From trade to the Iran war, Trump may be dragging the US into stagnation

 

·       Due to Trump’s chaotic policies, the labor market weakened, economic growth slowed, and now inflation is spiraling due to the SOH double blockade.

·       All focus now on the Trump-Xi meeting—whether it will lead to a durable Iran war ceasefire/permanent peace and the full opening of the SOH

·       At around 252 estimated CY25 EPS for SPX-500 and 7500 levels, the PE is around 30, historically at the bubble zone.

On May 8, 2026, some focus of the market was on the US NFP/BLS job report for April '26 and the overall employment situation of the world’s biggest economy amid Trump’s chaotic policies on immigrants and trade/tariff war with Iran. Overall, at a glance, under Trump’s unpredictable policies, the US economy may now be facing a stagflation-like scenario.

·       Higher cost of living/inflation (adverse effects of tariffs, supply chain disruptions, and higher cost of energy/fertilizers/commodities) (Avg CPI 3.0% in 2024 vs 2.7% in 2025 and 3.3% in Mar '26).

·       Higher number of unemployed persons (7373K in Apr '26 vs 6865K in Jan '25) despite a lower number of labor force (169995K vs 170696K)

·       Lower economic growth (2.1% in CY25 vs. 2.8% in CY24)

This follows just after the Fed cuts rates on December 10 by another 25 bps back-to-back as insurance against growing unemployment. The market is not expecting any further rate cut in H1CY26, even under the new Fed Chair, Warsh (a Trump appointee), as he is sounding more hawkish than earlier.

The BLS Establishment Survey

The latest BLS establishment survey flash data (seasonally adjusted) shows that the U.S. economy (private + public/government sector) added +115K non-farm payroll (NFP) jobs in Apr '26 after losing -156K in Feb '26 and gaining +185K in Mar '26. The market was expecting a +62K increase in NFP jobs in Apr '26 against the y/y figure of +108K. The US NFP employment covers public (government) and private sector employees/jobs, excluding the farming/agriculture industry.

After the latest revisions, the 3M rolling average (3MRA-YTM) of US NFP job additions was around +50K against +71K yearly (y/y). The 2025 average was around +10K against +122K in 2024 and +148K in 2019 (pre-COVID). The US job market may now be under meaningful stress due to Trump’s uncertain, bellicose policies on tariffs, war with Iran, and immigration & deportation despite the so-called big & beautiful bill (fiscal stimulus). Overall, the nominal number of US NFP employees was around 158736K in April '26 vs 158268K in Jan '25 under Trump 2.0. The average R/R in 2026 is now around +76K, far lower than the Fed standard of +175K on average.

The BLS flash data also shows the U.S. private sector (only private establishment/business employees) added +123K payroll jobs in Apr '26 against +190K and -148K in the last two months. The market was expecting a +75K gain in Apr '26 against +99K (y/y). After the latest revisions, the 3M rolling (3MRA-YTM) of US private NFP job additions was around +89K against +80K (y/y). The April '26 ADP Private Payroll was around +109K.

The 2025 (YTM) average of US private payroll job addition was around +28K against the 2024 average of +85K and the 2019 average of +148K. The pre-COVID longer-term (2014-19) average private payroll job addition was around +174K, indicating significant stress in the private sector amid Trump policy uncertainty.

After the latest revisions, the 3M rolling (3MRA-YTM) of US private ADP NFP job additions was around +85K against +80K for BLS NFP job additions. In 2025, the same was +33K (ADP NFP) vs. +28K (BLS NFP).

Overall, the nominal number of US NFP private employees was around 136148K in Nov '25 vs 129435K in Feb '20 (pre-COVID).

The latest BLS Establishment survey flash data also shows the government payroll, i.e., employment in federal, state, and local governments, contracted around -8K jobs in Apr '26 against -5K and -8K in the last two months. The market was expecting a -13K contraction in Apr '26 against +9K (y/y).

After the latest revisions, the 3M rolling average (3MRA-YTM) of US government NFP job additions was around -15K. After the latest revision, the 2026 (YTM) average for the US government payroll was around -10K against +15K in 2025, +37K in 2024, and 18K in 2019 (pre-COVID). The longer-term pre-COVID (2014-19) average government payroll addition was around +36K. Overall, under Trump 2.0, the US government payroll contracted drastically by 249K from 23557K in Jan '25 to 23308K in Apr '26 due to Trump’s policy to privatize the US economy almost fully and to improve the overall economic productivity.

The US Federal Government payroll jobs under Trump 2.0 are now under huge stress due to Trump’s perceived & flawed fiscal austerity narrative and DOGE’s kick-out action. Trump is now trying to abolish as many federal government jobs as possible to make the US economy driven by only the private sector, expecting higher efficiencies and productivity. But this policy is not working, and no economy in the world can survive only on the private sector.

Also, although Trump is trying to be 100% capitalist, some of his actions, like buying stakes of certain private companies, including chips and rare earth materials, are equivalent to state-sponsored socialistic capitalism! Trump’s perceived plan to provide a $2000 ‘tariffs’ check to most of the Americans (lower end of the pyramid) will make them even more shy, even China & Russia, the so-called kings of socialistic & communist policies. Trump always blasts the ‘lunatic left,' but in hindsight, ‘capitalist’ Trump or any US president, including the entire Congress (politicians), has no issue adopting ‘socialism’ in any financial crisis, which may leave even ‘socialist’ China behind.

Overall, in the last 12 months under Trump 2.0, the US economy has lost significant jobs in government (-249k) but gained in the private sector (+711k). In summary, for the last 12 months, private education & healthcare services were the biggest employers for the US economy (as per the long-term trend), followed by leisure & hospitality (travel/tourism & hotels), construction (led by AI data centers and other manufacturing projects), retail trade, utilities, and other services (repair & maintenance, personal & laundry services, religious, grant-making, civic, professional, and similar organizations).

Almost all other private sectors dragged US employment under Trump 2.0, led by manufacturing (despite tall claims of reshoring amid tariff threats), mining and logging, transportation and warehousing, information and tech (AI disruptions), financial services, and professional and business services. The softening of the US employment situation is structural rather than cyclical amid Trump policy uncertainty and AI disruptions. Also, Trump’s chaotic tariff policies are causing supply chain issues for the US manufacturing sector, while almost all big CAPEX is happening in the AI sector. The high cost of living (affordability) crisis is also affecting discretionary consumer spending.

As per the latest revision in the establishment survey, the change in total nonfarm payroll (NFP) employment for February was revised down by -23K, and the change for March was also revised up by +7K. With these revisions, NFP employment in the last two months combined was revised down by -16K from what was previously reported.

The BLS Household Survey

The latest BLS household (HH) survey data shows the nominal number of the US civilian non-institutional population (>16 years of age) increased by +97K to 274955K in Apr '26, while the labor force decreased by -92K to 169555K. The labor force participation rate was 61.8% in Apr '26 vs. 61.9% sequentially and the lowest since Oct '21.

In nominal terms, the US labor force declined by around -701K under Trump 2.0 from 170,696K in Jan '25 to 169,995K in Apr '26.

The current 3MRA-YTM of labor force addition was around -225K against the non-institutional civilian population (working age above 16 years) growth of +126K, while the labor force participation rate was 62.2%. The labor force addition average rate was 223-124K in 2018-19 (pre-COVID) and +93K in 2024. The pre-COVID average participation rate was around 63.1%, while 2006 levels were around 66.4% (pre-GFC days).

As per the BLS Household (HH) survey, the U.S. economy has lost 226K employed persons in Apr '26, against the contraction of 64K sequentially (m/m) and the addition of 389K yearly (y/y). The 3MRA-YTM number of additions of employed persons for 2026 was --169 K vs. +297K in 2025. The U.S. had 163,831K employed persons in Jan '26 and 162,622K in Apr '26; i.e., lost around 1,209K employed persons under Trump 2.0 so far. The pre-COVID (2018-19) average was around +206K/M. Post-COVID (2022-24) average was around +154K, which now plummets to -71K on average under Trump 2.0 (Jan '25-Apr '26). The US BLS HH survey includes nonfarm payroll (NFP) employees (private + public/govt) and self-employed persons (including professionals, contractors, and agriworkers).

As per household survey data, the nominal number of unemployed persons increased by +134K to 7,373K in Apr '26 against -332 sequentially (m/m) and +24K yearly (y/y). The 3MRA-YTM was -56K vs. -37K in 2026. Overall under Trump 2.0, the nominal number of US unemployed persons increased by around +508K from 6865K in Jan '25 to 7373K in Apr '26.

In Apr '26, the U.S. unemployment rate was unchanged at 4.3% from 4.3% sequentially (m/m) and 4.2% yearly (y/y) and in line with the market expectations of 4.3%. The 3MRA-YTM was 4.3% vs. 4.0% (y/y), while the pre-COVID level was 3.6%.

The U-6 unemployment rate, including discouraged & underemployed workers, surged to 8.2% from 8.0% sequentially and from pre-COVID levels of 6.8%.

In Apr '26, the US employment rate was 95.7% vs. 95.7% sequentially and 95.8% year-over-year. The 3MRA-YTM was 95.7% in 2026 vs. 96.0% in 2025 and 96.3% in 2019 (pre-COVID).

In Apr '26, the US employment-to-population rate was 59.1% vs. 59.2% sequentially and 60.0% yearly, the lowest in over 4 years; the pre-COVID rate was 60.8%. The 3MRA-YTM was 59.5% in 2026 vs. 59.8% in 2025.

Further fine prints of BLS H/H survey data indicate the US NFP (Payroll) employment (Private + Public) averaged 3MRA-YTM was -125K in 2026 vs. +293K in 2025 and +201K on average in 2018-19 (pre-COVID).

Similarly, in Apr '26, the US self-employed persons were expanded by +296K vs -131K (m/m) and +161K (y/y).

The 3MRA-YTM self-employed persons were -44K in 2026 vs. +3K in 2025, against +10K pre-COVID (2018-19).

The 3MRA-YTM non-agricultural self-employed persons were -44K in 2026 vs. -39K in 2025.

The US agri-related employed persons (employees + self-employed) ─ 3MRA-YTM was around -1K in 2026 vs. +43K in 2025 and around +8K in pre-COVID times (2018-19).

The 3MRA-YTM of US part-time employment was around -17K in 2026 vs. +65K in 2025 and -12K pre-COVID (2018–19).

The US multiple job holders' (excluding agri) YTM average was -104K (5.2% of employed persons) vs. +30K in 2025 (5.4%); and +10K pre-COVID (5.0%).

The US multiple job holders' (including agriculture) YTM average was +119K (5.0% of employed persons) vs. -29K during pre-COVID (4.5% of employed persons).

 

The US multiple job holders' (including agri) YTM average was +441K (5.6% of employed persons) in Apr '26 vs. -194K in 2025 (5.3%), +85 in 2024 (6.3%), and +57 in 2023 (5.3%).

The US real wage growth (nominal growth - CPI) was around +0.9% in Apr '26 vs +1.0% in 2025 and +0.7% in 2024. The average US monthly wage (NFP employees) was around $4889 in Jan '25 and was $5133 in Apr '26. But the US real wage growth has already turned negative (-0.24%) in Apr '26 after CPI inflation surged +3.8% in Apr '26 following the March ’26 jump of +3.3% as gasoline prices soared due to higher crude oil prices amid the lingering Iran war. Although Trump boasted about his tariffs in 2025, and theoretically it was around 20%, the actual weighted average tariff rate was around 8% (after various exemptions), and assuming 1/3^rd of that was absorbed by US importers/producers, global exporters/suppliers, and US consumers, the actual net effects of Trump tariffs (after FX adjustment—higher USD) were almost negligible on the rate of inflation (price rise), even after a one-time effect to some extent (price rise).

In brief, under Trump 2.0 (from Jan '25 to Apr '26), as per the household survey:

·       Total employees under payroll (public, Pvt., and Agri.): 152247K vs 151331K (-916K)

·       Self-employed persons: 9097K vs 8904K (-193K).

·       Agri-related employed persons (wage + self-employed): 2487K vs 2387K (-100K)

·       Total self-employed persons: 11584K vs 11291K (-293K).

·       Total employed persons: 163831K vs 162622K (-1209K)

·       Total labor force: 170696 vs 16995 (-701K)

·       Unemployment rate: 4.0% vs. 4.3%

·       Employment/Population: 60.1% vs. 59.1%

·       EST. Survey ─ Payroll Employees (Public + Pvt.): 158.268M vs 158.736M (+0.468M)

·       Private Payroll: 134711K vs 135428K (+711K)

·       Government Payroll: 23557K vs 23308K (-249K).

·       Multiple Job Holders (excluding agro): 8774K vs 8434K (-340K).

·       Multiple Job Holders (including agro): 8508K ─ 5.3% vs. 9792K ─ 5.6% (+1284K)

·       JOLTS job openings: 7.43M vs 6.87M (-0.56M)

·       Average real wage growth: +1.0% in 2025 vs. +0.7% in 2024; YTM-2026 (Jan-Apr) +0.9%; but already turned negative (-0.24%) in April '26 as headline CPI inflation soared to +3.8% due to higher oil (Iran war).

Conclusions

If we consider 2024 (Biden) and 2025-26 (Trump 2.0), the US economy may be approaching inevitable stagflation/stagnation-like scenarios as the labor market is weakening, inflation is surging, real wage growth is turning negative, and economic growth (real GDP) is going down from +2.8% in 2024 to +2.1% in 2025 and may fall well below 2.0% in 2026 due to Trump’s chaotic policies from trade/tariffs to the Iran war and overall autocratic behavior with an imperialistic bullying attitude. Trump’s core focus may be on his daily dose of reality shows rather than actual economic reform & performance (development). The AI bubble may burst any time like a house of cards (despite ongoing tech optimism), as we have seen during the 2007-08 US subprime/housing crises amid the same circular finance narrative.

Fair valuation: SPX-500

As per current QTR/TTM and yearly trends, the CY25 EPS for SPX-500 may be around $246-252 (15-20% growth) against FY24 EPS of $210 and Q3CY25 TTM EPS of $234. Also, at around 15-20% CAGR, the CY26 EPS may come around $305 in an optimistic (best-case) scenario. In the base-worst case, it may grow around 15-10%. Now assuming a fair PE of 30-25-20-15 as a bubble-best-base-worst-case scenario, the CY25 average fair value may be around 5675 (7566-6305-5044-3783). Similarly, the CY26 average fair value may be around 6853 (9137-7614-6091-4568). At around 7500 and the estimated CY25 EPS of $252, the PE of SPX-500 is around 30 currently, in the bubble zone. Looking ahead, 7600-7700 may be a good hurdle for SPX-500, while 6300-6000 may be the base for CY26 as the best base-case scenario.

Technical outlook: DJ-30, NQ-100, SPX-500, and gold

Looking ahead, whatever may be the narrative, technically Dow Future (CMP: 50000) now has to sustain over 50700 for a further rally to 51000-51500 in the coming days; otherwise, sustaining below 50500/50200-50000/49500, DJ-30 may fall to 48500/48000-47600/46600 and 46000/45700*-45200*/45000 and 43800/43000-42000/39000-36800 in the coming days (base to worst-case scenario).

Similarly, NQ-100 Future (29600) now has to sustain over 29200 for a further rally to 30000/30300-31000/31425 in the coming days; otherwise, sustaining below 29100/28500*-28100/27800, it may fall to 27400-27000 and 26600/26300-26000/25600; NQ-100 may again fall to 24600/24400-24000/23900 and further to 23600/23300-22800/22400 and 21900-21000 in the coming days.

Looking at the chart, technically SPX-500 (CMP: 7400) now has to sustain over 7600 for a further rally to 7900/8000-8375/8500 in the coming days; otherwise, sustaining below 7550/7500-7300/7200 and 7100-6900, it may fall to 6835/6700 and further 6600-6500/6450 and 6350/6300-6250/6180 and 5860-4800 in the coming days.

Looking at the chart, technically Gold (XAUUSD) ─ CMP 4700 now has to sustain over 4760 for a further rally to 4805/4815-4850/4900 and 4975*/5000-5515/5555-5575* in the coming days. On the flip side, sustaining below 4750/4720-4660/4600, it may further fall to 4550/4500* and further 4450/4390*-42135/4100* and 4000-3950 in the coming days.

Disclaimer:

• I have no position or plan to have any position in the above-mentioned financial instruments/assets within the next 72 hours.

• I am an NSE-certified Level-2 market professional (Financial Analyst—Fundamental + Technical) and not a SEBI/SEC-registered investment advisor. The article is purely educational and not a proxy for any trading/investment signal/advice.

• Please always consult with your personal financial advisor and do your own due diligence before any investment/trading in the capital market.

• I am a professional analyst, signal provider, and content writer with over ten years of experience.

• All views expressed in the blog are strictly personal and may not align with any organization with which I may be associated.

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