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Yahoo
25 minutes ago
- Yahoo
Bank of America sees stagflation, not recession—and no rate cut this year. It's because of 2 specific Trump policies
Bank of America Research economists remain convinced that the Federal Reserve will not cut interest rates in 2025, despite a recent wave of disappointing jobs data fueling market speculation of an imminent policy shift. The reason, according to a new research note: The U.S. economy is headed toward a battle with stagflation—not recession—and cutting rates could worsen that toxic mix of stagnation and inflation. The BofA team, led by senior U.S. economist Aditya Bhave, cited two major Trump administration policies as the key factors in their call: tough new immigration restrictions and a fresh series of import tariffs. Why it's not a recession, according to BofA First things first, Bhave's team turned to the July jobs report that stunned Wall Street with a net downward revision of 258,000 jobs for May and June. That's the second largest in modern history outside of the initial pandemic shock and the largest ever in a non-recession year, according to Goldman Sachs calculations. But BofA's strategists argue this doesn't spell recession. In fact, the crux of their argument, they say, is that 'markets are conflating recession with stagflation.' The key distinction comes down to labor supply, not just demand. The research points to a sharp contraction in the foreign-born labor force—down by 802,000 since April—as immigration policy has tightened dramatically. This supply-side squeeze is pushing against weaker labor demand, keeping metrics that should indicate labor slack—such as the unemployment rate and the ratio of job vacancies to unemployed workers—basically flat for the past year. Bank of America estimates that break-even job growth, meaning the rate of hiring needed to keep joblessness steady, will hit just 70,000 per month this year. Chair Jerome Powell's recent comments support this interpretation, BofA said. Even if payroll growth slows to zero, the Fed now considers the labor market at 'full employment' as long as the unemployment rate doesn't spike. In July, unemployment inched up to 4.25% from 4.12%, but remains within range-bound levels. Other economists disagree with this assessment. A team at UBS said the labor market is showing signs of 'stall speed,' with a subdued average workweek of 34.25 hours in July—below 2019 levels and far from the 'stretching' that's typical when labor markets are tight owing to worker shortages. Industry-specific data also show that job losses are not concentrated in sectors with large immigrant workforces, further supporting the view that slack comes from weakened demand, not a supply constraint. By contrast, BofA still sees labor demand holding up, and pointed to average hourly earnings growth of 3.9% year on year in July, and aggregate weekly payrolls increasing by 5.3%. The debate over demand versus supply is critical as the answer will determine how the Fed responds to stagflationary signals. BofA explained how two Trump policies are fueling the brewing mix of stagnant growth and inflation that could be taking America back to the 1970s. Policy No. 1: Immigration restrictions Trump's changes to immigration have quietly but dramatically choked off labor supply. BofA analysts said this is happening earlier than they expected, and they remarked that the collapse in the foreign-born labor force has more than offset gains among native-born workers—even though the latter make up more than three-quarters of the total workforce. Sectors that rely heavily on immigrant labor, like construction, manufacturing, and hospitality, have seen disproportionate job losses. Those three accounted for 46,000 of the downward revisions to the May and June data. 'Construction payrolls have stalled out this year, manufacturing has declined for three consecutive months, and leisure and hospitality added just 9K jobs in total in May and June,' BofA said. That's notable because leisure and hospitality was a strong spot in the labor market in 2023–24. Policy No. 2: Tariff escalation The second pillar of stagflation comes from a new round of import tariffs, particularly on Chinese goods. Since July 4, the overall effective U.S. tariff rate has jumped to about 15%. Bank of America's economists warn that tariffs are starting to show up in the inflation data: Core goods prices excluding autos rose 0.53% in June, the fastest in 18 months. Crucially, underlying core PCE (personal consumption expenditures) inflation remains stuck above 2.5%—well above the Fed's target. With long-term expectations anchored for now, policymakers are wary of cutting rates before there's clear evidence that inflation has peaked. Some regional Fed presidents have warned the tariff effect could last deep into 2026. Risks for the Fed: Cutting now could backfire Markets are currently pricing in a quarter-point cut by September. But Bank of America says cuts next month would be risky—especially if the labor market is tight owing to supply, not demand. Cutting rates too soon could undermine the Fed's credibility if inflation simply accelerates in response, forcing a swift reversal. The research note concludes that unless the August jobs report brings a sharp rise in unemployment—specifically above 4.4%—or inflation softens unexpectedly, the Fed is likely to hold steady through the end of the year. Any move to cut rates now would require 'putting more faith in a forecast of labor market deterioration and transitory tariff effects than in the data in hand,' the strategists write. For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 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Business Insider
28 minutes ago
- Business Insider
Phunware reports Q2 EPS (16c), consensus (14c)
Reports Q2 revenue $455,000, consensus $726,500. Q2 software and subscription bookings totaled $600,000.'The second quarter of 2025 was highlighted by new product innovation and technology expansion with the highly-anticipated introduction of Phunware (PHUN) AI solutions,' said Jeremy Krol, interim CEO of Phunware. 'We are proud to showcase and demo our new AI Concierge product feature and Guest Services Agent product feature at HITEC in Indianapolis. Although still in development, we believe these product features will help hoteliers unlock additional revenue by utilizing AI in their hospitality applications.' Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Yahoo
42 minutes ago
- Yahoo
Bitcoin, Ethereum and XRP Sink as Crypto Liquidations Top $900 Million
Top cryptocurrencies pushed deeper into the red after a days-long slump Friday, triggering over $900 million dollars in liquidations, as global unrest and a poor U.S. jobs report impacted markets before the weekend. Bitcoin, which nearly eclipsed $120,000 towards the beginning of the week, has fallen to $113,411 at writing, a drop of roughly 5.6% from the recent peak. Ethereum took a steeper dive in the second half of the week, falling from around $4,000 on Sunday to $3,518 at writing—a 10.5% downturn. XRP followed a similar pattern, topping $3.32 on Sunday before dropping as low as $2.92 earlier today. The token has since leveled out to $2.98, a 10.2% dip since last weekend. Those slumps have coalesced to wipe out hundreds of millions of dollars in crypto derivative positions in just the last 24 hours. Some $905 million in positions have been liquidated since last evening, according to data from CoinGlass. The vast majority of those liquidations—over $823 million—were of long positions, or bets that the price would rise. Several factors are likely at play in the latest crypto downturn, all of which relate to macro political and economic factors. On Friday morning, the U.S. Labor Department released a new jobs report that underwhelmed expectations to the degree that President Donald Trump fired the official responsible for publishing the memo within hours of its release. Hours prior, the White House levied a new barrage of sweeping tariffs at nations around the globe, spooking markets on- and off-chain. And as if that wasn't enough global drama for a Friday afternoon, Trump then announced he ordered multiple nuclear submarines to approach Russian waters, in response to threats made earlier in the week by a senior Russian official. Crypto Rally Stalls as Dogecoin Tanks and Bitcoin Tests Key Support: Analysis Analysts told Decrypt earlier this week that current Bitcoin price woes may also be thanks to a longer-term tug-of-war playing out between profit-taking whales and long-term holders. Many market participants are anticipating that Bitcoin's price will continue to fall over the course of August and September, the analysts said—potentially as low as $80,000—before surging back in Q4. Last week, Glassnode analysts predicted that should Bitcoin's price fall below $110,000 after recent surges, the drop could trigger an acceleration in sell-offs. Even amid the turmoil, Myriad users remain optimistic that the price of Bitcoin is more likely to rise to a new peak of $125,000 than drop back down to $105,000. Predictors give the climb to $125,000 a more than 53% chance, as of this writing. (Disclosure: Myriad is a product of DASTAN, Decrypt's parent company.)
