Goldman Sachs' Jan Hatzius: Today's jobs report makes it more likely Fed will cut in September
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Yahoo
21 minutes ago
- Yahoo
Economic fears of investors are here — and fed by Trump's reaction
For months, the U.S. economy appeared to be weathering the disruptive effects of President Donald Trump's trade and immigration policies. But over the course of 72 hours, that sunny outlook darkened, as the latest government data this week showed the president's revolutionary remaking of the world's largest economy had hit a snag. Subscribe to The Post Most newsletter for the most important and interesting stories from The Washington Post. Friday's disappointing jobs report revealed a labor market that is much weaker than either the White House or Federal Reserve understood. Inflation, the voter irritant that helped return Trump to the Oval Office, is proving newly stubborn. And consumers are growing more cautious with their spending. After campaigning on a pledge to free business from worrying about Washington's dictates, Trump has made public policy - and his own norm-busting behavior - the primary variables affecting the $30 trillion U.S. economy, economists said. It all adds up to an economy that grew at an annual rate of 1.2 percent over the first half of the year, a notable downshift from its 2.4 percent pace at the end of 2024. The S&P 500 index, which has been on a tear since mid-April, reacted by shedding 2.5 percent of its value this week. 'We're seeing dramatic changes in policy across multiple dimensions. Trump inherited an economy that was in very good shape, that was in balance. He is trying to move it to a different equilibrium. And the corporate sector and everyone else are in the process of adjusting,' said Eric Winograd, senior vice president of AllianceBernstein in New York. That adjustment grew even tougher on Friday, when the president ordered the head of the Bureau of Labor Statistics fired over claims that she had tampered with employment figures to hurt him politically, without presenting evidence. Even as the costs of his policies became more apparent, the action ignited worries that Trump's volatile temperament could cause additional economic harm by undermining market confidence in the government data that investors, business executives and policymakers require to make decisions. Firing a nonpartisan analyst for delivering bad news was 'straight out of an autocratic playbook,' said Heidi Shierholz, former chief economist of the Labor Department and now the president of the Economic Policy Institute, a left-of-center think tank. 'If policymakers and the public can't trust the data - or suspect the data are being manipulated - confidence collapses and reasonable economic decision-making becomes impossible. It's like trying to drive a car blindfolded,' she said. What provoked Trump's ire was news that employers had created just 73,000 jobs in July and that the BLS had overstated hiring for the prior two months by 258,000 positions. The downward revisions left total new hiring over the past three months at an anemic 106,000 compared with the 368,000 jobs created during the same period in 2024. Trump's command to cashier Erika McEntarfer, a veteran labor economist who had helmed the agency since January 2024, drew widespread criticism including from the ex-Heritage Foundation economist he had appointed to that post in 2017, William Beach, who called the firing 'totally groundless.' The president's thirst for complete control of public agencies' data and decisions extends to the nation's central bank. On Friday, Trump - who has simultaneously said the economy was 'booming' and called for urgent interest rate cuts to spur growth - resumed his attacks on Fed Chair Jerome H. Powell. 'Jerome 'Too Late' Powell, a stubborn MORON, must substantially lower interest rates, NOW,' Trump wrote on social media, one week after telling reporters the Fed chief was 'a very good man.' The president has repeatedly mused about a near-unprecedented firing of Powell for refusing to cut rates to levels normally seen during profound economic weakness. This week, the Fed's monetary policy committee opted to stand pat, with Powell later telling reporters that the labor market was 'solid.' The weak jobs report that Trump assailed may, ironically, increase the odds that the Fed will cut rates at its next meeting, in September. Investors believe there is a more than 80 percent chance of a rate cut next month, based on trading in financial instruments that track central bank actions, according to CME Group. On Friday, Adriana Kugler, a member of the Fed's Board of Governors, announced her resignation, giving Trump an early opportunity to name a replacement who shares his desire for cheaper money. Kugler, whose term does not expire until January, was named to the board by President Joe Biden in 2023. She plans to return to her position as a professor at Georgetown University. As a 2024 candidate, Trump promised to 'cut costly and burdensome regulations.' The president has slashed environmental mandates, taken a largely hands-off stance toward development of artificial intelligence, and mandated the elimination of 10 old regulations for each new rule. Yet the sheer scale of Trump's economic ambitions, and his 24-7 social media pronouncements, have made Washington the focus of business and investment decision-making. 'Government policy [has] been the biggest change over the past couple of months,' said Erica Groshen, senior labor market adviser at Cornell University who served as BLS commissioner from 2013 to 2017. Trump's policies are dominating labor market trends. Uncertainty about his trade policy, which has lifted tariffs to their highest average rate since the 1930s, is freezing business decision-making, including over hiring, economists said. In July, the only industries engaging in significant new hiring were health care and social assistance. The rest of the private sector lost a combined 49,000 jobs over the past three months, according to Kathy Bostjancic, Nationwide's chief economist. 'That really reflects this large degree of uncertainty that businesses are feeling about trade policy and the economic agenda, and particularly tariffs,' she said. 'It's the uncertainty here that is the real killer because it paralyzes companies. They don't know what to do.' At Craig's Coffee, a roastery and cafe in Detroit, policy uncertainty has forced owner Craig Batory to hit the brakes on hiring and expansion. He started the year ready to offer raises to his staff of eight and to hire at least two new employees, but scrapped those plans when the president intensified his campaign to remake global trade. The majority of Batory's coffee comes from Brazil and will soon be subject to a 50 percent tax. 'Since the tariffs were announced, everything's gone on hold,' he said. 'All of the money we'd set aside for hiring, product testing, research and development, end-of-year bonuses - all of that immediately went away because we had to save it to cover the rising cost of green coffee.' With major brands such as Procter & Gamble, Nike and Hasbro planning to raise prices, customers seem worried, too. About 30 percent of Batory's regulars have pared their monthly subscriptions this year from two bags of coffee to one, he said. 'It feels like everything has been indefinitely paused,' he said. 'I'm kind of holding my breath, hoping things change.' While fallout from the president's ambitious trade overhaul is slowing hiring, the administration's border policies are simultaneously shrinking the labor supply. The immigration crackdown, including restrictions on student visas, is a worry for Kevin Chapin, who owns a violin sales and repair shop in New Haven, Connecticut. About one-third of his business comes from foreign college students who play the violin. Several have already told him they're staying in their home countries this year because of the Trump administration's policies. 'We're anticipating a hit once school begins in the fall,' Chapin said. 'Our whole industry is very nervous.' He's frozen expansion plans, and when his only employee got a job offer in June, Chapin encouraged him to take it. 'I hate to say it, but I was glad to not have him on payroll anymore because it was a relief financially,' he said, adding that he and his wife have been working overtime to keep the business going. 'Under normal circumstances, I would've hired someone right away. But now I'm going to wait a few months until the bank account gets to a more comfortable place.' Chapin spent thousands of dollars buying up extra inventory early this year, hoping to stock up before new tariffs kicked in. Now he's low on cash and anticipating higher costs from new tariffs, raising the cost of instruments from China, horsehair from Mongolia and accessories from Europe. So far, companies' need for more workers and the number of job seekers available have declined more or less to the same degree, keeping the unemployment rate from spiking, said Winograd, the economist. But a smaller labor force with less hiring has troubling implications. 'It sends a signal that the growth rate of the economy is likely to be slower,' Winograd added. At the White House, officials this week celebrated a spate of recent trade deals and tariff announcements as marking an end to the uncertain environment that has chilled hiring and investment. 'We've been hearing a lot about uncertainty over the last few months, but that's all resolved now,' Stephen Miran, chairman of the White House Council of Economic Advisers, told CNN, speaking before the president fired the BLS chief. 'So, it's all going to get much, much better from here.' Related Content Pets are being abandoned, surrendered amid Trump's immigration crackdown The Post exposed this farmer's struggle. Then the USDA called. Kamala Harris will not run for California governor, opening door for 2028 run Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
28 minutes ago
- Yahoo
Uncertain economic times? That means it's gold's time to shine
What's it worth: From Costco gold bars to pots of gold That's enough for more than 1 billion Olympic gold medals, which are actually primarily made of silver, and about 750,000 pots of gold waiting at the end of every rainbow. Or you'd have to spend $694 billion at Costco on its 1-ounce gold bars, although the $3,410 bar is out of stock. Value of reserves rises and falls with price of gold The price of gold fluctuates, but as of July 2025, the market value of all the gold stored in the New York Federal Reserve vault could be estimated somewhere between $470 billion and $680 billion, depending on the market price of gold, which hit a record high this year. Who owns all the gold in the Fed's stockpile? But none of that gold belongs to the Fed, and most of it isn't American. In 2021, the U.S. Treasury Department reported it only stores about 13.4 million fine troy ounces – about 416 metric tons – there. The rest belongs to foreign governments, other central banks, and official international organizations, who trust the Fed to keep it locked away 80 feet below street level. Golden opportunity for a heist movie? Where is the world's gold stored? The United States stores gold in other places, too. The largest American-owned gold stockpile is at Fort Knox in Kentucky, which houses about 147.3 million fine troy ounces of gold – about 4,583 metric tons. Other countries, including Germany, Italy, and France, also have large gold reserves. More: Trump wants lower interest rates. Will the Fed make cuts? Live updates Why people still like gold Beyond its shine, some investors, central banks, and governments view gold as an attractive asset that inspires confidence, even in uncertain times. 'It's historical money. It goes back several millennia as original money,' said Aakash Doshi, the global head of gold strategy at State Street Investment Management. 'It goes back to biblical times. It was one of the gifts from the three wise men.' Invest in Gold Thor Metals Group: Best Overall Gold IRA Priority Gold: Up to $15k in Free Silver + Zero Account Fees on Qualifying Purchase American Hartford Gold: #1 Precious Metals Dealer in the Nation While today gold isn't used as a large-scale payment method, it's a highly liquid asset with no particular credit risk and is not directly controlled by any central bank, according to Joe Cavatoni, the senior market strategist for the Americas for the World Gold Council. Some investors still view it as 'real' money – something that can't be printed – and a hedge against market and economic volatility. 'Gold performs in good times as well as in the bad times,' Cavatoni said. Why gold demand surged While the dollar or the euro isn't going away anytime soon, Doshi said the demand for real hard assets that complement fiat currency rose over the last few decades as global debt and governments' share of that debt has increased. In 2024, gold overtook the euro as the second-largest global reserve asset after the U.S. dollar, according to a June European Central Bank report. Doshi listed the 2008 financial crisis, the U.S.-China trade war, shifting trade alliances like the rearrangement of the North American Free Trade Agreement, and expanded sanctions as forces driving some central banks' increased interest in gold, as they seek stability amid economic shocks and geopolitical tension. Cavatoni said that rating agencies' recent downgrades to the U.S. government's creditworthiness and the risks that come with holding treasuries are also likely on people's minds, adding that a lot of the increased demand is coming from emerging market central banks. Gold price jumped since the start of 2024 He said gold is valued higher when market risk is unclear and uncertainty is high, adding, 'that's kind of the world we're living in now.' 'When you think about their absolute level of holdings, they are still very low relative to the percentage of total reserves. And I think that there's still an opportunity for them to continue to grow,' Cavatoni said. 'But I think we're seeing in our second quarter data and other sound bites that they're definitely paying close attention to what the performance is going to look like.' Reach out to Rachel Barber at rbarber@ and follow her on X @rachelbarber_ Illustrations by Veronica Bravo This article originally appeared on USA TODAY: In uncertain economic times, that means it's gold's time to shine Sign in to access your portfolio
Miami Herald
an hour ago
- Miami Herald
Trump's next job: Selling skeptical Americans on his economy
Six months into his comeback term, Donald Trump has taken full ownership of the U.S. economy. For better or worse, his party must now sell it to voters. The president has hailed the world's 'hottest' economy – and found others to blame for any wobbles. When Friday's jobs report showed a dramatic slowdown in hiring, he fired the head of the agency that published it. He's pinned some frustrations on his predecessor Joe Biden, and continues to berate the Federal Reserve for what he considers too-high interest rates. But for political purposes, his takeover has now been cemented - after passage of the 'One Big Beautiful Bill' tax-and-spending law, and the latest phase of his global tariff rollout. Commerce Secretary Howard Lutnick trumpeted the transition: 'The Trump Economy has officially arrived,' he posted on social media. The question is whether Americans like it. Next year Trump's economic record will be on the midterm ballot. Polls suggest voters are unhappy with the tariffs and tax plans — potentially giving Democrats an opening. The loss of GOP majorities in Congress could stall Trump's legislative agenda and expose him to impeachment efforts, as it did in his first term. The July employment figures, with job creation running at the weakest pace since the pandemic, were the latest indicator of a slowing economy. GDP shrank in the first quarter then rebounded in the second, as trade shifts skewed the numbers — but the overall pace in the first half of 2025 has been around half of last year's, with consumers hitting the brakes amid trade war uncertainty. Still, unemployment remains low and so far there's been little sign of the tariff-led surge in prices that many pundits warn of. 'The economy has held up remarkably well. Inflation has stayed relatively tame. But I do think there are storm clouds on the horizon,' said Republican strategist Marc Short, who served in Trump's first administration. Many businesses have so far avoided passing on tariff costs to consumers, he said, but 'the frog has been boiling all along.' Trump announced another round of tariff hikes this week, after months of often chaotic threats and reversals. Almost all U.S. trading partners now face higher rates. The import taxes are bringing in billions in government revenue, but the longer-term economic impact remains unclear. Critics say U.S. consumers and businesses will foot the bill. A recent Fox News poll shows that 62% of voters disapprove of Trump's handling of tariffs – while 58% are against the tax and spending bill, and 55% are unhappy with his overall handling of the economy. Voters are especially sensitive to the cost of living right now after prices skyrocketed under the Biden administration. Fed Chair Jerome Powell has cited the risk that tariffs could rekindle inflation as one reason for holding interest rates steady — to Trump's fury. The president has campaigned aggressively for lower rates, hinting he may fire Powell before his term ends next May. On Friday he called on the Fed's board to 'assume control' if Powell doesn't deliver a cut. There were some signs in June's price data that tariffs are starting to nudge prices higher for products like furniture and appliances. Still, the White House has a decent story to tell, according to Republican strategist Alex Conant. 'I would certainly take this economy over two or three years ago,' he said. 'There are two things that crush a president, inflation or unemployment. Right now both are low.' Democrats see opportunities to go after Trump on his tax-and-spending legislation as well as his tariffs. The measure includes new breaks for tips and overtime pay — but also steep cuts to health programs that will hurt many low-income Americans. 'Our summer's all about Cancel The Cuts,' former House Speaker Nancy Pelosi said on social media. 'I'll be looking at how House and Senate Republicans fare back home as they try to sell the recent budget bill,' said Democratic strategist Jim Manley. 'If you look at the polling, Democrats have to focus on his handling of the economy, because Americans are not happy.' With tariffs largely in place, the White House in August plans to start promoting its tax law. State and local officials were at the White House this week getting briefed on the legislation, one official said. Another White House insider said Trump was expected to hit the road as part of the effort. Key parts of the bill like the tips exemption are 'huge immediate political winners,' Conant said. 'They should not only run on them, they should attack Democrats for opposing them.' The law also extends tax cuts from Trump's first term, which had been due to expire. That's potentially the GOP's strongest argument to voters — 'if they'd not done it, can you imagine what your tax bill would've been like next April' — according to veteran Republican pollster Frank Luntz. 'They should be saying it, they're doing it to some degree,' he told Bloomberg TV on Friday. 'But it's not being heard.' The White House maintains that the economy is booming. 'All the naysayers and the doomsayers have been proven wrong,' Communications Director Stephen Cheung said. And Trump is pulling other levers to improve GOP chances in the midterms. He's raised $236 million for his political operation in the first six months of 2025 — an unprecedented sum for a second-term president. The latest filings to the Federal Election Commission suggest most of that cash will be available for GOP House and Senate candidates. Trump is also urging Texas lawmakers to redraw the state's congressional map in an effort to win House districts that are more favorable to Republicans — a move Democrats have decried as a power grab. Midterm elections historically favor the party out of power — potentially giving a boost to Democrats, who were soundly beaten in 2024. But the opposition party is also struggling in the polls, and hasn't coalesced around an effective appeal to voters. Former Chicago Mayor Rahm Emanuel, who has said he is considering a 2028 Democratic presidential bid, said the party has a clear economic message available for the midterms — which includes focusing on tariffs as an effective tax hike. 'This is all about accepting that Donald Trump owns this economy,' Emanuel said. Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
