The first 18 months of Donald Trump’s second presidential term have been dominated by policy-driven economic shocks: tighter immigration enforcement and higher tariffs promised during the 2024 campaign, and an unforeseen war with Iran that pushed oil prices up and raised risks to global supply chains.
Macro picture: inflation and real incomes
Inflation has remained persistently above the Federal Reserve’s 2 percent target during this period. The combined effect of higher energy prices and import tariffs has stalled disinflation: oil rose to around $100 per barrel, roughly a 50 percent increase compared with prices before the Middle East conflict began.
Adjusted for inflation, real household incomes have essentially stagnated over the first 18 months. The tight labor market after the pandemic had lifted nominal incomes for a time, but slower wage growth and reduced government transfers have left purchasing power little changed.
Labor market and manufacturing employment
Stricter immigration policies and demographic aging have reduced the number of people available for work; as a result, both the labor force and the number of employed people have declined since the president returned to office. Investment has increased in some areas — notably data centers serving artificial intelligence — but manufacturing employment now is lower than at the end of Joe Biden’s presidency, so promised factory job gains have not materialized.
Education and health care have been the main sources of job creation, while structural changes in productivity and global supply chains have limited employment gains in the manufacturing sector.
Housing affordability
The Atlanta Fed’s housing affordability measure shows that homeownership remains out of reach for many households. Post-pandemic dynamics — a run-up in house prices during years of very low interest rates, followed by Federal Reserve rate hikes that pushed mortgage rates higher — have worsened affordability. Higher insurance costs tied to larger home values and local zoning rules also constrain supply. The federal government has only limited tools to expand housing supply; measures such as tax credits could help, but homeownership continues to consume a large share of household income.
Financial markets and corporate issuance
Equity markets have risen during the first 18 months of the term: the S&P 500 gained roughly 25 percent, close to the 24 percent median for first 18-month presidential periods going back to 1981 and above the period’s typical roughly 9.5 percent annualized compound growth rate. This performance indicates that stock gains are not necessarily a unique testament to presidential policy, since markets tend to climb independently of the incumbent.
Corporate bond issuance was also notable: $1.52 trillion of bonds were issued from the start of the year through the end of June, a large share of which funded AI infrastructure such as data centers. That volume points toward one of the highest annual issuance levels since 2015 and exceeds the post-2020 recovery figures.
The role of artificial intelligence
Investment in artificial intelligence has been a major growth engine for markets: financing for data centers and AI projects boosted corporate issuance and created some construction-sector jobs. So far, however, these investments have not translated into a large increase in manufacturing employment.
Conclusion — what matters to voters
While the US economy has proven more resilient than many forecasters expected, key voter concerns — reducing prices, restoring factory employment, and improving middle-class living standards — have not been materially resolved in the first 18 months. Policymakers and voters will be watching how inflation behaves going forward, how oil-market tensions and tariffs influence prices, and whether AI-driven investment yields broader employment gains.
