Assessing the risk

Labor's sensibility -- labor's awareness of approaching recession -- is evident in three of the last four recessions, and in the current trend:

Labor Force Participation Rate: https://fred.stlouisfed.org/graph/?g=1HWVL

The pandemic recession arose from non-economic causes. Since I am using sensibility to mean "the ability to feel and react" to an approaching recession, the 2020 recession should not even count. So make it three out of three recessions, plus the current trend.

When Labor Share goes up, Capital Share goes down. As the graph below shows, rising Labor Share typically brings on recession. Based on the graph, we might say the business decisions that increase Capital Share appear to be the decisions that create recessions.

Labor Share: https://fred.stlouisfed.org/series/PRS88003173

A trend of rising Labor Share typically ends in recession, yes. But unlike labor sensibility, Labor Share gives no early warning of recession.

My gut tells me that announced layoffs may give an early warning of recession:

• The Challenger Report headline of September 5, 2024 was: Job Cuts Announced by US-Based Companies Surge in August 2024; Hiring Falls to Lowest YTD Since Challenger Began Tracking in 2005
• And before that, the Challenger Report headline of February 1, 2024: Job Cuts Announced By US-Based Companies Surge 136% to 82,307 to Begin 2024; Financial, Tech Lead
• Time magazine in early 2023 reported that
• "Disney announced 7,000 job cuts"
• "Amazon CEO Andy Jassy revealed that the company was cutting 18,000 jobs"
• "Microsoft announced plans to eliminate 10,000 jobs", and
• "Google’s parent company Alphabet said on Jan. 20 that it would shed 12,000 jobs."
• The same Time article reported "the overall 6% increase in job cuts recorded in the U.S. during 2022"

But maybe these stats are not as bad as they sound.  This FRED graph shows that layoff counts were unusually low after the pandemic recession, in 2021 and 2022. As of 2025, however, layoff counts appear to be back in the normal range. So more surges in job cuts, coming now, could very likely be an early warning of recession.

And just the other day, Reuters reported that "US announced job cuts surge in March on Doge hit":

Layoffs announced by U.S. employers surged in March to the highest level since the pandemic recession as the government purged federal workers and contractors to slash spending.

It is as if the government wants to create a recession or (as I suggest) a depression. The federal government appears to be pushing hard for economic decline. Does that trouble you? It troubles me.

And, as if job cuts are not enough, the US and our trading partners appear to be engaged in a bidding war to raise tariff rates to the highest possible level. And curse our luck, the price increases created by tariffs are cost-push increases.

Cost-push slows the economy. 

That is what recession is: a slow economy. An even slower economy is called a depression.

 

We also have Milton Friedman saying

There is strong evidence that a monetary crisis involving a substantial decline in the quantity of money is a necessary and sufficient condition for a major depression.

And then we have the Donald and the DOGE, and giddy Musk with his symbolic chain saw, and the federal spending cuts of, oh, a trillion or two. Those cuts are an extra push, to push our economy toward depression. As if things are not bad enough already.

And then again we have Milton Friedman, this time saying "lower government spending can contribute to reduced monetary growth." A trillion or two less government spending might do no harm in a strong and healthy economy. But despite what people may say, and despite what we may want to think, our economy is not strong and healthy. So the government spending cuts concern me.

A reduction of federal spending can reduce money growth. A severe reduction of federal spending can be a necessary and sufficient condition for a major depression. Necessary and sufficient, Friedman said. "Sufficient" is the problem. Is a trillion or two of federal spending cuts sufficient? Is it enough to create a depression? What if we also double the price of imports? And if we take huge numbers of people out of the labor force?

The Trump tariffs increase import prices without increasing wages. Because of the tariffs, consumers will spend more to buy less. Spending more is a problem when we are not also earning more. And buying less slows the economy.

Tariffs slow the economy. The reduction in federal spending alone could be enough to create "a major depression." If not, tariffs may slow the economy enough to make it one. Labor Force Participation shows a trend of decline since September 2023 or before, so we could be in a recession already. (I don't think so; not yet, but soon.) And announced job cuts? Keep an eye on the news reports. You don't want to be the last to know.

"But, they're creating a depression? Why??" you might ask. "This is just crazy!!!"

If it was in fact the current Administration's intent to create a depression, surely they would not admit it. This does not prove that depression is their plan.

Nor does it prove that depression is not their plan.

Why? You want a why? I'll tell you why. Trump wants regime change. He doesn't want democracy. He doesn't want to be restrained by the US Constitution. He wants to be a dictator -- "for one day," he said. Dictator, for a short time. And after that, Emperor. Emperor of the Western Hemisphere: For now, emperor of the US, Canada, Greenland, and Panama. Before long, certainly also Mexico and probably all of Central and South America.

Why create a Depression? A depression will make it easier to get rid of the US Constitution. A depression will be the last straw, convincing the majority of Americans that the existing US government is the cause of our economic problems. (It is: The cause, specifically, is policy that promotes excessive reliance on credit in the private sector. But that does not mean we need to change our form of government.) A depression will have the voting majority ready to torch the Constitution.

Why depression? I refer you to a bit of US history from the Great Depression of the 1930s, from William E. Leuchtenburg's Franklin D. Roosevelt and the New Deal, 1932-1940. Leuchtenburg writes:

Many argued that the country could get out of the morass of indecision only by finding a leader and vesting in him dictatorial powers. Some favored an economic supercouncil which would ignore Congress and issue edicts; Henry Hazlitt proposed abandoning Congress for a directorate of twelve men. Others wished to confer on the new president the same arbitrary war powers Woodrow Wilson had been granted. Even businessmen favored granting Roosevelt dictatorial powers when he took office. Distressed by the chaotic competition in industries such as oil and textiles, alarmed by the outbursts of violence, convinced of the need for drastic budget slashing, they despaired of any leadership from Congress. "Of course we all realize that dictatorships and even semi-dictatorships in peace time are quite contrary to the spirit of American institutions and all that," remarked Barron's. "And yet -- well, a genial and lighthearted dictator might be a relief from the pompous futility of such a Congress as we have recently had... So we return repeatedly to the thought that a mild species of dictatorship will help us over the roughest spots in the road ahead."

Depression opens a door to the future Donald Trump wants. That's why I expect a depression.