Charting the global economy: US job market wavers in cue for Fed

Economic Times

4 days ago

Synopsis
Central banks globally are reacting cautiously, with many holding rates steady amidst these complex conditions and trade tensions.
iStock Signs of a sluggish job market and the risk of a reacceleration in inflation due to higher import duties are dueling forces dividing Federal Reserve officials over the path of interest rates. The US labor market is wavering after a slowdown in economic growth during the first half of the year — implications of heightened uncertainty tied to trade policy.
President Donald Trump unveiled a slew of new tariffs that boosted the average US rate on goods from across the world, forging ahead with his effort to reshape international commerce and bolster American manufacturing. The baseline rates for many trading partners remain unchanged at 10% from the duties Trump imposed in April.
Signs of a sluggish job market and the risk of a reacceleration in inflation due to higher import duties are dueling forces dividing Federal Reserve officials over the path of interest rates. In the wake of a weak jobs report on Friday, Treasury yields declined on bets the Fed will lower interest rates as soon as September after keeping them unchanged this week.In Canada, central bankers left interest rates unchanged, while keeping the door open to more cuts if the economy weakens and inflation pressures stay in check. The Bank of Japan also held the line on borrowing costs.Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:
US
Job growth slowed sharply over the past three months and the unemployment rate rose in July, showing the labor market is shifting into a lower gear amid widespread economic uncertainty. Not only is job growth cooling markedly and unemployment rising, it's harder for unemployed Americans to get a job and wage gains have largely stalled. That poses further risks to a slowdown in consumer and business spending that's already underway.
Economic growth moderated through the first half of the year as consumers tempered their spending after a late-2024 splurge and companies adjusted to frequently shifting trade policy. While gross domestic product increased at a solid 3% annual rate, final sales to private domestic purchasers, a narrower metric of demand, rose at the slowest since the end of 2022.
Factory activity contracted in July at the fastest pace in nine months, dragged down by a faster decline in employment as orders continued to shrink. A measure of employment slid to the lowest level in more than five years, suggesting producers are stepping up efforts to control costs amid higher tariffs and softer demand.Europe
The euro-area economy unexpectedly eked out growth in the second quarter, benefiting from better-than-predicted performances in France and Spain. Gross domestic product increased 0.1%. While the results suggest some resilience in the 20-nation bloc at a time of heightened uncertainty, they mask economic contractions in Germany and Italy, the region's biggest and third-largest members.
As European Union leaders work through the consequences of their new trading arrangement with the US, they are confronting the bitter reality of just how far they have fallen. Even with the unpalatable terms, the EU may struggle to deliver on its new commitments to the US.
Asia
Bank of Japan Governor Kazuo Ueda kept investors guessing over the timing of his next interest rate hike with comments that cooled expectations of a near-term move and weakened the yen. The BOJ kept the overnight call rate at 0.5% at the end of a two-day policy meeting in a widely expected unanimous vote.
China Commands A Big Share of Global Manufacturing | Its share of global manufacturing value added is almost 30%China's top leadership emphasized its determination to reduce excess competition in the economy, with President Xi Jinping endorsing a campaign targeting one major cause of deflation and tensions with trade partners.
Major Items US Imports from India
Trump said Thursday he would impose a 25% tariff on India's exports, before following through a day later, and threatened an additional penalty over the country's energy purchases from Russia. India is weighing options to placate the White House, including boosting US imports, and has ruled out immediate retaliation, according to people familiar with the matter.
Emerging Markets
The global trade war that Trump unleashed from the Rose Garden that afternoon shook investor confidence in the US economy so much that it sparked a stampede out of the dollar. Much of that money has flowed into other developed countries but billions have washed up in developing nations, reviving a market that for more than a decade had been relegated to a mere afterthought in investing circles.
Chile's economic activity unexpectedly fell for the second month in June as a plunge in mining offset gains across other sectors in one of Latin America's richest nations.
Mexico Grows More Than Forecast in Second Quarter | GDP rose 0.7% from 1Q; output climbs 0.1% from year agoMexico's quarterly economic growth came in higher than expected in the three months through June as manufacturing and services powered Latin America's second-largest economy despite US tariffs.
World
At an average of 15%, the world is still facing some of the steepest US tariffs since the 1930s, roughly six times higher than they were a year ago. Trump's latest volley outlined minimum 10% baseline levies, with rates of 15% or more for countries with trade surpluses with the US. The months of negotiations, marked by Trump's social-media threats against US allies and foes alike, ended with new rates that were largely in line or lower than those on April 2.
The world economy will keep weakening and remains vulnerable to trade shocks even though it is showing some resilience to Trump's tariffs, the International Monetary Fund said. Its updated projections are slightly better than those in April, but largely reflect distortions such as front-loading in anticipation of tariffs.
Central Bank Watch In addition to the US, Canada and Japan, central bankers in Pakistan, Georgia, Singapore, Brazil, Colombia, Dominican Republic, Malawi and Eswatisi held interest rates steady. Chile, South Africa and Mozambique cut rates. Ghana lowered borrowing costs by the most on record.