Today’s report that 151,000 jobs were added in the U.S. in February shows continued economic strength, but weakening consumer confidence and worries about the impact of tariffs is concerning, UNC Chapel Hill economist Gerald Cohen said in a press briefing today.
“If we continue to get job growth like we did today, we’ll be OK,” Cohen said. ”If spending numbers continue to be weak, I’d be worried,” Cohen says. He is chief economist of the Kenan Institute of Private Enterprise and a professor at the Kenan-Flagler Business School.
Cohen said he worries that economic activity in the second and third quarter could decline significantly should consumer confidence continue to decline. There appeared to be a strong increase in inventories as businesses bought products in the last quarter of 2024, anticipating tariffs favored by the newly elected Trump Administration, he says.
During his 30 years as an economist, Cohen noted that when consumer confidence declined, “sometimes it has looked bad and it gets worse.” In other instances, consumers have continued to spend money aggressively, boosting the economy. “Animal spirit psychology plays a hugely important role,” he said.
Research conclusively suggests that tariffs contribute to inflation, he said, citing studies related to aluminum, steel and appliances as examples. Concern about the impact of tariffs, which the Trump Administration is championing to help bolster U.S. manufacturing, is causing unusual volatility in the investment markets.
The February unemployment rate of 4.1% nationally shows a “slight loosening in the tight labor market,” according to Lawrence Yun, chief economist at the National Association of Realtors. In a release, he added that, “The wage gain of 4% is outpacing the inflation rate of 3%, thereby raising the standard of living. Some signs of cracks in the economy are emerging.”