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The Hill
a day ago
- Business
- The Hill
Stocks slump as Wall Street braces for inflation spike
Stocks closed with losses Monday as Wall Street braces for the first federal inflation report released after President Trump ousted the head of the agency responsible for producing it. The Dow Jones Industrial Average closed with a loss of 201 points, falling 0.5 percent Monday. The S&P 500 index and Nasdaq composite each fell 0.3 percent. The dip comes one day before the Bureau of Labor Statistics (BLS) is set to release the latest reading of the consumer price index (CPI), which is expected to show inflation rising in July. Economists expect prices to have risen by 0.2 percent in July — 0.3 percent without food and energy included — to hit a core annual inflation rate of 3 percent, according to consensus estimates. 'The data, due tomorrow, probably will show that goods prices rose at an above-trend pace, albeit no faster than in June. Meanwhile, services prices likely increased moderately overall, boosted by a rebound in airline fares, partly offset by a fall in hospital services prices,' wrote Samuel Tombs and Oliver Allen of Pantheon Economics in a research note. After winning the 2024 election with the promise to bring prices down, Trump is facing increasing backlash from voters and concerns from fellow Republicans as his tariffs keep up pressure on inflation. Wall Street will pay close attention to the report and Trump's reaction to it after the president's explosive response to the July jobs report. The federal jobs report for July showed the U.S. gaining just 73,000 jobs last month and included stunning revisions to the initially reported employment gains for May and June. The net result showed the U.S. gaining barely more than 100,000 jobs over the past three months, roughly a third of what economists say is necessary to prevent unemployment from rising. Trump responded by accusing the BLS — a nonpartisan agency of statisticians — of manipulating the jobs data to benefit Democrats, but he provided no evidence to support his claim. The president also fired former BLS Commissioner Erika McEntarfer, sparking an outcry from her Democratic and Republican predecessors, along with scores of economists. Despite Trump's claims to the contrary, revisions to employment and inflation data are normal aspects of how the BLS maintains the most accurate data on the economy. The White House has also failed to show any evidence of political manipulation of data at the BLS, and economists say it would be nearly impossible to skew the jobs report in that manner. 'These numbers are put together by teams of literally hundreds of people following detailed procedures that are in manuals. There's no conceivable way that the head of the BLS could have manipulated this number,' said former Treasury Secretary Larry Summers. Any doubts about the credibility of U.S. jobs or inflation data could pose serious consequences for the country's reputation and financial dominance. 'This is much more dangerous than the pressure on the Fed,' Cato Institute research fellow Jai Kedia told The Hill. 'The labor and inflation statistics are the bedrock of every other federal institution that's trying to work on the economy.'
The Herald Scotland
6 days ago
- Business
- The Herald Scotland
Why jobs downgrade that caused Trump to fire statistics chief was huge
That marked the largest two-month revision ever outside of recessions, Goldman Sachs said. It left monthly job gains averaging an anemic 35,000 from May through July. "Important numbers like this must be fair and accurate, they can't be manipulated for political purposes," Trump said on Truth Social. He added that "today's jobs Numbers were RIGGED in order to make the Republicans, and ME, look bad." But forecasters said the revisions actually clear up a disparity between surprisingly resilient job gains and other economic indicators, such as gross domestic product, that have been feeble this year. "I think the revisions have really resolved a discrepancy between GDP data and payrolls," said Samuel Tombs, chief economist of Pantheon Macroeconomics. "I don't see any reason to suspect manipulation here." "Taken together, the economic data confirm our view that the U.S. economy is growing at a below-potential pace," Goldman Sachs wrote in a note to clients. Unemployment among Black Americans rises It can be an early sign of economic strain. What is the current state of the economy? Trump's tariffs hammered activity in the first quarter by pumping up imports (which are subtracted from growth) as retailers and manufacturers stocked up on foreign goods to avoid the imminent levies. That led to a second-quarter reversal that juiced GDP. After the tariff effects canceled each other out, the economy grew at a meager annual rate of 1.2% the first half of the year. There are two ways to grow the economy - by adding workers and by increasing productivity, or output per worker. Since the 1.2% average rise in GDP can be entirely explained by strong productivity gains, the economy's sluggish performance is consistent with virtually no net job gains from May through July, Tombs said. There are other signs that the economy and job market are losing steam. Just 42% of CEOs of small and midsize companies plan to add to their staffs in the next year, the lowest on record dating to 2003, according to a June survey by Vistage, a CEO networking group. How does the jobs report work? Each month, the BLS provides an initial reading of job gains for the previous month and revises figures from the prior two months twice based on follow-up surveys. The downgrade of 133,000 jobs for June marked the first revision for that month, and May's 125,000 drop was its second and final revision. To come up with its monthly job growth estimates, the agency surveys 631,000 job sites operated by 121,000 businesses and government agencies across the country. The bureau revises the data twice because many employers don't respond to the first survey or because officials modify the factors it uses to seasonally adjust the figures, Goldman said. For example, since hiring is traditionally weak in the summer, the seasonal adjustment would boost the employment tally to account for that dip. Even before Friday's stunning revisions to May and June, job growth for January through April was revised down each month by an average 52,000 - based on changes from the first to the third estimates. Last year saw an average downward revision as well, but it was just 20,000. Since 1979, the median two-month combined estimate change was an upward revision of 10,000. Here's why economists believe the payroll revisions for May and June were so large: Falling response rates, slowing economy A declining share of employers have been responding to BLS's jobs surveys. In July, 58% responded, similar to July 2024 but down from 68% in the same period in 2022 and 2023 and an average 74% in the 2010s, according to Tombs and BLS figures. Small businesses in particular have struggled to cope with Trump's tariffs, which must be passed along to consumers through higher prices or absorbed by the companies, squeezing their profits, Tombs said. Amid those troubles, "Responding to BLS is not a high priority" for small- and mid-size firms, said Jonathan Millar, senior U.S. economist at Barclays. Some firms also may be hesitant to acknowledge they've pared back hiring, even though the surveys are anonymous, Tombs said. When they ultimately do report their staffing numbers - the response rate for the third payroll estimates has topped 90% - they likely have decreased from the previous month. Companies increasingly have been holding off on hiring due to the uncertainty generated by the tariffs, Millar and Tombs said. That likely has sparked sharp downward revisions to job gains throughout 2025, but the hiring pullback may have reached "an inflection point" in May and June that more dramatically dimmed the jobs picture, Millar said. "I don't think we've faced a situation where we had such a profound supply shock," Millar said, referring to the constraint on foreign parts and products caused by tariffs. How the government interprets slowing job gains When job growth slows, BLS in its first estimate mistakenly attributes the downshift to changes in seasonal trends, Goldman Sachs said. But as subsequent readings also come in softer, the agency's model learns it's not the result of a seasonal adjustment quirk but rather a genuine pullback in hiring and revises down the jobs totals, the research firm said. The immigration crackdown Former President Joe Biden began restricting crossings at the Southern border in June 2024 and Trump stepped up enforcement and launched massive deportations in 2025, Millar said. Since it takes six to nine months for migrants to settle into jobs, the crackdown likely started to show up more prominently in the jobs numbers in May and June, he said. Little hiring, few layoffs For many months, employers haven't hired lots of workers, but also haven't laid off many after grappling with dire worker shortages during the pandemic. That unusual dynamic could be throwing off seasonal adjustment factors that expect ramped-up hiring and layoffs at certain times of the year, causing officials to revise down job gains more sharply, Goldman suggested. State and local government jobs About 20% of the big downward revision in May and June was due to the challenges of making seasonal adjustments to state and local education employment figures at the end of the school year, when many teachers and other employees come off the payroll, Goldman said. Initially, BLS overestimated total jobs numbers in that sector after seasonal adjustments and then revised down the figure by 51,000 for the two months, Goldman said. Contributing: Joey Garrison, USA TODAY; Reuters
Yahoo
16-07-2025
- Business
- Yahoo
Inflation rises to 2.7% as companies shift tariff costs to consumers
This story was originally published on CFO Dive. To receive daily news and insights, subscribe to our free daily CFO Dive newsletter. Inflation rose last month as companies passed on to consumers the cost of tariffs, affirming a Federal Reserve stance of holding borrowing costs steady this year while assessing the impact from Trump administration changes to trade and other policies. The consumer price index increased at a 2.7% annual rate in June compared with 2.4% the prior month, the Bureau of Labor Statistics said Tuesday, well above the Fed's 2% inflation target. Imported goods led the price gains during June, with apparel, household furnishings and appliances rising 0.4%, 1% and 1.9%, respectively. The report delivered 'a knock-out punch to tariff-inflation deniers,' Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs said in a client note. 'Tariff costs are strikingly visible,' he said, noting that the price of goods excluding food, energy and autos rose 0.5%, the most in three years. The newest sign that inflation persists above the Fed's target prompted traders in interest rate futures to all but rule out a central bank reduction to the federal funds rate during a July 29-30 policy meeting, according to the CME FedWatch Tool. Traders raised odds of no change to 97% from 94% on Monday. The inflation report will probably do little to settle a debate among policymakers over whether import duties will fuel a one-time or sustained increase in price pressures. Price gains in services and other categories remained subdued in June, with airline fares and accommodation prices falling 0.1% and 2.9%, respectively, the BLS said. Rents increased just 0.23%, slightly above the 0.21% gain in May, which was the smallest increase since mid-2011. Also, the price of new vehicles declined 0.3% in June while the price of used cars and trucks fell 0.7%, the BLS said. Fed Chair Jerome Powell and other policymakers have favored resuming cuts to the main interest rate only after confirming that import duties will not trigger higher inflation beyond a few months. 'Continued overall solid economic conditions enable the Fed to take the time to carefully assess the wide range of incoming data,' Boston Fed President Susan Collins said Tuesday in a speech. 'Thus, in my view, an 'actively patient' approach to monetary policy remains appropriate.' At the same time, two Fed governors appointed by President Donald Trump have suggested this month that tariff-induced inflation will pass and expressed openness to considering a reduction to the benchmark rate as early as the next meeting. Trump for weeks has pressured Powell to reduce the federal funds rate, which he says would lead to a reversal in the federal government's mounting borrowing costs. "Consumer Prices LOW. Bring down the Fed Rate, NOW!!!" Trump said Tuesday in a social media post after release of the inflation data. He has repeatedly said Powell should slash the federal funds rate — which now ranges from 4.25% to 4.5% — by as much as 3 percentage points. The call for lower borrowing costs from Trump and White House officials prompted criticism Tuesday from JPMorgan Chase CEO Jamie Dimon. 'I think the independence of the Fed is absolutely critical,' Dimon said after the bank announced quarterly earnings, according to the Wall Street Journal. 'Playing around with the Fed can have adverse consequences, the absolute opposite of what you might be hoping for.'
Politico
10-07-2025
- Business
- Politico
Trump steps up attacks on Powell with tariff inflation muted
Businesses accelerated their imports prior to Trump's tariffs taking effect, which may have helped keep prices steady as they worked through existing inventories. The June Logistics Managers Index — which tracks freight activity and pricing — found that inventories expanded last month 'as importers scrambled to take advantage of the pause in the most punitive tariffs.' Trump's latest round of tariff threats may have little effect on overall costs, however. Samuel Tombs of Pantheon Economics said the sky-high 'reciprocal' levies that could hit Japanese and South Korean imports on Aug. 1 won't have a material impact on the overall tariff rate or inflation, given that the exports from both countries are largely covered by exemptions and sector-specific levies. What's more, there's some indication that certain exporters from overseas might be absorbing some of the costs by reducing prices for American importers. Economists at Goldman Sachs estimate that exporters have eaten a fifth of the costs so far — with Chinese exporters accounting for the lion's share — based on how product-level import prices have moved following the implementation of new import taxes. (Miran noted in his report that prices on imported goods began fading in 2023.) Still, the remaining costs are considerable. The U.S. has taken in almost $100 billion in tariff revenue this year — Bessent recently said the total could climb to as high as $300 billion by year-end — but evidence suggests those costs have largely been borne by companies. In the same report, the Goldman team estimated that tariffs have been responsible for less than a one-tenth of a percentage point increase in consumer prices this year — though the effects could still intensify. While businesses from Best Buy to Costco have raised prices due to import duties, many others are holding fire. 'Most businesses have not fully passed along the cost of the tariffs,' Neil Bradley, the chief policy officer and head of strategic advocacy at the U.S. Chamber of Commerce, said during a panel on Wednesday. 'Part of that's a hope that the tariffs go down. Part of it is a concern about market share that they might have. Part of it might be uncertainty about the macroeconomy.' As long as that remains the case, high-level economic data will continue to provide Trump with arguments to go after Powell over borrowing costs — or make lowering interest rates a litmus test for anyone who might want to take his place.
Yahoo
03-07-2025
- Business
- Yahoo
US Job Growth Picks Up With Help From Public Education Hiring
(Bloomberg) -- US job growth exceeded expectations in June as an unusual surge in public education employment masked a slowdown in hiring across the rest of the economy. NYC Commutes Resume After Midtown Bus Terminal Crash Chaos Struggling Downtowns Are Looking to Lure New Crowds Massachusetts to Follow NYC in Making Landlords Pay Broker Fees What Gothenburg Got Out of Congestion Pricing Foreign Buyers Swoop on Cape Town Homes, Pricing Out Locals Payrolls increased 147,000 last month, driven by a jump in state and local government employment, according to a Bureau of Labor Statistics report out Thursday. The jobless rate declined to 4.1%, indicating employers remain reticent to lay off workers. Private payrolls rose just 74,000 in June, the least since October and largely due to health care. The figures are consistent with sluggish hiring as employers grapple with President Donald Trump's erratic trade policy and await congressional approval of his signature tax legislation. 'Ignore the boost from education jobs; private demand for labor is slowing,' Samuel Tombs, chief US economist at Pantheon Macroeconomics, said in a note. 'The tariff tax hike, restrictive monetary policy and worries about a further intensification of the trade war are weighing heavily on labor demand.' Treasury yields rose and the S&P 500 climbed as the figures took pressure off the Federal Reserve to lower interest rates at the end of this month. Fed Chair Jerome Powell has said there is no rush to reduce borrowing costs until there is more clarity about the impact of tariffs on inflation. Price pressures have been subdued so far this year. Powell recently told lawmakers that if the labor market were to meaningfully weaken, it would be possible to cut rates sooner than expected. State government payrolls climbed by the most since the start of 2023, led by education, while employment at local governments also surged. Several economists cast doubt on the strength of the figures, pointing out possible seasonal adjustment issues. Broader Moderation Health care and social assistance payrolls rose 59,000, the least in four months. Employment also moderated in leisure and hospitality, as a 20,000 increase in June followed a downward revision of similar size in May. Payrolls declined in manufacturing, wholesale trade and business services. The jobs report is composed of two surveys — one of businesses, which produces the payrolls figures, and another of households, which publishes unemployment and participation. While the number of unemployed fell for the first time in five months, the participation rate — the share of the population that is working or looking for work — also declined. In addition to its trade strategy, the Trump administration is implementing what the president has vowed will be the largest mass deportation of undocumented immigrants in history. That has implications for the labor market as foreign-born workers have been a major source of job growth in recent years. Thursday's data showed the size of the foreign-born labor force declined for a third straight month to the lowest level this year. Over the last three months, the foreign-born labor force has fallen the most in data back to 2007 when excluding the onset of the pandemic. Other data recently have pointed to a cooling labor market. Recurring jobless claims — a proxy for people who already receive unemployment benefits — have surged since early May and stand at the highest level since the end of 2021. Another closely watched measure is the differential between people saying jobs are plentiful versus those saying they're hard to get in the Conference Board consumer confidence survey. The gap is currently the smallest since March 2021. What Bloomberg Economics Says... 'The Fed will see the report as validating its patient stance toward rate cuts, as officials wait for this summer's inflation prints before deciding whether to resume cutting rates in September — when markets are largely pricing in the first cut.' — Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou Economists are also paying close attention to how labor supply and demand dynamics are impacting wage gains. The report showed average hourly earnings increased 0.2% from May and 3.7% from a year ago — the smallest since July 2024. The length of the workweek declined, further reinforcing signs of slower demand. Demographic details in the report showed the unemployment rate for Black Americans jumped to 6.8%, the highest since the start of 2022. A separate report out Thursday showed the US trade deficit widened in May after narrowing in the prior month by the most on record on the largest-ever plunge in imports. --With assistance from Jarrell Dillard, Matthew Boesler, Reade Pickert and Nazmul Ahasan. SNAP Cuts in Big Tax Bill Will Hit a Lot of Trump Voters Too How to Steal a House America's Top Consumer-Sentiment Economist Is Worried China's Homegrown Jewelry Superstar Pistachios Are Everywhere Right Now, Not Just in Dubai Chocolate ©2025 Bloomberg L.P. 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
