Hang ‘Em High!

Interest rates, Of course

Hang ‘Em High!

Interest rates, Of course

Even though Warsh has barely had a chance to take a step, he’s already falling down on the job and stumbling badly - way behind the curve… should have raised rates probably should have raised rates even before he was nominated as Fed chairman Oh yes way, way, behind the curve. Did-Ja think Powell Had nailed it or mailed it? Well, this ‘hey let’s dump on the new Fed Chair’ approach does not seem to be bearing las frutas. Lo siento mucho (not really). But some do love it so Besame smoocho, as they say in Spanish.

The July jobs report shows a loss in jobs amid weak private sector gains and trimming by the government. This loss is not severe, but it is a negative number, and recent monthly ‘gains’ are now weak. Yet... the unemployment rate fell to 4.1% from 4.2% while economists had expected a return to 4.3%. Oopsy.

Now, ex-post, this will be ‘explained’ by the drop in the participation rate. If you ain’t participatin,’ you ain’t unemployed. So, some will argue these are discouraged workers, but the fact is the border is shut (the way is closed – in Hobbit language). And the job market is a shrinking beast with no migrants (no new ones) and where AI is displacing even the best, of the best, of the best – you know the ones we saw in ‘Men in Black.’ They are wearing black now because they mourn their job losses.

I’m still here but my job is gone. That is the lament. My student loan is high and a payment is due, my jobs went to AI what am I to do? A new car is too expensive just forget about a house, its time to suck it up - vote for the next socialist in town! … Maybe move to Michigan?

Yes, the economy is in transition, and it is harder to get a job when things are changing, and firms are not yet quite sure what works and what does not. And, when they have poured millions and billions into AI, they surely want a return for it. Meanwhile back at the ranch (the trough at least) Trump has been shrinking the government sector – at least hiring is weaker but spending remains full bore ‘on track’ for more new records.

The job numbers in the table above speak of a less robust economy with fading wage pressure despite a dropping and low rate of unemployment.

So, guys- does that rate hike still seem inevitable? Overdue? Is Warsh still a Trump sock-puppet? Or is all that in flux?

I have been pushing back against the sock-puppet theory since before day one. Kevin would never ever allow Jim Henson or anyone else to manipulate him. But then political affiliations die hard. And Trump appointed him so Trump owns him or so they say...oh yeah forget about that Powell guy – a Trump appointee!. That was different – or was it the same?

Fed policy has not been well executed yet Powell went out on folk-hero status mostly for opposing Trump, yes, he did have FIVE YEARS of missing his inflation target – but what is that compared to standing up to Trump? If we calculate Yr/Yr PCE inflation from August of 2024 just before the Fed started cutting rates in this cycle, then in the subsequent 21 months the year over year PCE was higher than its pre-cut level in August in 18 of the 21 following months. Think of that! And all the while Powell testified to following the dual mandate and all that time (in fact for 64 months now) the PCE and every other top inflation gauge has been above 2%. So that burden falls on Warsh but now we see less than glowing eco-numbers. Gas prices are high. Inflation is even moving higher. Trump is ‘refreshing’ his tariffs, the war drags on and even the view of this economy as resilient may raise a few eyebrows.

We have been told how growth in spending is on the back of the rich, the wealthiest who buy most new cars. The gain in traction of socialists, and schemes to tax the super-rich even more should be surprising no one. There is a sense of unfairness afoot. A bad sign in a democracy…And a good bit of irrationality as well.

This employment report falls short of being a true ‘wake up call.’ But it should take forecasts off auto-pilot. Yes, the economy is being driven by capital spending and data center construction, and despite the lack of jobs there is push back partly because some fear those data centers will house more AI facilities and will take their jobs.

The ISMs this week were good and solid and strong but those are not the ‘ISMs’ I worry about. It is Social-ISM and Capital-ISM. We are headed into mid-term elections with a strong-man president who is bleeding popularity and whose economy is suddenly less golden with inflation up, and wage gains moderating and people angry over a war he said he would never be part of.

Yet his opposition is in real disarray because, despite the facts socialism is still viewed by most as anti-social – but less so among Democrats who also have a blood lust for Trump. Off with his head! Or at least off with his crown- no Kings…

This is my county

Land of my birth (but that may not make you a citizen)

This is my country

Greatest on Earth (well with an asterisk or two to some…)

I’m pledging my allegiance! (well for now…)

America the bold (or socialist)

Since this is my country

To have and to hold (A republic if you can keep it)

So, this job report will help to open rifts in the outlook along the economic watch-towers. Forecasts will shift. Economists will gnash their teeth. Democrats will be emboldened that the great economic Trump Machine will support him less. And so, our divisiveness will troll on.

The main problem with hating Trump is that there is nothing to replace him. I do not see socialism as viable. And I see no Democrat candidates seeking to get elected except by opposing Trump and chanting no Kings. Trump is a lame duck, and this is his last mid-term.

Democrats need to get sense of direction and that means to see what is going on globally and with technology trends and get a sense of direction not just stopping one path. Do they think socialism is the answer- really? There are forces afoot that must be dealt with and hating Trump won’t get you where you want to go, as Mama Cass used to sing. So, break down the economy and the employment report and think about the future. The future is now.