As the Trump administration pursues a deeply chaotic policy agenda, key labor market data haven’t yet revealed strong signs of economic weakness, but other sources indicate growing recessionary pressures. Consumer expectations are more pessimistic about inflation and unemployment, manufacturing and construction activity are declining, the stock market has fallen and remains volatile, and GDP forecasts look grim. These “softer” measures could take time to reflect in the official jobs data, particularly at the national level. This week’s data releases—including the Job Openings and Labor Turnover Survey (JOLTS) tomorrow, unemployment insurance claims on Thursday, and the jobs report on Friday—should provide more clarity.

Soft indicators reveal economic weakness

By “soft” indicators, we primarily mean data sources that rely on consumer or business sentiment rather than outcomes. For example, a “soft” measure of consumer strength would be consumer sentiment surveys asking them about their confidence levels, but a “hard” measure of consumer strength would be their actual spending. Other “soft” measures include forecasts that make projections based on past historical relationships. So far, it is these soft indicators that have deteriorated noticeably while most hard indicators have not yet strongly signaled a recession.

The latest New York Federal Reserve survey shows that consumers have more pessimistic expectations about inflation, their households’ financial situation, and particularly unemployment: The probability that unemployment will be higher one year from now hit its highest expected level since the pandemic recession in 2020. The University of Michigan’s consumer confidence surveys also show a worsening of expectations over the next year regarding unemployment and inflation.

In their Manufacturing Business Outlook, the Federal Reserve Bank of Philadelphia reported a deterioration in general activity, new orders, and current shipments in April. This weakness showing up first in the manufacturing sector is ironic given that the Trump administration’s tariff policies are often defended on the grounds that they will help U.S. manufacturing. The Census Bureau’s data on monthly new residential construction also show some softening in the housing market, particularly for single-family housing starts.

Further, the stock market losses have wiped out any gains from the last year, and measures of stock market volatility remain high—reflecting a lack of confidence in the current economic and policy landscape. The Atlanta Federal Reserve’s GDPNow model estimates a 2.5% decline in real GDP for the first quarter of 2025.

Key labor market indicators could begin to show trouble brewing

This economic turmoil has not yet been reflected in top-line labor market data—though they have shown some weakness in federal employment. This week’s releases of JOLTS, UI claims, and the jobs report could begin to indicate widespread economic distress.

The delay in data reporting could be one of the reasons we haven’t seen a pronounced deterioration in this labor market data. The latest JOLTS data are from February, which showed very little change, but the fingerprints of recent policy decisions are visible for the federal workforce. Figure A shows a significant spike in federal layoffs, hitting 22,000 in February. Tomorrow’s JOLTS release will likely show continued weakness among federal workers in March that may begin to be visible in the overall data.

The latest jobs report provided data for mid-March and has shown a net loss of 15,000 federal jobs since January. However, this number may have been kept low because many federal workers were put on administrative leave, and those workers remain officially on federal payrolls. I’ll be surprised if more of the widely reported cuts to the federal workforce and federal contractors aren’t visible in the next jobs report on Friday.

The most updated read on the labor market comes from the unemployment insurance (UI) programs. The Department of Labor aggregates state reports of how many workers filed for initial UI claims each week, and how many people received UI benefits for regular state programs and separately for federal employment. The latest data show higher initial and continued UI claims for federal workers than this time last year, consistent with the spike in layoffs from JOLTS and the drop in employment in the payroll data.

The UI claims data also show a spike in regular continued UI claims (not including federal) in D.C. Figure B shows that national UI claims grew 4.7% over the year but grew a whopping 98.3% over the year for D.C. residents, likely reflecting job losses among federal contractors and related sectors.

While the fingerprints of recent policy decisions are clearly showing up in the soft data, it may take time for it to hit the overall labor market measures, at least at the national level. Unless there is a dramatic shift in the current policy agenda, we will likely start to see measured weakness in upcoming labor market data in the coming months.