Worries mount that Trump agenda is testing economy’s resilience

Subscribe to enjoy similar stories. The U.S. economy has proved pessimists wrong so many times, it’s tempting to think nothing can stop it.

President Trump’s first-month policy blitz is putting that resilience to the test. It’s far too early to say if cracks are forming in the overall economy, which grew at a healthy 2.3% annual clip in the fourth quarter. The unemployment rate dipped to 4% in January, low by historical standards.

But consumer spending, which accounts for more than two-thirds of demand, declined 0.2% in January, the Commerce Department reported Friday, instead of rising as economists expected. It was the largest monthly drop in four years. Meanwhile, the Conference Board’s consumer confidence index posted its largest monthly decline in February since 2021, and consumer expectations of inflation have risen.

An index of global economic policy uncertainty based partly on news articles and economic forecasts has topped its pandemic-era record. The S&P 500, which rose more than 6% between Election Day and Feb. 19, has since fallen 3.1%.

The yield on 10-year Treasury notes has tumbled from 4.79% on Jan. 14 to 4.23% Friday. It is now below three-month Treasury bill rates.

Bond yields reflect expectations of growth and Federal Reserve interest-rate actions. When they drop below short-term rates, a configuration called an “inverted yield curve," it tends to foreshadow softer growth. Economists refer to confidence surveys and financial indicators as “soft" data.

They are notoriously volatile, influenced by news, and often poor predictors of real economic activity. Most “hard" data—on income, the labor market, and output—generally point to an economy chugging along. The drop in consumer spending in January may have