Ferrari starts year with racing profit but warns of tariff impact

Commentary: How markets will punish Trump if he fudges the economic data

Yahoo

10 minutes ago

Yahoo

Commentary: How markets will punish Trump if he fudges the economic data

President Trump is laying the groundwork for replacing real economic data with his own numbers. It's a terrible idea that will blow up in his face if he tries it — and cause the Trump presidency more damage than any legitimate numbers could. Trump fired the economist in charge of the Bureau of Labor Statistics on Aug. 1 after the latest employment report showed a sharp slowdown in hiring. The problem isn't the data or the economists who produce it. The problem is that, right on schedule, Trump's disruptive policies are messing up the economy. His tariffs are raising costs and jamming up business operations with new inefficiencies. His workplace raids, meant to ensnare unauthorized migrants, are reducing the labor supply and leaving some companies disastrously short of workers. After firing the BLS commissioner, Erika McEntarfer, Trump said in a social media post that she 'rigged' the job numbers to make him look bad. Trump specifically cited revisions in the jobs data for May and June that cut total employment by 258,000. That put average job growth during the last three months at an anemic 35,000 — 80% below the average pace of job growth during Joe Biden's last year as president, an underperformance that Trump must find intolerable. There are legitimate concerns about the quality of the surveys BLS conducts to compute the jobs data. Those are huge surveys relying on accurate and complete responses from thousands of firms and regular people. The methodology is complicated. Trump's own cutbacks to the agency make mistakes more likely. One of the main reasons BLS revises the data in the first place is to provide more accuracy as it refines the results of a given month. The downward revisions for May and June were large, but hardly unprecedented. Trump isn't talking about any of that. The employment numbers aren't rigged, and the few serious economic people in Trump's administration — Treasury Secretary Scott Bessent, White House economist Kevin Hassett — ought to be telling him that. A lot of economic data is unflattering to Trump, however, and there's a good chance it will get worse as tariffs and migration raids further stifle the economy. Trump acts like he knows it, and has been thinking for some time about how to provide alternate data that's more flattering to the Trump economy. For most of his second term, Trump has been raging about Federal Reserve Chair Jerome Powell, demanding that the Fed slash interest rates and musing about firing Powell. Trump has also floated the idea of appointing a 'shadow' Fed chair who would give more upbeat assessments of the economy than the Fed's sober analysis, and perhaps replace Powell when his term expires next Trump's commerce secretary, Howard Lutnick, wants to change the way the government calculates economic growth. In June, the BLS, which also calculates inflation data, said it was reducing the collection of pricing data in some parts of the country. Starting Aug. 14, it will cut the number of wholesale prices it measures. The agency says staffing shortages are the main reason it's dialing back data collection. Trump, of course, has slashed staffing at myriad government agencies as part of the so-called DOGE efficiency commission's work. Trump makes no secret of seeking to exert maximum control over all facets of government, including agencies established to be independent of political manipulation. He could very well co-op economic data by putting loyalists in charge of the relevant agencies and instructing them to make the data friendlier. He clearly wants a Federal Reserve that will juice the economy on his command, and if he appoints the right people for the rest of his presidential term, he might get that too. If any of that happens, it will backfire, maybe spectacularly. The simple reality is that nobody, not even the president, can fool markets, at least not for very long. Official government data is important, but businesses, investors, and consumers rely on thousands of data points that tell them almost everything they need to know about how the economy's doing. Presidents have tried many times to generate a counternarrative meant to persuade voters they're better off than they think they are. It never works. Ordinary workers know how far their paycheck stretches and whether they're getting ahead or falling behind. Most can tell you that without knowing whether the inflation or unemployment rate is going up or down. Businesses know what's happening with their order book and cash flow, and spend more or less accordingly. Investors read pricing signals the government can't control and buy, sell, or hedge based on what they see. The bond market is the ultimate arbiter of economic truth, and right now it's expressing concerns about the Trump economy and Trump's own policies. Joe Brusuelas, chief economist at RSM, points out there's a 'risk' or 'fear' premium in markets right now that's pushing long-term interest rates about 0.65 percentage points higher than they'd otherwise be. That interest rate premium is the extra amount investors demand in order to lock up their money in longer-term bonds. It compensates them for what they think is the risk of higher inflation in the future, along with uncertainty over other factors that could affect the value of their investments. The current term premium is not historically high. But it's higher than it has been for most of the last 15 years. And not all of it involves Trump's policies. Last fall, for instance, long-term rates rose by about a full point while the Fed was cutting short-term rates by a full point. That was a very unusual move, suggesting investors foresaw higher inflation over a five- to 10-year time frame and demanded higher rates to buy bonds maturing during that time. Still, Trump has inherited a dyspeptic bond market, and his tariffs clearly contribute to inflation expectations because they're a tax on imports that literally raises prices paid by businesses and consumers. Another problem is the massive amount of US government borrowing, which may finally be approaching unsustainable levels. If or when the day arrives when there aren't enough buyers for Treasury securities, the only outcome can be higher rates for all bonds to entice buyers. And higher long-term interest rates raise costs for every business or consumer borrowing money. The weird pricing action from last fall shows that if Trump did manage to force the Fed to slash short-term rates, long-term rates might actually rise, because investors would anticipate higher inflation due to looser monetary policy. Trump doesn't care about short-term rates, which only apply to banks making overnight loans. What he really wants is lower long-term rates, so that businesses and consumers borrow and spend more, stoking growth. Trying to force that to happen would probably have the opposite effect. The same thing would happen if Trump tried to fool the world by publishing bogus data showing the economy doing better than it really is. Every serious investor would know it's a sham. Uncertainty would worsen as opacity on some facets of the economy replaced transparency. That would cause upward pressure on the interest rate risk premium, pushing rates higher. Brusuelas's data shows a risk premium of more than 2 percentage points during some periods during the last 25 years. If there were such a premium today, the typical mortgage rate would be more than 8%, instead of 6.7%. In 2008, during the financial crisis, the term premium approached 4%, which would push interest rates today above 10%. That's the range, or trouble, Trump could cause in bond markets if he tries to manipulate the economy and fails. Would it cause a recession? Nobody knows, but that may be the wrong question. Americans are in a foul mood largely because they think management of the economy stinks and they feel prosperity slipping away. When Joe Biden was president, he repeatedly touted record job growth and other things going right, convincing approximately nobody that they were better off than their personal finances led them to believe. Americans want to feel like they're getting ahead at home and at work. Legitimate data won't convince them if they don't see it happening in their own lives, and bogus data won't do any better. Consumer attitudes have been at recessionary levels for much of the last five years, and if Trump starts producing doctored data, it may depress people even more. Truth has value, even to Trump. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices. Sign in to access your portfolio

Exclusive-Fed's Daly says time is nearing for rate cuts, may need more than two

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10 minutes ago

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Exclusive-Fed's Daly says time is nearing for rate cuts, may need more than two

By Ann Saphir (Reuters) -San Francisco Federal Reserve Bank President Mary Daly on Monday said that given mounting evidence that the U.S. job market is softening and no signs of persistent tariff-driven inflation, the time is nearing for interest rate cuts. "I was willing to wait another cycle, but I can't wait forever," Daly said of the Fed's decision last week to leave short-term borrowing costs in their 4.25%-4.50% range rather than cut them, as a couple of her colleagues wanted and as President Donald Trump has demanded. While that doesn't mean a September rate cut is a lock, she said, "I would lean to thinking that every meeting going forward is a live meeting to think about these policy adjustments." The two quarter-point interest-rate cuts that Fed policymakers back in June penciled in for this year still "look to be an appropriate amount of recalibration, and less important is, does it happen in September and December than does it happen at all kinds of permutations to get those two cuts." Daly said there is still plenty of data including a couple of labor market and inflation reports due out before the Fed's policy-setting meeting, in September, and she's keeping an open mind. "We of course could do fewer than two (rate cuts) if inflation picks up and spills over or if the labor market springs back," Daly said. But "I think the more likely thing is that we might have to do more than also should be prepared in my judgment to do more if the labor market looks to be entering that period of weakness and we still haven't seen spillovers to inflation." A Labor Department report Friday showed U.S. employers added just 73,000 jobs last month, and massive revisions to previously reported data showed only 33,000 jobs were added in the two prior months. Those figures, to Daly's mind, don't mean the job market is precariously weak - in times of economic flux, she said, raw employment numbers are often less informative than ratios like the unemployment rate, which ticked up just a tenth of a percentage point in July to 4.2%. Still, she said, looking at a broad dashboard of labor-market measures, there is "evidence after piece of evidence" that the labor market is softening quite a bit compared to last year. "I would see further softening as an unwelcome result," she said. "I'm comfortable with the decision we made in July, but I am increasingly less comfortable with making that decision again and again." At the same time, she said, there's no evidence that tariff-driven price increases are seeping more broadly into inflation, and if the Fed waits long enough to be certain it won't -- a process that could take six months or a year, she said - the Fed will "for sure" be too late to move. The Fed is approaching a "tradeoff space where you are trying to make a judgment about where does policy need to be to continue to put downward pressure on inflation, and where does it need to be to continue to make sure that sustainable employment can be achieved," she said. "That's why I didn't think that July was a necessary change, but I do think, increasingly, policy is not aligned." 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

Commentary: How markets will punish Trump as he fudges the economic data

Yahoo

10 minutes ago

Yahoo

Commentary: How markets will punish Trump as he fudges the economic data

President Trump is laying the groundwork for replacing real economic data with his own numbers. It's a terrible idea that will blow up in his face if he tries it — and cause the Trump presidency more damage than any legitimate numbers could. Trump fired the economist in charge of the Bureau of Labor Statistics on Aug. 1 after the latest employment report showed a sharp slowdown in hiring. The problem isn't the data or the economists who produce it. The problem is that, right on schedule, Trump's disruptive policies are messing up the economy. His tariffs are raising costs and jamming up business operations with new inefficiencies. His workplace raids, meant to ensnare unauthorized migrants, are reducing the labor supply and leaving some companies disastrously short of workers. After firing the BLS commissioner, Erika McEntarfer, Trump said in a social media post that she 'rigged' the job numbers to make him look bad. Trump specifically cited revisions in the jobs data for May and June that cut total employment by 258,000. That put average job growth during the last three months at an anemic 35,000 — 80% below the average pace of job growth during Joe Biden's last year as president, an underperformance that Trump must find intolerable. There are legitimate concerns about the quality of the surveys BLS conducts to compute the jobs data. Those are huge surveys relying on accurate and complete responses from thousands of firms and regular people. The methodology is complicated. Trump's own cutbacks to the agency make mistakes more likely. One of the main reasons BLS revises the data in the first place is to provide more accuracy as it refines the results of a given month. The downward revisions for May and June were large, but hardly unprecedented. Trump isn't talking about any of that. The employment numbers aren't rigged, and the few serious economic people in Trump's administration — Treasury Secretary Scott Bessent, White House economist Kevin Hassett — ought to be telling him that. A lot of economic data is unflattering to Trump, however, and there's a good chance it will get worse as tariffs and migration raids further stifle the economy. Trump acts like he knows it, and has been thinking for some time about how to provide alternate data that's more flattering to the Trump economy. For most of his second term, Trump has been raging about Federal Reserve Chair Jerome Powell, demanding that the Fed slash interest rates and musing about firing Powell. Trump has also floated the idea of appointing a 'shadow' Fed chair who would give more upbeat assessments of the economy than the Fed's sober analysis, and perhaps replace Powell when his term expires next Trump's commerce secretary, Howard Lutnick, wants to change the way the government calculates economic growth. In June, the BLS, which also calculates inflation data, said it was reducing the collection of pricing data in some parts of the country. Starting Aug. 14, it will cut the number of wholesale prices it measures. The agency says staffing shortages are the main reason it's dialing back data collection. Trump, of course, has slashed staffing at myriad government agencies as part of the so-called DOGE efficiency commission's work. Trump makes no secret of seeking to exert maximum control over all facets of government, including agencies established to be independent of political manipulation. He could very well co-op economic data by putting loyalists in charge of the relevant agencies and instructing them to make the data friendlier. He clearly wants a Federal Reserve that will juice the economy on his command, and if he appoints the right people for the rest of his presidential term, he might get that too. If any of that happens, it will backfire, maybe spectacularly. The simple reality is that nobody, not even the president, can fool markets, at least not for very long. Official government data is important, but businesses, investors, and consumers rely on thousands of data points that tell them almost everything they need to know about how the economy's doing. Presidents have tried many times to generate a counternarrative meant to persuade voters they're better off than they think they are. It never works. Ordinary workers know how far their paycheck stretches and whether they're getting ahead or falling behind. Most can tell you that without knowing whether the inflation or unemployment rate is going up or down. Businesses know what's happening with their order book and cash flow, and spend more or less accordingly. Investors read pricing signals the government can't control and buy, sell, or hedge based on what they see. The bond market is the ultimate arbiter of economic truth, and right now it's expressing concerns about the Trump economy and Trump's own policies. Joe Brusuelas, chief economist at RSM, points out there's a 'risk' or 'fear' premium in markets right now that's pushing long-term interest rates about 0.65 percentage points higher than they'd otherwise be. That interest rate premium is the extra amount investors demand in order to lock up their money in longer-term bonds. It compensates them for what they think is the risk of higher inflation in the future, along with uncertainty over other factors that could affect the value of their investments. The current term premium is not historically high. But it's higher than it has been for most of the last 15 years. And not all of it involves Trump's policies. Last fall, for instance, long-term rates rose by about a full point while the Fed was cutting short-term rates by a full point. That was a very unusual move, suggesting investors foresaw higher inflation over a five- to 10-year time frame and demanded higher rates to buy bonds maturing during that time. Still, Trump has inherited a dyspeptic bond market, and his tariffs clearly contribute to inflation expectations because they're a tax on imports that literally raises prices paid by businesses and consumers. Another problem is the massive amount of US government borrowing, which may finally be approaching unsustainable levels. If or when the day arrives when there aren't enough buyers for Treasury securities, the only outcome can be higher rates for all bonds to entice buyers. And higher long-term interest rates raise costs for every business or consumer borrowing money. The weird pricing action from last fall shows that if Trump did manage to force the Fed to slash short-term rates, long-term rates might actually rise, because investors would anticipate higher inflation due to looser monetary policy. Trump doesn't care about short-term rates, which only apply to banks making overnight loans. What he really wants is lower long-term rates, so that businesses and consumers borrow and spend more, stoking growth. Trying to force that to happen would probably have the opposite effect. The same thing would happen if Trump tried to fool the world by publishing bogus data showing the economy doing better than it really is. Every serious investor would know it's a sham. Uncertainty would worsen as opacity on some facets of the economy replaced transparency. That would cause upward pressure on the interest rate risk premium, pushing rates higher. Brusuelas's data shows a risk premium of more than 2 percentage points during some periods during the last 25 years. If there were such a premium today, the typical mortgage rate would be more than 8%, instead of 6.7%. In 2008, during the financial crisis, the term premium approached 4%, which would push interest rates today above 10%. That's the range, or trouble, Trump could cause in bond markets if he tries to manipulate the economy and fails. Would it cause a recession? Nobody knows, but that may be the wrong question. Americans are in a foul mood largely because they think management of the economy stinks and they feel prosperity slipping away. When Joe Biden was president, he repeatedly touted record job growth and other things going right, convincing approximately nobody that they were better off than their personal finances led them to believe. Americans want to feel like they're getting ahead at home and at work. Legitimate data won't convince them if they don't see it happening in their own lives, and bogus data won't do any better. Consumer attitudes have been at recessionary levels for much of the last five years, and if Trump starts producing doctored data, it may depress people even more. Truth has value, even to Trump. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices. 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

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Commentary: How markets will punish Trump if he fudges the economic data

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Ferrari starts year with racing profit but warns of tariff impact

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Commentary: How markets will punish Trump if he fudges the economic data

Exclusive-Fed's Daly says time is nearing for rate cuts, may need more than two

Commentary: How markets will punish Trump as he fudges the economic data

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