 2025 and early 2026 come in. As you can see, Wisconsin was in the top 20 for private sector job gains between March 2025 and March 2026, and 2nd in the Midwest behind Michigan.

What had been reported as a sizable drop in jobs at the end of 2025 in the monthly jobs reports now appears to have been a small gain for us over that time period, followed by a slight decline in the first 3 months of 2026. This is far from scientific, but in using year-over-year growth numbers for the QCEW, I get this for our state.

We also see a reversal from the full-country revisions when it comes to manufacturing, as a decline that the Wisconsin Department of Workforce Development was reporting for the end of 2025 doesn't show up in the QCEW. But it also makes you wonder if the rebound that's been reported for the rest of this year actually happened.

It's a similar story for leisure and hospitality jobs, which the DWD monthly reports said had gone down at the end of 2025 and then rocketed back up in 2026. If you look at the QCEW and do a year-over-year comparison, it looks like jobs gained in the sector in the second half of 2025, then dipped in the first part of 2026. And we'll see if the originally reported increase for April and May holds up upon further review.

It's nice to see Wisconsin holding up better than most Midwest states as the "gold standard" jobs report comes in. But the national numbers should worry you, as this economy isn't going to be able to grow much overall if job growth is at the lowest non-COVID levels in years. And it reminds me of this quote by our nation's Treasury Secretary from last week.

Bessent on the latest bad jobs report: "After the deportations that we've seen and the closing of the border, we don't need to produce as many jobs"

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— Aaron Rupar (@atrupar.com) August 20, 2026 at 10:16 AM

If the lack of jobs being added in America reflects a lack of growth (or decline) in the labor force, and if fewer people are needed to work, then we're going to have to think differently as to how we want our economic policies to look. And in how to handle the persistent inflation that might result from overconsumption in a time of labor, supply shortages, and a lack of competition from new businesses being started up.

Higher Wis revenues help in 2026. But GOP Tax Scam will cost state more in 2027 and beyond

We got the final numbers for Wisconsin tax revenues, and they exceeded the already-rosy possibilities the Evers Administration gave this Spring.

General purpose revenues (GPR) increased 3.4% in fiscal year 2026 (FY26) to $23,132.2 million. This is 2.0% more than the Legislative Fiscal Bureau’s modified January 15, 2026 estimate of $22,681.4 million.

So on the revenue side, it’s $450 million more than projected by LFB, and more than $1.2 billion above what was baked into the 2025-27 budget.

Based on LFB’s breakdown of the K-12 and tax cut plan that was shot down by the State Legislature, this means there was $3.4 billion in the state’s bank account on June 30 if expenses end up meeting projections. And if we assume revenues grow in FY 2027 by the same 1.8% that LFB projected back in May, there would stil be just under $3.3 billion at the end of the budget cycle on June 30, 2027.

But that’s a big IF on the expense side. We know that the state is projected to need another $322 million in funding for Medicaid to get through the budget cycle that ends next June 30. In addition, inflation is running higher than the 2.9% for 2026 that was projected by LFB when the budget was put together in Spring 2025. While the higher revenues help state budgets in the short term because of higher sales taxes on higher-priced items and excessive profits for companies, expenses will eventually increase for programs such as Medicaid and other costs of services (and already have in some cases).

However, the current strong revenue numbers could give a chance to revive the K-12/tax cut deal between Evers and WisGOP legislative leaders that was tanked in the State Senate this May. And Joint Finance Co-Chair Rep. Mark Born told WisPolitics that he'd be open to doing so. So let’s go back to the price tags of the items in that deal.

$300 single/$600 married couple income tax rebate $870 mil
Special Ed aids $315 mil
K-12 aid to cut property taxes $302.5 mil
Tech College property tax cut $50 mil
Additional charter/choice aid payments $16.3 mil
Income tax exclusion on OT premium $179.9 mil (then $148.1 mil a year after that)
Income tax exemption for tips $52.9 million ($48.9 mil a year after that)

I still favor a one-time tax rebate . Although I don't mind the idea of a one-time bump in Special Ed aids, as it would be very hard to justify taking that away in the next budget.

I'd add that one complication about any K-12 aids being put in at this time of the year is that the school year has now started, and there are already 61 operating referenda questions scheduled for November, which might make for an odd situation if these schools are getting the aids that would lessen the need for a referendum for added resources.

Also remember why Tom Tiffany opposed the deal in May. Because he wanted more money left over for permanent income tax cuts that lower revenues year after year. And he wants to handcuff K-12 schools even further.

Tom Tiffany said during an interview on News Talk 1130 WISN on Tuesday that he would not vote for the package that would send $600 million more to schools in the state, in exchange for no taxes on tips or overtime, and direct refund checks to taxpayers across the state.

“I would not vote for it,” Tiffany said.

He blamed Gov. Tony Evers for offering Republicans a bad deal.

“He could have put in here the repeal of the 400-year property tax increase, and he did not,” Tiffany added. “All he wanted in there for the relief was a ‘sugar high’ for a year.”

Yes, Tiffany is deceiving about Evers' veto that allowed K-12 schools to raise resources at a still-insufficient $325 per student. The large number of referenda shows that's likely not enough and that the state needs to do its part to help in both resourcing the schools and in leveling off school property taxes. But under Tiffany and WisGOP, that clearly would not going to happen, so vote accordingly.

One last variable to consider - Tom Tiffany and his fellow Republicans in Congress set a time bomb that goes off after this November's midterms that goes beyond the $72 million in added FoodShare costs that the State of Wisconsin is already taking on due to changes in Tax Scam 2.0. And it'll either make Medicaid costs go much higher, or cause a lot of Wisconsinites to be in need.

Rural hospitals closing or shutting down key departments like obstetrics will be one of the biggest stories of 2027. Democrats need to make it one of the biggest stories of the next two months.

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— 🗽LOLGOP🗽 (@thefarce.org) August 29, 2026 at 6:14 AM

Nonprofit hospitals just finished three straight years of improving margins, helped along by Democrats strengthening the ACA, strong patient volume and new tools. Fitch Ratings says that streak is over. The ratings agency called Trump’s bill the “dominant near-term threat” to hospital finances, with Medicaid enrollment cuts, work requirements, and payment caps set to hit starting in 2027. Public Citizen reviewed financial records from nearly every hospital in the country and found that 446 were at high risk of closing or cutting services due to the law’s roughly $1 trillion in Medicaid cuts. The hospitals most exposed sit in blue states like California, New York, Illinois, and Washington, and the damage falls hardest on Black and Latino communities....

Rural America gets hit hardest of all. Nearly 200 rural hospitals have closed since 2005, and more than 400 others, over a fifth of all rural hospitals left standing, are at risk right now. New paperwork requirements and eligibility checks every six months instead of every year are expected to knock 1.5 million rural Medicaid recipients off their coverage. A new cap on state payments to hospitals will speed up closures even further. (Wisconsin is less exposed to this due to Gov Evers and the Legislature working through the night to increase the state's hospital assessment before Tax Scam 2.0 was passed).

States don’t get to run a deficit the way Washington does. When H.R. 1 phases down the provider taxes states use to fund their share of Medicaid and caps what they can pay hospitals directly, states have to make up the gap in the same budget year, not the same decade. Colorado already cut Medicaid provider rates and capped payments to family caregivers to close a $1.5 billion gap. Montana stopped covering doula services. Oregon ordered every state agency to find cuts. This is the same law terrorizing the same states twice (at least), once through the hospitals and once through the statehouse.

So it might make sense to hold onto more surplus funds into the next budget, because Donald Trump. Tom Tiffany and other Republicans are going to force the state to spend more money due to Tax Scam 2.0.

Personally, I'd be OK with one-time income tax rebates at this point, and have them go out in October as an advance to help Wisconsinites pay the higher school property taxes that Republicans have caused due to their lack of state funding. I'd add in the special ed funding and/or Tech College funding (I think Tech Colleges should be state-funded anyway), as those are items that are going to be very hard for either side to want to give up on, no matter what happens in November.

Then I'd bank the rest (around $2 billion as it stands today) because we don't know how bad and costly things are going to get under the last 2 years of Trump/Vance/other. But it seems likely that it'll be a sizable cost for both everyday Wisconsinites and our state government, and WisGOP Congressmen like Tom Tiffany have only themselves to blame for that.

US economy didn't grow much in Q2, but prices and profits sure did!

Another key bit of data relased this week was the second look at GDP for Q2 2026. The GDP part wasn’t big news – real GDP was estimated at 1.5% in the first release last month, and it stayed at 1.5% here, with a slight upward increase in consumption offset by an increase in imports.

It was interesting that inflation was estimated to be even higher than what was originally reported in July.

The price index for gross domestic purchases increased 5.8 percent in the second quarter, revised up 0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 5.3 percent, revised up 0.2 percentage point, and the PCE price index excluding food and energy increased 3.6 percent, also revised up 0.2 percentage point.

That 5.3% increase in the PCE price index is up for an annualized rate of 4.6% in Q1 and 2.9% in Q4 2025 (aka – the last quarter before we started dropping bombs on Iran).

But there was a first-time release in that report about something else.

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $400.9 billion in the second quarter, compared with an increase of $74.4 billion in the first quarter.

OH? As inflation jumped in Q2 in 2026, we also saw a big jump in corporate profits to another record?

But at least the US is getting more taxes from these corporations making record profits, right?

It's almost like these sorts of things might be connected, eh?

Even the Trump fluffer running for Governor in our state admits that corporations and related consolidation are part of the reason prices are higher.

GOP gubernatorial candidate Tom Tiffany broke with Donald Trump over the president’s plans to import 300,000 metric tons of ground beef and then sell it below market price….

During a stop in Hales Corners yesterday, Tiffany told reporters: “I stand with Wisconsin farmers” when asked about the president’s plans to import ground beef over the next 90 days. In exchange for easing tariffs, the exporters will provide a 25% discount on beef, according to the deal Trump announced.

Tiffany said a core issue is the beef packing industry is dominated by four producers, leaving insufficient capacity for ranchers. He vowed if elected to start a young farmer program.

Not mentioned - Tom Tiffany voted for the corporate tax cuts last year that increases the incentive for profit-hoarding.

And is Tom Tiffany demanding that the Trump Administration break up these four beef packers to drop prices and increase competition. OF COURSE NOT!

Is he getting back to his day job in DC and going to work on legislation to stop Trump's desperate and stupid moves that could depress prices and viability for producers? OF COURSE NOT!

Is he demanding that all of this foreign beef be strictly inspected to make sure they meet American standards, especially since 30,000 pounds just got recalled in Texas and Florida after slipping by inspectors? OF COURSE NOT!

He's just complaining and trying to seem like he cares about the Ag owners, while not doing anything that might cut off the real economic and health problems that may result. And Tiffany certainly won't do anything to discourage the corporate profiteering off of the higher prices that Americans are paying in the second half of 2026.

Inflation over 3% may mean higher interest rates, but July spending and wages are soft

After a weak retail sales report earlier in the month, Thursday had the Commerce Department’s income and spending report for July , which would give an indication how the consumer side of the economy looked like for the start of the 3rd quarter of 2026.

Consumer spending rose in July at the slowest pace in seven months, suggesting the U.S. economy lost a little steam after the end of the 2026 World Cup and start of the third quarter.

Personal spending increased a mild 0.2% last month, the government said. Americans spent less on goods for the second month in a row after splurging in the spring.

Lower gasoline prices last month made spending look weaker than it really was, but households also had to rebuild savings after using rainy-day funds to cope with a surge in inflation this year.

Consumer spending is the main engine of the U.S. economy. Spending in the second quarter grew at a surprisingly robust 3.5% annual pace, adjusted for inflation, after a meager 0.5% increase in the spring.

That 3.5% increase in consumer spending for Q2 is post-inflation, which translated into an annualized increase of nearly 9% before inflation, or around 0.75% a month. So a 0.2% increase is quite a deceleration from that standpoint.

On the positive side, the same report said American incomes were up by 0.4% for July, which meant the US savings rate rose to 3.0%. That’s the first time the savings rate went up in 6 months, and is the highest level since March (although it’s still among the lowest levels in 20 years).

But if you dig into the actual report itself, you find out that most of that income increase was outside of wages and other compensation people get from work.

Total wages and salaries only rose by 0.3% for July, and are only up 3.5% overall in the country in the last 12 months. And with gas prices heading back up in August, does real consumer spending and inflation-adjusted wages take a step back at the same time, and put a limit on Q3 growth?

In the wake of that income and spending report, questions in the financial media turned to what effect these numbers will have on Federal Reserve policymakers when they meet in 3 weeks.

The Personal Consumption Expenditures (PCE) index rose 3.3% in July [over 12 months] on a "core" basis, which excludes volatile food and energy prices. That was in line with expectations and the same level as June. Month over month, prices rose 0.2%, also in line with expectations and up from 0.1% in June.

The monthly increase suggests inflation is rising at a mild rate (from Jake: It WAS rising at a mild rate through July. Maybe not so much now). New York Fed president John Williams has said that if inflation on a monthly basis, as measured by PCE, comes in at 0.2% or lower, that would indicate inflation is coming back down to the Fed's 2% target on its own, implying the Fed would not need to raise rates.

Boston Fed president Susan Collins said Tuesday that she was content to hold rates steady at the last meeting, but she would need to see evidence that inflation is dropping to continue holding rates.

Absent that, Collins said it would be appropriate to raise rates "soon" to ensure the Fed gets inflation back down in a reasonable time frame.

It’s noteworthy that we won’t see the August income and spending report with the Fed’s preferred PCE measure until after that September Fed meeting. And the Fed meeting after that one is not scheduled until late October, after many Americans will have voted in the 2026 midterms.

One month does not make a trend, but between the loss of jobs, mediocre spending figures and low wage growth, it sure seems like the 3rd Quarter of 2026 got off to a slow start for the US economy. I know the Atlanta Fed is still claiming the data indicates GDP growth is closer to a boom than a recession, but I think those projections will decline quickly if August’s data is as lame as what we’ve seen in July.

Wisconsin's brain drain problem could be solved if Wis businesses would pay up

Recently, the Wisconsin Policy Forum released a report on our state's “brain drain” problem.

Based on our analysis of data from the U.S. Census Bureau’s 2024 American Community Survey five-year estimates, we estimate that 59.8% of Wisconsin-born adults aged 31 to 40 who now live in another state have a bachelor’s degree or higher. In contrast, an estimated 45.2% of adults in that age group who were born in another state but now live in Wisconsin hold a bachelor’s degree or higher, a gap of 14.6 percentage points…. We refer to this gap as “net brain drain.”

Wisconsin’s net brain drain ranks second nationally, behind only North Dakota (see Figure 1 on page 1). This is a slight improvement from 2009, when Wisconsin’s net brain drain (-15.3 percentage points) was the highest in the nation. Most other Midwestern states have experienced similarly high rates of net brain drain, with the exception of Illinois, which stands out as the region’s only net “brain‑gain” state (+10.4 points). Nationally, a few other states with strong metropolitan hubs — such as Virginia (+5.8 points) in the Southeast and Colorado (+8.2) and Utah (+1.0) in the West — defy regional brain‑drain trends….

In some ways, Wisconsin is a victim of its own success, as the Policy Forum paper notes that Wisconsin raises a larger number of college graduates than most states, but then we get a sizable amount of them who leave.

A state’s educational baseline affects the impact of net brain drain. Among U.S.-born adults aged 31 to 40, Wisconsin starts from a relatively strong position; 43.4% of Wisconsin‑born adults in this group hold a bachelor’s degree or higher, which is above the national average of 40.6% and ranks 16th nationally (see Figure 3). In contrast, several other high brain‑drain states begin from a much lower baseline; for example, only 38.0% of 31- to 40-year-old Indiana natives hold bachelor’s degrees.

So even with a relatively high number of college-educated natives leaving the state, Wisconsin still keeps enough of our graduates to not have a low education level of the workforce overall.

Although Indiana’s net brain drain rate (–11.5 percentage points) is slightly better than Wisconsin’s (– 14.6 points), our state also fares better when looking at the educational attainment of current residents within this same age range. Both states see similar gaps in educational attainment between their birth cohorts and current residents (–4.4 points versus –3.7), but Wisconsin’s stronger starting point results in a more educated resident population. Wisconsin ranks 26th nationally at 39.0%, while Indiana ranks 39th at 34.2%

Interestingly, in the same month as that brain drain report came out, Wisconsin ranked very well for those who are currently residing in our state.

With high marks for safety and affordability, Wisconsin was listed among the country's best places to live in 2026 in a new report from WalletHub.

The personal finance website ranked states on a 100-point scale that looked at a range of categories: affordability, economy, education, health, quality of life and safety. Overall, Wisconsin ranked third in the nation, with a total score of 59.32.

So what’s going on here? Here’s what Wallethub had to say.

Wisconsin is the third-best state to live in, thanks to its affordable housing market, where the ninth-highest housing affordability helps make homeownership more attainable for residents.

Wisconsin has the 15th-lowest premature death rate in the country and the 16th-lowest share of live birth with low weight. It also has the ninth-highest share of residents with health insurance coverage, at 94.8%.

The Badger State also ranks sixth for the quality of its school systems. It has the best high school graduation rate in the country, too, over 96%. Good-quality education has helped the state’s residents find employment, contributing to the seventh-lowest unemployment rate in the country.

Finally, Wisconsin offers a safe environment for residents, with the sixth-lowest property crime rate in the country and has the 18th-lowest traffic fatality rate in the country.

So we’re consistently above average in a lot of things people want out of a state. And that top-ten ranking for school systems (best in the Midwest) sure goes against Tom Tiffany’s complaints about how education is allegedly failing in this state.

So what’s the disconnect here? One part seems obvious.

If college-educated Wisconsinites are most likely to leave to Minnesota and Illinois and other states that have larger metro areas, that means they are likely getting paid more in those places. And if you look at the Quarterly Census of Employment and Wages (QCEW), you’ll find that Illinois and Minnesota consistently pay higher average wages than we do.

I also want to supplement that wage information with a chart that was included in wide-ranging Journal-Sentinel article about admissions to UW-Madison what places its students come from, and where they end up in the years after their graduation.

UW system data on alumni residency shows the majority of in-state students will live in Wisconsin after earning their degree. Three years postgraduation, 87% of in-state students will still live in Wisconsin, while 10 years after graduation 63% will.

When you look at out-of-state alumni living in Wisconsin, that percentage drops to about 11% living in Wisconsin three years after graduation.

Alumni from other UW campuses are more likely to stay in Wisconsin. About 93% of in-state students and 16% of out-of-state students are Wisconsin residents three years postgraduation.

That gap between where in-state students at the flagship school in Madison and the other UWs end up is illuminating to me, because it shows that many Badgers have to go elsewhere to boost their career/life opportunities once they hit their mid-to-late 20s. It is less likely to be the case for graduates of the other UW schools as they advance in their careers, although it also does happen more over time for them as well.

That chart also shows that Wisconsin-based companies aren’t offering enough to out-of-state students to keep them around after graduation, even if they might have better access to recruit those students due to on-campus collaborations and work experiences.

So it seems we need to find a way to encourage more pay and advancement with growing companies here in Wisconsin. Some of this may be through advanced research jobs and opportunities through our colleges and universities (a big reason why the Madison area outpaces the rest of the state), but the private sector needs to be stepping up in this state and competing with larger metro areas for talent.

If they can even offer a salary that is close to what the big towns pay, that may be enough to encourage Wisconsin’s college graduates to stay and raise families in a state that has strong K-12 schools, good affordability (comparatively, anyway), and a high quality of life.

Sorry Scotty - I don't think we're growing and tariffing our way out of this debt

We hit a new fiscal milestone in this country last week - $40 trillion in debt! But Treasury Secretary Scott Bessent says Americans shouldn't worry, because we can just power through it.

Treasury Secretary Scott Bessent says "we're going to have to grow our way out of this" in reference to the U.S. debt crossing the $40 trillion threshold.

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— NBC News (@nbcnews.com) August 20, 2026 at 3:00 PM

But it won't just be growth that gets our fiscal situation back on track, In an interview with CNBC's Sara Eisen, Bessent claimed tariff revenue will be part of the plan.

“One of things that’s temporary here that’s influencing the deficit has been these tariff refunds, and we won’t have to do that again,” Bessent said, adding that the administration was reinstituting tariffs. “I would expect that our 2026 tariff income is going to be roughly what it was in 2025.”

Oh? You mean we will be back to having $30 billion a month in tariffs that Congress didn't approve of? That's what businesses and consumers were paying to the government before the previous tariffs were ruled illegal by the Supreme Court, and those funds had to be sent back to those businesses (those refunds were not necessarily passed on to consumers).

But the CBO said on Friday that tariff refunds and related adjustments will only lower around $250 billion a year of tariff revenue in this fiscal year, and CBO has also estimated our budget deficit to go over $2 trillion for this fiscal year. So that's another $1.85 trillion of deficit due to everything else. And how is that number going to go down in future years?

Perhaps Bessent was thinking of a couple of things. The first is new 10-12.5% tariffs on most imported goods that the US put in place last month. Although I'll add that the CBO accounted for this in their analysis of lower tariff revenue overall.

Or maybe Bessent knew this was going to happen after the markets closed on Friday.

Update: The U.S. has now imposed 50% tariffs on $20 billion worth of Canadian products. Prime Minister Mark Carney says Canada will match those tariffs "dollar for dollar" next month.

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— NPR (@npr.org) August 22, 2026 at 11:33 AM

Trade negotiations between the United States and Canada fell apart Friday night, shortly before a midnight deadline for the 50% tariffs to take effect on $20 billion worth of Canadian products, including some dairy products, alcoholic beverages, cement and hockey equipment.

U.S. Customs and Border Protection issued a bulletin to businesses Friday warning that its officers would be ensuring importers complied with the new rates starting immediately after the deadline passed. Carney said Friday night that "Canada will match those tariffs dollar for dollar to protect our workers and businesses." He later said the retaliatory tariffs set to kick in next month will focus on American sectors such as "steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics."

Tariffs on dairy, pulp and paper? That seems pretty relevant to Wisconsin farmers and businesses, as UW-Madison's Menzie Chinn reminds us that Wisconsin has nearly 1/4 of the value of its exports go to Canada.

If you adjust for inflation, it looks like we export nearly $6 billion to Canada. Do you think any of the 6 WisGOP Congressmen are going to tell the Trump Admin that these new tariffs are likely help their constituents? Including Tom Tiffany, who wants to be governor of this entire state, and would deal with the job losses that might result from the lack of sales?

What, me worry?

Likewise, are these Congressmen going to be asked if they agree with this claim from Trump's Treasury Secretary?

Bessent on the latest bad jobs report: "After the deportations that we've seen and the closing of the border, we don't need to produce as many jobs"

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— Aaron Rupar (@atrupar.com) August 20, 2026 at 10:16 AM

So how do we grow so fast our debt doesn't matter, while not creating as many jobs as in the past?

It's not possible unless you are talking about massive inflation that $40 trillion total have a lot less meaning than it has today. There's no way we'd be having massive growth as Bessent describes without a large amount of supply shortages (due to fewer workers making stuff) and big increases in income to workers and consumer spending - when real wage growth is down in 2026 and consumer saving is already declining and at multi-year lows. So how much more can/will the American consumer spend?

Trump/GOPs are nothing but BSers when it comes to the budget and the real economy. But what do you expect from the dumb son of a real estate mogul whose advisors are mostly mega-millionaires and billionaires? Aka "people who will ever deal with the consequences of a bad decision that hurts the economy for people with real jobs?"

Is productivity the middleman that's allowing for big corporate profits?

One of the mysteries we have had in the last year-plus is why businesses continue to report increased costs due to tariffs, but consumer prices haven’t risen by nearly as much over the same time. I’d theorized that there was something going on in the middle of those stages of production, and I got more evidence of that this week.

Robust U.S. productivity levels appear to have blunted the full inflationary impact of President Donald Trump's large-scale trade tariffs, new research from the Federal Reserve Bank of Boston said.

"Industries in which tariffs induced higher costs in ‌2025 also experienced greater labor productivity growth, which helped them mitigate those higher costs," bank researchers wrote in a paper ‌released on Wednesday.

That means that while firms may have confronted higher input costs due to the president's tax increases, by getting more output out of their workforces they were ​able to hold off on passing on those costs. That in turn helped inflation, which has been above the Fed's 2% target for half a decade, come in lower than it otherwise would have due to the taxes. Altogether, the tariffs, which rose from an average level of 2.5% before Trump's return to 10%, joined with healthy productivity rates, added 0.5 percentage point to the core level of the personal consumption expenditures price index, the ‌authors found. The analysts said firms facing strong tariff-related ⁠cost increases managed to keep output steady while cutting labor inputs, and "the reduction in hours contributed to greater labor productivity growth."

In other words, workers are the ones paying the price of the tariffs, even more than consumers are. Businesses are squeezing out more from their employees (and/or using fewer employees), which allows for both higher profits and limits on inflation.

It goes along with this chart that I brought up last week.

it helps explain why wage and job growth have been so lousy for American workers under Trump 2.0. And helps explain why so many people don’t trust data centers and AI initiatives these days, because we can see where workers and their pay raises keep getting squeezed out in favor of automation and money-trading schemes under the guise of “increased productivity”.

Next week, we get the first look at corporate profits for the 2nd quarter of 2026. Let's see if my theory holds up, especially in the wake of big increases in oil and gas prices between April and June. I suspect it will.