DOES TRUMP WANT (AND NOW NEEDS) A RECESSION?

OBSERVATIONS: WHY IS DOGE REALLY NEEDED?

Perhaps the best illustration of why America desperately needs the Department of Government Efficiency (DOGE) is that government workers cost 42.1% more than their private-sector counterparts, according to the latest data from the Bureau of Labor Statistics. Either government workers are the best and the brightest around, producing world-class results, or the taxpayers aren’t getting their money’s worth.

Anyone who has personally dealt with the US Government knows it’s the latter. This is because government lacks the same incentive structure as the private sector. Wasteful labor expenses are commonplace. For a business, labor is a cost that will only be undertaken if the corresponding benefit exceeds that cost. This is because the business operates on a profit incentive. The firm’s owner is acutely aware that all business decisions affect the bottom line and thus his or her personal pocketbook. Actions are taken urgently. Governments – not so much!

Government bureaucrats who are spending the taxpayers’ money daily are immune from the personal ramifications of their own actions., It’s not the bureaucrats’ money, so they have no incentive to personally feel it is spent efficiently.

“The problem I see is that we have people spending other people’s money on requirements delivered by others they have little real visibility into or adequate authority over!”     Elon Musk after 45 days of DOGE

It’s very difficult to fire a government worker, which creates tremendous incentive for that worker to slack off and do as little work as possible when not felt appreciated (who has not felt that!). This creates today’s scenario where government employees are extremely well paid for little work and even less accountability! This is not to say that all government workers are lazy bureaucrats who deserve to be fired. Some of them are true public servants who efficiently do the work set before them. But DOGE data indicate many government workers do not fit this profile.

In the last quarter of 2024, the most recent data available, the average hourly cost to employ a worker in the private sector was $44.67. Government workers, on the other hand, cost $63.46 per hour on average, or 42.1% more.

These costs reflect not just wages or salaries but also benefits — which are infamously generous for government workers. Who gets a pension anymore?? The average hourly cost to an employer of a private sector worker’s benefits is $13.20. For a government worker, the employer’s cost is $24.23, or a whopping 83.6% higher.

In exchange for this much higher cost of employment, the taxpayer gets lackluster results, which is why DOGE is hell-bent on reducing the headcount of government employees. Many states are now looking into joining this crusade against labor market waste to reduce government employment at all levels: federal, state, and local.

DOGE has already achieved remarkable results, identifying tens of thousands of unnecessary positions in the federal workforce. This is not to say it hasn’t come without people being harshly and even unfairly treated. I have personally conducted such “Downsizing” efforts and it is an extremely difficult & emotionally difficult job!

When department and agency heads are equipped with this knowledge, they can take the required steps to eliminate this waste from government payrolls and save taxpayers billions of dollars annually.

In the last monthly employment report from the Bureau of Labor Statistics, federal government payrolls declined by 10,000. This is in stark contrast to the previous administration, which saw government payrolls explode to new records. In fact, right before the November presidential election, government employment increased by over 700,000 in a single month.

DOGE is off to a great start, but there is still a long way to go. Rogue judges and deeply entrenched bureaucrats are doing everything they can to protect the inefficient status quo, including their own bloated salaries and benefits packages. For the sake of the taxpayer, let’s hope DOGE keeps delivering victories. – Based on work by A J Antoni

WHAT YOU NEED TO KNOW!

A PLUNGING ATLANTA FED GDPNow OUTLOOK

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -3.7 percent on April 1, down from -2.8 percent on March 28. The alternative model forecast, which adjusts for imports and exports of gold as described here, is -1.4 percent.

Jan – 1.5%

Feb – 2.8%

Mar – 3.7%

RESEARCH – MARKET DRIVERS

1- DOES TRUMP WANT (AND NOW NEEDS) A RECESSION?

• • The Honeymoon is nearly over for the Trump Administration, because of major delays that, though should be expected, were dismissed in campaign rhetoric as insignificant. Resistance to Trump’s Art of the Deal” is intensifying not diminishing!
  • Trump is well aware that a US Recession is long overdue and potentially close at hand.
  • Trump knows the exposure he has to the mIdterm elections, now 18 months away, where historically he can expect to lose seats. A lost House means a halt to his political agenda, making him a lame duck president with the full likelihood of impeachment proceedings in the first few minutes that the Democrats resume control of the House – a fact!
  • What would a politician do in a situation like that?

DECISION: GET THE RECESSION UNDERWAY IMMEDIATELY!

“The more you listen to the current US administration the more you appreciate that they are prepared to sacrifice near-term market performance and economic growth if it’s required to meet their longer-term objectives… this is now the 28th worst out of 98 years.” (DB’s Reid) Trump needs and wants a US Recession NOW!

2- EVEN THE DOGS TAIL HAS STOPPED WAGGING!

• • We believe stocks were slammed Friday with traders fearful of equities approaching circuit breaker levels. This distorted reponses and contributed to after cash close selling in offshore markets.
  • However, what is clear is Recession is now the base case for a surging number of economists.
  • China’s 34% Tariff announcement on imported goods signaled China is ready to fight – not prepared to negotiate until it modifies its current position.
  • Global markets on Friday began pricing in:

• • • TRADE WARS HAVE BEGUN.
    • A RECESSION HAS BEGUN & IS BEING PRICED IN WITH REDUCED EARNINGS & PE VALUATIONS.
    • CURRENCY WARS FOLLOW FROM TRADE WARS.

DEVELOPMENTS TO WATCH – POLICY DRIVERS

1- AMERICA FIRST TRADE POLICY

• • In 2017, my Administration pursued trade and economic policies that put the American economy, the American worker and our national security first. This spurred an American revitalization marked by stable supply chains, massive economic growth, historically low inflation, a substantial increase in real wages and real median household wealth, and a path toward eliminating destructive trade deficits.
  • My Administration treated trade policy as a critical component to national security and reduced our Nation’s dependence on other countries to meet our key security needs.
  • Americans benefit from and deserve an America First trade policy. Therefore, I am establishing a robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs and businesses. 

2- TRUMP’S TARIFF TURMOIL

• • Be careful when you call Trump Tariffs “Reciprocal”. The Trump Administration’s view of what is included in Reciprocal is likely to be quite different than most would think!
  • “The numbers [for tariffs by country] have been calculated by the Council of Economic Advisers … based on the concept that the trade deficit that we have with any given country is the sum of all trade practices, the sum of all cheating,” calling it “the most fair thing in the world.”
  • Using US census bureau trade data for 2024, the ratio of a country’s goods trade deficit with the US over that country’s exports to the US yields the same results.
  • The bigger the nominal trade deficit a country has with the US adjusted for the absolute size of that country’s imports, the bigger the tariff (and reciprocal tariff).

GLOBAL ECONOMIC REPORTING – ECONOMIC DRIVERS

LABOR REPORT (NFP) – Unemployment Rate

• • The March jobs report ended up being far stronger than expected, as the US added a whopping 228K jobs, the highest since December and more than double the 117K in February (revised lower from 151K).
  • Beating the consensus estimate of 140K by 3 sigma
  • The number was also above the highest estimate from Wall Street analysts, which was 200K.