Jobs Cool, American Dream Fizzles

You may recall that the July employment report’s “larger than normal” revisions to previous hiring prompted President Trump to fire Erika McEntarfer, the commissioner of labor statistics. There were more limited fireworks associated with the August jobs report, which showed a further cooling of the labor market in 2025. In August 22,000 jobs were created, and the two previous months were revised lower by a combined 21,000, and the unemployment rate edged up to 4.3 percent, the highest level in four years.

This report is consistent with what many businesses have been saying since the spring: it’s tough to operate and plan for future hiring under a cloud of tariff-related uncertainty, high interest rates, and mercurial consumers, who may retrench their spending. As a result, many companies have put hiring plans on hold, though there is no evidence of widespread layoffs permeating throughout the broader economy.

That said, anyone who has lost a job recently knows that it’s taking more time to get a new one and as a result, the number of people who have been out of work for more than six months has risen. Those dual trends tend to occur when the economy is softening, which usually has one positive benefit: historically, a slowing economy keeps a lid on inflation. But that’s not expected today, where tariff-related increases are expected to push prices higher in the coming months.

Economic ambiguity is creating anxiety not just for businesses, but also among low to middle class Americans. [Pew Research defines “middle class” as those earning from two-thirds to double the real median household income, which is currently $80,600, according to the Census Bureau. Based on this definition, middle class earners fall into a range of about $53,000 - $161,000.]

Middle income wage earners have recently been expressing dour sentiment that low-income earners have long been expressing. According to John Leer, chief economist at data-intelligence firm Morning Consult (as quoted in the Wall Street Journal), “There was a period of time, briefly, where the middle-income consumer looked like they were being dragged up by all that was going well in the world,” but “things fell off a cliff.”

There was further evidence of the angst in a recent Wall Street Journal - NORC poll, which revealed “that the share of people who say they have a good chance of improving their standard of living fell to 25%, a record low in surveys dating to 1987. Nearly 70% of people said they believe the American dream, that if you work hard, you will get ahead, no longer holds true or never did, the highest level in nearly 15 years of surveys.”

What explains this dim outlook? Clearly the recent inflationary period has eaten into American pocketbooks as well as their psyches. But there are two other areas that stick out: housing affordability and participation in the stock market. As I noted in a recent post, homeownership affordability has dropped to its lowest level on record. According to Redfin, the typical homebuyer now needs to earn about $112,000 per year just to afford the median-priced home of $447,035. That shuts out about 70 percent of the middle class, not to mention all of those households who earn less than $53,000. The inability to enter the housing market crosses off one big aspect of the “American Dream”.

And if you are scraping by and do not invest in the stock market (or do not have access to a retirement plan), the incredible 13 percent annualized returns of the past decade have done nothing to improve your life. According to a Gallup poll, the percentage of Americans who are invested in the stock market right now, either in an individual stock, a stock mutual fund, or in a self-directed 401(k) or IRA, stands at 62 percent. That’s great, except when you consider that 38 percent do not invest at all.

If you are struggling to meet your monthly expenses, can’t afford a home or are not benefiting in a significant way from financial markets, it’s hard to believe in the American dream.