- In February, the number of Americans planning a vacation in the next six months was the lowest in 15 years, excluding the pandemic when travel was pretty much obsolete, according to a survey conducted by the Conference Board. Apollo chief economist Torsten Slok points to uncertainty as the underlying rationale.
Americans are planning fewer vacations in an era where it’s probably much needed.
Research nonprofit the Conference Board tracks Americans who plan on taking a vacation on a six-month basis. In Feb., it was the lowest in 15 years, apart from the COVID-19 pandemic, which halted almost all travel. Apollo chief economist Torsten Slok blamed policy and economic uncertainty in a research note published Wednesday.
“The biggest downside risk is that policy uncertainty could create a sudden stop in the economy where consumers stop buying cars, stop going to restaurants, and stop going on vacation, and companies stop hiring and stop doing capex,” he wrote, referring to capital expenditures, basically the money companies spend to acquire, maintain, or improve long-term assets.
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That policy uncertainty he references lies mostly in President Donald Trump’s tariffs and Elon Musk’s non-cabinet cost-cutting body the Department of Government Efficiency (DOGE). “There are adjustment costs associated with changing trade policy and changing the size of the government sector, and the immediate question for markets is how big the short-term pain will be,” Slok wrote.
So let’s start with tariffs. The self-proclaimed “tariff man,” after a one month grace period, imposed 25% tariffs on Mexico and Canada, plus an extra tariff on China. Each country retaliated—the early makings of a global trade war. Stocks tumbled on the news, and Wall Street was worried about higher prices, slower economic growth, and increased recession risks. But the impact on markets and the economy, Slok said, depends on how long they’re in place. Commerce secretary Howard Lutnick seems to be hinting at some sort of deal. But only Trump knows his plans for tariffs.
Nevertheless, Slok claims consumer sentiment and corporate sentiment have already taken a hit; people are expecting fewer jobs ahead, and companies are pulling back on making plans that cost money. “If policy uncertainty persists, consumers and firms may begin to hold back spending decisions,” he said. “Combined with DOGE-driven layoffs, this will put upward pressure on the unemployment rate.”
Which brings us to the central bank. The Federal Reserve’s dual mandate is stable prices and maximum employment. “From a Fed perspective, the biggest problem is that tariffs increase prices and hence inflation,” Slok wrote. “That is why a trade war, by definition, is a stagflation shock: Higher prices and lower sales. If tariffs on Canada and Mexico continue for several months, then the Fed will focus on the rising unemployment rate and start cutting rates soon.”
