Some Good News
Author: Greg Valliere
February 12, 2026
Big governments often make big mistakes (see the El Paso airport fiasco). But sometimes economic policy clicks just right.
Donald Trump continues to surprise on the upside when it comes to the economy. Nonfarm payrolls rose by 130,000 last month—about twice market expectations—and unemployment fell by a tenth of a percentage point.
Despite the harsh winter weather, there’s no recession in sight. In recent months, it became fashionable to predict a sharply weakening labor market, yet job growth has continued at a moderate pace.
This resilience has helped produce a budget deficit outlook that appears manageable, at least until demographic pressures intensify in the next decade.
Data from the Congressional Budget Office, released yesterday, showed the deficit declined by $111 billion last month—a 39 percent reduction in red ink so far this fiscal year compared with last year.
Trump will undoubtedly take credit; to be fair, tariffs have boosted revenues. Higher spending and tax cuts have also played a role.
There is, however, a significant risk: highly stimulative fiscal policy could prove excessive, as we noted earlier this week.
Trump is also pressing the Federal Reserve for further rate cuts—but if upside economic surprises continue, the economy may not need much additional medicine.
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