Analysis: Tough jobs report puts Trump’s Iran war plans to the test

A difficult jobs report comes at a tough time for the White House. Gas prices are rising due to the war in Iran, while stock market turmoil is making savers and retirees antsy about the state of their 401(k)s.

Data released Friday showing a loss of 92,000 jobs in February will put pressure on the Trump administration to reconsider military and homeland security policies that have complicated the nation’s economic outlook. But there may simply not be enough time to force through a substantial policy shift that could improve the economic outlook before the November midterms. 

The state of the economy is mixed. The unemployment rate rose to 4.4% in February, reversing a decline from the month before. That rate is still low in historical terms. Meanwhile wages rose 3.8% since the year before, helping to reverse workers’ losses in purchasing power from high inflation under the Biden administration. 

The rosy-tinted view of this report is that it shows an economy in rough stasis, with good prospects for improvement. Healthy businesses don’t need to expand now because they are becoming more productive, and they aren’t conducting mass layoffs. And with a crackdown on illegal immigration well underway, it is no surprise that a good number of people are leaving the workforce. 

“You can have strong output and not really, you know, magnificent job growth, if there’s a big gain of productivity,” Kevin Hassett, top White House economic advisor, said on CNBC’s “Squawk Box” on Friday. 

But that high-level message might not land well for people who have watched gas prices jump nearly 23 cents in just a week, according to AAA. Captains of ships carrying oil and other energy supplies are reluctant to pass through the Strait of Hormuz while missiles are flying. That has pushed the price of oil above $90 a barrel for Brent crude as of Friday morning. It was near $72.50 a week ago, before the Iran operation started. The last time oil topped $100 a barrel was in 2022 after Russia invaded Ukraine.

Stocks have fallen as investors ingest the possibility of those higher energy prices pushing up inflation. The S&P 500 dropped 1.5% as trading opened Friday morning. That could prompt the Federal Reserve under Chair Jerome Powell to rethink lowering interest rates, as President Donald Trump has repeatedly demanded he do.

“It’s high time for the Federal Reserve to cut interest rates and stop foolishly strangling America’s economic resurgence under President Trump,” White House spokesman Kush Desai told CNBC on Friday.

For now, the administration isn’t expressing much concern. There has been “no discussion” of releasing oil from the Strategic Petroleum Reserve, Hassett said on CNBC. 

Trump in a social media post Friday said he wasn’t considering any kind of quick deal with Iran to end the fighting. “There will be no deal with Iran except UNCONDITIONAL SURRENDER!,” he wrote.

But economic data such as the jobs report will make that position difficult to sustain. Americans may well ask why the U.S. is paying an economic and military cost in Iran, since Trump said prior airstrikes in June destroyed the country’s nuclear program. The new joint U.S.-Israeli operation killed Iran’s longtime supreme leader. Why keep going?

At this point, it may not be up to the U.S. With Iran still between leaders, it isn’t clear who could make a ceasefire deal, even if one were viable. And Iran’s military forces have little left to lose in attacking U.S. interests, including energy supplies. The threat of an all-out U.S. attack was one reason Iranians held off retaliating against the U.S. in previous episodes. That bridge has now been thoroughly burned.

It may be easier for Trump to pivot on immigration. The crackdown in Minneapolis produced enough political blowback for Trump to soften his approach. Now he has a chance to do so nationwide. On Thursday he fired Homeland Security Secretary Kristi Noem and named Sen. Markwayne Mullin, R-Okla., her expected replacement. An immigration approach that focuses on apprehending dangerous criminals and steers clear of raiding businesses might help the labor market’s loss of workers. 

The lower interest rates Trump wants are in reach, too. Fed chair nominee Kevin Warsh would likely cut rates regardless of the oil shock, in large part because he believes in that productivity story, too. But to get Warsh into office, Trump needs to end an investigation into Powell that has prompted Sen. Thom Tillis, R-N.C., to stand in the way of advancing any Fed nominees. Trump and U.S. Attorney for the District of Columbia Jeanine Pirro have so far shown no sign of budging.

An overall Trump administration push to improve the economic outlook could make some headway, though how long it would take to show up in the numbers is anyone’s guess. But it would require a level of political coordination and strategic discipline that Trump has struggled with in his second term. The pace of events will only make that more difficult.