Russia Set to Sidestep Recession for Now, Even as Growth Fades
Gross domestic product in annual terms expanded 1.5% in the second quarter, according to the median estimate of economists surveyed by Bloomberg. That implies the economy also grew quarter-on-quarter to avoid a second straight contraction — the definition of a technical recession.
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28 minutes ago
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Trump could trigger a financial crisis in Russia — if he wants to — but has backed off from his threat of ‘very severe consequences'
President Donald Trump and Russian President Vladimir Putin ended their meeting in Alaska on Friday without a ceasefire deal. Despite Trump's earlier threat that Moscow would face 'very severe consequences' if the summit didn't produce an agreement, he said he would hold off on imposing new sanctions. But a tougher U.S. crackdown on tankers delivering Russian oil would cripple Putin's war machine, an expert said. The U.S. holds immense leverage over Russia's economy and ability to continue waging war on Ukraine, but President Donald Trump has backed off from earlier warnings that lack of progress on a ceasefire would result in harsh penalties for Moscow. Trump and Russian President Vladimir Putin ended their highly anticipated meeting in Alaska on Friday without a deal. On Saturday, Trump shifted his stance toward reaching a more comprehensive peace agreement between Russia and Ukraine, mirroring Putin's position, rather than a ceasefire. He also reportedly backed Putin's idea for Ukraine to give up territory it holds in exchange for a Russian promise that it won't attack again. That marked a big swing from his rhetoric leading up to the Alaska meeting, as he threatened 'very severe consequences' for Russia if Putin didn't agree to a ceasefire. When asked why he didn't follow through, Trump said he would hold off on any new penalties and suggested the threat remains on the table as diplomacy plays out. 'Because of what happened today, I think I don't have to think about that now,' he told Fox News. 'I may have to think about it in two weeks or three weeks or something, but we don't have to think about that right now.' Trump had previously warned Russia's oil sector could face secondary sanctions. Oil and gas generate the bulk of the Kremlin's revenue, and the U.S. could exploit this critical vulnerability. In particular, cutting off the 'shadow fleet' of tankers that deliver Russia's oil under the radar would send the war economy into a 'deep financial crisis,' according to Robin Brooks, a senior fellow at the Brookings Institution and former chief economist at the Institute of International Finance. After the Biden administration sanctioned nearly 200 ships in January, just before Trump returned to office, their activity collapsed, he pointed out in a Substack post on Saturday. But there are 359 more ships that have already been sanctioned by the European Union or United Kingdom, but haven't been targeted yet by the U.S. 'Sanctioning these ships would be a hammer blow to the Russian war machine,' Brooks wrote. 'There would undoubtedly be a sharp fall in the Urals oil price, reducing the flow of hard currency to the Russian state, and the Ruble would most likely depreciate significantly.' Meanwhile, foreign policy expects have called the Alaska meeting a success for Putin as he was able to avoid severe consequences from Trump while also buying time for his military to make more battlefield gains in Ukraine. But Melinda Haring, a nonresident senior fellow at the Atlantic Council's Eurasia Center, also noted that Trump has significant leverage over Russia. 'Let's hope that Trump sees through Putin's endless appetite to talk and tires of the Russian dictator's pseudo-historical lectures,' she wrote in a blog post. 'Trump can squeeze the Russians; he seems to forget that the United States holds the cards, not Moscow.' Oil and gas revenue tumbled 27% in July from a year ago, and Russia is running out of financial resources as war-related spending deepens its budget deficit. The National Wealth Fund, a key source of reserves, has dwindled from $135 billion in January 2022 to just $35 billion this past May and is expected to run out later this year. 'Russia's economy is fast approaching a fiscal crunch that will encumber its war effort,' economist and Russia expert Anders Åslund wrote in a Project Syndicate op-ed last week. 'Though that may not be enough to compel Putin to seek peace, it does suggest that the walls are closing in on him.' This story was originally featured on 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
an hour ago
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Shock jobs report stirs recession fears: 5 takeaways
The disappointing July jobs report threw a bucket of cold water on an economic outlook that appeared to be holding up surprisingly well despite President Donald Trump's high import tariffs, immigration crackdown and widespread federal layoffs. Not only did employers add a disappointing 73,000 jobs – well below the 105,000 expected – but payroll gains for May and June were revised downward by a whopping 258,000. That left May's additions at 19,000 and June's at 14,000, the weakest performance since the nation was climbing out of the COVID-19 recession in December 2020. By late afternoon Aug. 1, Trump announced he ordered the firing of Erika McEntarfer, the U.S. commissioner of Labor Statistics. The president in a social media post accused McEntarfer of manipulating figures for "political purposes," though he did not provide any evidence. In early afternoon trading, the Dow Jones Industrial Average was down about 607 points and the benchmark S&P 500 index was off 1.5% Over the past three months, the economy has averaged just 35,000 employment gains. Here are a few takeaways: This was no blip The poor showing likely wasn't an outlier that will be followed by a resumption of healthy job gains in the months ahead, economists said. Consumers have reined in their spending somewhat, amid worries about Trump's tariffs pushing up prices, and are pulling back on travel and recreational activities. As more of the import charges hit store shelves, Americans will likely restrain their outlays further, Pantheon Macroeconomics wrote in a note to clients. That should translate into weaker job gains, especially in sectors such as manufacturing, retail, trucking and warehousing, the research firm said. And on July 31, Trump escalated his global trade fight with a sweeping new round of import levies. Meanwhile, executives' confidence in the business outlook has been shaken in recent months by the tariffs – which are squeezing profit margins – and that's expected to spell a more pronounced decline in business investment, Pantheon said. 'Sadly, employment appears set for a further summer slowdown as firms, facing renewed cost volatility from escalating trade tensions, remain focused on managing labor costs through reduced hiring, performance-based layoffs, restrained wage growth, and lower entry-level wages,' Gregory Daco, chief economist of EY-Parthenon, wrote to clients. Also, after the Supreme Court recently lifted a stay on mass federal layoffs, 'the decline in federal employment likely will gather more momentum over the coming months,' Pantheon said. The Labor Department has tracked 84,000 federal job losses this year, but the number of buyouts and job cuts announced was much larger. Hiring across the economy hit a 12-month low in June, Labor Department figures show. Will there be a recession in 2025? The dreaded word has slipped back into the conversation after fading the past couple of months as Trump delayed many tariffs and reached deals with several countries. 'To me, today's jobs report is what entering a recession looks like,' Josh Bivens, chief economist of the left-leaning Economic Policy Institute, said in a statement. 'Could we pull up? Sure. But if we look back and end up dating an official recession that starts 3-6 months from now, this is what it would look like today – rapid softening/deterioration in the labor market.' A recession now appears 'very, very likely' unless Trump lowers the tariffs by Labor Day, said Mark Zandi, chief economist of Moody's Analytics. Could a skidding economy and stock market lead Trump to reverse course? A darkening economic outlook and tumbling stock market could well prompt Trump to try to soften the import fees, Zandi said. 'He's going to try to pull it back,' he said. But if he doesn't act before Labor Day, 'It will be too late,' Zandi said, adding the duties will start to ripple too dramatically into retail prices and consumer and business sentiment for the effects to be undone. A September fed rate cut likely At a July 30 news conference following the Fed's decision to hold rates steady for a fifth straight meeting, Fed Chair Jerome Powell described the labor market as solid and balanced. He also said officials would focus primarily on the unemployment rate as they decide whether to lower rates in September. The jobless rate edged up to 4.2% in July. It's still historically low because Trump's immigration constraints, particularly deportations, shrank the labor force – the pool of people working or looking for jobs – even as demand for employees has waned. In other words, the supply of job seekers has contracted at the same time hiring has declined, keeping the unemployment rate roughly stable. But Morgan Stanley suggested the feeble job gains of the past three months would spur the Fed to act in September despite stable unemployment. 'The slower payroll pace keeps downside risks elevated and a September cut on the table,' Morgan Stanley said in a research note. Fed fund futures markets are now putting the chances of a September rate decrease at 85%, up from 45% after Powell's July 30 remarks. AI is starting to crimp job gains Professional and business services shed 14,000 jobs in July and payroll gains in the sprawling white-collar sector have been stagnant for more than two years. July's showing included job losses in computer and technical roles. Staffing executives say companies are replacing many entry-level information technology workers with artificial intelligence. 'It is happening,' Goldman Sachs chief economist Jan Hatzius said on CNBC after the release of the July jobs report. 'This is not the main thing driving the labor market... But we're seeing early signs.' (This story was updated to add new information) This article originally appeared on USA TODAY: July jobs report takeaways: Weakening labor market, recession fears 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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an hour ago
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US will dodge recession, but Trump's policies will slow economic growth: Report
President Donald Trump's aggressive economic policies will likely significantly slow U.S. growth and push up inflation but stop short of causing a recession or 'stagflation' – the dire scenarios that forecasters envisioned before he took office, a report says. 'The totality of the policies does not push the economy to the brink of recession but it significantly diminishes growth' during Trump's four-year term, said economist Justin Begley of Moody's Analytics. He added, 'It's not yet stagflation but it's edging that way.' Stagflation is an economy characterized by high inflation, slow or stagnant growth and high unemployment – an unusual and toxic cocktail. Typically, a sluggish economy leads to low inflation, allowing the Federal Reserve to cut interest rates to stimulate more borrowing and activity. The Fed, however, faces a dilemma because lowering rates to bolster a softening labor market could further drive up inflation. Consumer price increases generally have eased substantially after a pandemic-related spike but recently edged higher, in part because of Trump's sweeping import levies. His policies are imposing countervailing forces on the economy. Tax cuts and increased spending on border security and defense are set to juice growth. But those positive catalysts are expected to be more than offset by the tariffs, a historic immigration crackdown, layoffs of hundreds of thousands of federal workers and big cuts to social services programs such as Medicaid and food stamps, Begley said. During Trump's presidential race against former Vice President Kamala Harris last year, Moody's, among other research firms, predicted Trump's economic blueprint would spark a recession by mid-2025. Moody's has updated its forecast in part because the contours of his plan recently have become more clearly defined, Begley said. 'We have a better view where things are going,' he said. For example, high double-digit tariffs are in place for steel and aluminum, foreign cars and Chinese imports. And the White House has reached deals with trading partners such as Japan, South Korea, Vietnam and the UK that set tariffs at 10% to 20%. Trump's deportations and constraints on Southern border crossings are well under way. And his huge budget bill, which he signed into law on July 4, expanded his 2017 tax cuts, beefed up military and border security outlays, and slashed some entitlement spending. All told, Moody's projects Trump's policies will reduce economic growth by an average 0.4 percentage points annually – nearly half a point – during his term. That would leave the economy expanding an average 1.7% annually over the four years, with growth bottoming at 1.4% next year and peaking at 2.2% in 2028. The economy grew at an annual rate of 1.2% the first half of 2025. It's projected to grow at slightly less than a 1% pace in the second half, according to economists surveyed by Wolters Kluwer Blue Chip Economic Indicators. By contrast, the economy averaged 2.3% growth the decade after the Great Recession of 2007-2009 and 3.5% during former president Joe Biden's term. The latter, however, included unusually strong gains as the nation emerged from the pandemic recession. In 2024, Biden's last year in office, the economy grew a healthy 2.8%. Growth had been expected to downshift no matter who won the 2024 election as a post-COVID-19 surge in consumer demand petered out, Americans depleted government pandemic aid and other government stimulus measures faded. But by the end of Trump's term in 2028, the economy will be 1.3% smaller than if his policies had not been enacted, Begley wrote in a report. Also, the unemployment rate is expected to peak at 4.7% in 2027 before falling to 4.4% by the time Trump leaves office. Without his policies, unemployment would broadly hold steady at about 4% and there would be about 885,000 additional jobs, Moody's said. Trump's policies similarly are poised to push up inflation by an average of nearly half a percentage point a year. That would leave annual inflation averaging 2.6% during Trump's term and peaking at 3.1% in 2026, based on the Commerce Department's personal consumption expenditures price index. Inflation then would decline and nearly reach the Fed's 2% goal in 2028, the last year of his term. Absent the president's policies, inflation would achieve the Fed's target next year, Begley's analysis shows. Tariffs, by far, represent both the biggest drag on growth and the largest contributor to inflation, Begley said. Companies are expected to pass most of the costs of the duties to consumers, driving up prices. And that's expected to sap their buying power and reduce consumption, which makes up 70% of economic activity. Without the tariffs, the net effects of Trump's policies on growth would be slightly positive, Begley said. The benefits of tax cuts and increased defense and border spending would outweigh the toll taken by the immigration crackdown, federal layoffs and cutbacks to Medicaid and food stamps, he said. Another big hit comes from the deportations. Like the tariffs, the immigration crackdown is projected to both curtail growth and boost inflation. A reduced supply of workers in industries such as construction, agriculture and hospitality is expected to drive up wages and prices. And a smaller population of immigrants means less consumer spending. Here's why Moody's forecast of the effects of Trump's policies is less dire than it was before he took office: Although Trump's tariffs are higher than anticipated, Moody's expected more significant retaliation from foreign countries that would batter U.S. manufacturers' exports. At least so far, those nations have taken a more restrained approach. Moody's figured the Trump administration would seek to deport about 1 million immigrants who lack permanent legal status each year. But Begley said that has proven logistically challenging. Goldman Sachs estimates monthly deportations have averaged an annualized pace of about 600,000. Although Trump vowed during his campaign to eliminate taxes on tips and overtime, Moody's didn't necessarily expect him to follow through. The budget bill, however, scraps taxes on tips up to $25,000 a year and over time up to $12,500. This article originally appeared on USA TODAY: Will the US dodge a recession? Economist weighs in on Trump policies 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
