Posted originally on Jun 5, 2025 by Martin Armstrong 

May’s private payrolls based on ADP estimates are the lowest since March 2023. Private payrolls rose only 37,000 last month, far beneath April’s addition of 60,000 and a far cry from the Dow Jones forecast of 110,000.

The financial sector rose by 20,000, leisure and hospitality saw an increase of 38,000, and construction added 6,000. Still, that was not enough to offset the losses on other sectors. Professional and business services shed 17,000 jobs, education and health services lost 13,000, goods-producing industries shed 2,000, natural resources and mining lost 5,000, and manufacturing was down by 3,000.

Mid-sized corporations gained 49,000 employees, while small businesses with fewer than 50 workers lost 13,000, and large firms with over 500 employees lost 3,000 positions. Raises grew by 4.5% while wages for job changers rose 7%.

Donald Trump is blaming the Fed. “ADP NUMBER OUT!!! ‘Too Late’ Powell must now LOWER THE RATE. He is unbelievable!!! Europe has lowered NINE TIMES!” Trump said on his Truth Social site.

Europe has kept rates artificially low, and it has done absolutely nothing to prevent its economy from contracting. They destroyed pension systems and the banking sector, and still got no economic growth. Rates near zero don’t create investment when there’s no confidence and excessive regulation. It’s the same in reverse: high rates don’t stop inflation when the cause is geopolitical, not consumer-driven or based on demand.

Manipulating interest rates is no longer an efficient tool, as the issue is structural. We are in a phase of stagflation where we see rising costs without real growth. This is not driven by regulation, shortages, and geopolitical tensions. I have warned that history will turn around and blame Donald Trump for implementing tariffs. The tariffs themselves are not the cause of the current state of stagflation, but it is the easiest culprit for politicians and analysts to cite without having a deeper knowledge of the inner workings of the economy.

Only academics believe the Smoot-Hawley tariffs caused the Great Depression. Tariffs were merely the reaction, not the cause, to an overall decline in the global economy. War and reparations have left nations indebted to the point of financial failure.

The entire argument that the Smoot-Hawley Act caused the Great Depression is propaganda. It’s used to denounce free trade and blame Republicans, but the truth is that the collapse was already in motion from 1927, and Smoot-Hawley did not go into effect until June 17, 1930. You had sovereign debt defaults, currency crises, and collapsing capital formation. Tariffs were merely one variable of a much bigger problem. In fact, the US already had tariffs in place for over a century prior to the Smoot-Hawley Act, as that piece of legislation merely updated existing tariffs. Trade was on the decline long before tariffs.

The US was heading into a period of stagflation long before Trump took office. Franklin D. Roosevelt  criticized Smoot-Hawley during his 1932 campaign and blamed Republican leaders for being unable to “stimulate foreign trade.”

As FDR state in a 1934 message to Congress:

“”Other governments are to an ever-increasing extent winning their share of international trade by negotiated reciprocal trade agreements. If American agricultural and industrial interests are to retain their deserved place in this trade, the American government must be in a position to bargain for the place with other governments by rapid and decisive negotiation… If the American government is not in a position to make fair offers for fair opportunities, its trade will be superseded. If it is not in a position at a given moment rapidly to alter the terms on which it is willing to deal with other countries, it cannot adequately protect its trade against discriminations and against bargains injurious to its interests.”

This paved the way for the Reciprocal Trade Agreements Act of 1934, which provided the president with the power to negotiate bilateral tariff-reduction agreements without requiring Congressional approval. Roosevelt then engaged in reciprocity agreements based on mutual agreements where nations agreed to lower tariffs on each other’s goods, as Trump is doing today. Yet, today, consumers are wary of the future and less likely to spend.

Every negative piece of data will be blamed on the Trump Administration. The media will proclaim that jobs are fleeing the US due to Trump’s policies, but the trend was already in motion.