Cautious praise for the Federal Reserve Interest Rate Cut

The time has come with the much anticipated interest rate cut by the Federal Reserve Bank, and Wednesday’s announcement brought some joy to the market and also a measure of relief from American consumers, the drivers of the US economy; but, that joy has to be tempered as it will take at least six months for the effects to be seen.

One important aspect to be acknowledged is that Chair Jerome Powell has kept a steady hand on the tiller as he balanced the rocky ocean of post pandemic economics, sexton in hand, as he calibrated the interest rates from their near history making zero to one of, gasp, 50; and, which the data shows was relevant, as he noted at the recent Federal Open Market Committee meeting in Jackson Hole, Wyoming. 

While we have said in previous posts, that Powell is a self identified data driven chair, he was often not believed, but this announcement should cement that in the minds of Wall Street, as well as Main Street. 

50 basis point is a lot to some, but after seeing the latest CPI date, an inflationary measure, the downward drop of inflation to 0.2 in August meets the mandate of the Fed to 2 percent inflation

The other is full employment, and while there were some naysayers who panicked at the August unemployment rate which increased from July at 4.2 to 4.3 in August, but it was bound to eventually come down after post pandemic highs, and it was not a crash landing, but a soft landing that was previously scoffed at by some economists and lawmakers, but now seems apparent.

That, in and of itself,  has prompted strong reactions: 

“This is a bit of a surprise. The 50 [basis point] cut suggests an abrupt switch of focus back to the maximum employment mandate and a very sharp improvement in confidence in inflation progress in the last month and a half,” Brian Coulton, chief economist at Fitch Ratings, said in a reported commentary.

The Hill stated, “While some economists believe the Fed could have started cutting rates in July, the next few months are critical as the central bank attempts to bring the economy in for a “soft landing,” maintaining its dual mandate of low inflation and maximum employment as it brings down rates.”

Politically, it also has helped President Biden, even in his waning days, who had said in earlier comments that the increasing inflation was only “transitory.”

Democratic presidential candidate and Vice President Kamala Harris issued a statement where she clarified  that this action by the Fed was not the end of the road for inflation, and said, “while this announcement is welcome news for Americans who have born the brunt of high prices, my focus is on the work ahead to keep bringing prices down.”

Politics is a strange bedfellow, and while the Federal Reserve has always maintained its independence from the White House and Congress, it's also sparked alarm and drew dire warnings from lawmakers such as Elizabeth Warren, if the cuts were not taken.

“The uptick in unemployment and consumer-friendly CPI reading sparked concerns and renewed criticisms that the Fed may be behind on interest rate cuts, with Sens. Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.) and John Hickenlooper (D-Colo.) arguing in a Monday letter to Powell that the central bank’s “delays have threatened the economy and left the Fed behind the curve,” according to The Hill.

Warren, along with Sens. Whitehouse and Hickenlooper, also "pressed Powell on Monday to cut rates by 75 basis points, a highly unlikely move that exceeds the 50 basis point cut forecasted by most interest rate traders, according to the CME FedWatch tool,” added their report. 

“It is clearly the time for the Fed to cut rates. In fact, it may be too late: your delays have threatened the economy and left the Fed behind the curve,” the lawmakers wrote.

They are not alone, and there are many others that feel the same way, despite this good news, that the Fed was behind the curve of inflation, and to that Powell has retorted, “We don’t think we’re behind,” he said. “We think this is timely, but I think you can take this as a sign of our commitment not to get behind.”

A 75 basis point cut would have been impossible, according to other economists, giving the sense that the Fed was admitting that they were wrong, or were behind the curve; and, the markets would have gone crazy; and, also does not want to give even a scintilla of support for political operatives, on other side of the aisle.

What was not evident, and is largely assumed, is that the Fed may have been concerned about the labor market and wanted to get ahead of the possibility of either a weakened labor pool, or one that could be too strong in months to come. 

Earlier remarks posited that employers were hoarding employees and keeping them on the payroll to avoid bringing them back at even higher wages in anticipation of an economic comeback, but as we all learned on standardized tests, “there are no penalties for guessing.”

It’s not over, note some observers and have said “This would only be the first cut of a rate-cutting cycle. The size and frequency of future cuts will give us a better understanding of whether the Fed believes they are behind, or ahead of, ‘the curve,’” said Jonathan Ernest, an economics professor at Case Western Reserve University.

Challenges to voter rolls in 2024 by conservatives

With the die cast for the 2024 US Presidential election, and both the Republican and the democratic conventions being held and the verbal brickbats being thrown, and the less than 14 days before voters go to the polls on Nov. 5, and the polls grinding out data, right and left, and every utterance from Donald Trump, JD Vance, Kamala Harris and Tim Walz being treated as sacrosanct, there is one important aspect that does not seem to get as much attention from voters, as it should be, and that is voter access, specifically conservative groups making unsound allegations and charges of voter fraud towards state election boards.

Voter access is certainly not a new issue as American history has shown, especially during the turbulent 1960s when Black Americans were not given equal access, and blood was spilled, and demonstrations held, notably by Dr. Martin Luther King, Jr. that garnered headlines in Alabama and Georgia, to name but two states.

In the Southwest, Mexican Americans also fought a bitter fight to get voter equality with the white majority. And, the battle continued recently with efforts by now Chief Justice John Roberts, and his success at efforts to nullify the Voting Rights Act of 1965. And, while literacy tests were outlawed, those Southern states who had the most egregious laws of inequality have lost their examinations, called preclearance, to ensure that the laws were adhered to, but now there are efforts to disenfranchise voters across party lines, as well as those of race and ethnicity.

The loss of the White House in 2020 by the GOP has stung them ever since along with the continued falsehood that Trump was cheated by the Democrats to get Joe Biden elected, and conservative groups have marshaled their armies to examine state voter rolls looking for voter fraud, and charging that non citizens have, and are continuing to vote despite the lack of evidence, even from former Trump administration officials.

Earlier this year Scot Hoen, Carson City Nevada’s chief election official, has kept his eye on the ball of election integrity believing, as reported by The Alabama Reflector, that he was doing the right thing for democracy. Little did he know that this was going to be as heroic, even tortured, as imaginable.

He was named in a lawsuit by the Republican National Committee, along with Nevada county clerk, as well as the secretary of state, alleging “that five localities had ‘inordinately high’ voter registration rates, and that the state is violating federal law by not having what are known as ‘clean’ voter rolls.”

The state responded by saying that there was flawed data used by the RNC and that their analysis was like “comparing apples to orangutans.”

Notably, as reported, “Former President Donald Trump’s lawyers assert without evidence that more than 1,500 dead Nevadans voted in 2020 and that an additional 42,000 in the state voted twice.”

Humor aside, these efforts have continued unabated and, now that Harris has exceeded her post convention “bump”, the stakes are high, as we said previously that the race, with her entrance, is no longer his to lose.

Unsurprisingly, these are occurring in “the “blue wall” states of Michigan, Wisconsin and Pennsylvania, the centerpiece of Democratic campaigns that have won the White House in recent decades,” as identified by the Associated Press.

Historically, accusations by the GOP have been around since the 1960 election, with beliefs that John F. Kennedy was elected over Richard Nixon due to dead people voting.

Now with a deeply polarized nation, beset by concerns about asylum seekers and illegal immigration, police brutality against Black persons, and LGBT people, and the rights of parents of transgender children, plus economic concerns, American votes are at stake.

Aided by technology, conservative groups are pumping out mass challenges to plant falsehoods, and in another battleground state, Michigan, officials also faced a similar lawsuit, filed by the RNC in the same month.

David Becker, founder and executive director of the center for Election Innovation & Research, a nonpartisan organization that advises local election officials nationwide, told the Reflector, “When you see efforts to do mass challenges in the midst of the presidential primaries and months before a major election, i've got to wonder whether the intent is to create chaos and confusion amongst voters rather than legitimate list maintenance.”

Adding fuel to the fire the Republican led Georgia state government passed a recent bill that has been to “challenge voters and for how much evidence is needed to a successful challenge. It would also cut off registration removals within 45 days of an election,” as reported.

Indiana’s governor, Republican Eric Holcumb signed into law a bill that easily facilitates removal of voters with a comparison of “voter registration lists with motor vehicle lists for noncitizens,” and if a voter is flagged they would have 30 days to prove their citizenship.

Aided by tech, specifically a company called Eagle AI, that was developed to scan Georgian’s voter records, all of which not only places the onus on voters, in some states, but occupies valuable time of election officials.

The conservative groups have morphed to more than just that one, and there are those that have pushed back forcefully, and among them is All Voting is Local Action, a voting rights group, and Kristen Nabers, the Georgia state director, has said, as reported: “They’re perpetuating these lies that our voter toll are full of fraudulent voters and bloated.” and noted, “The burden on election officials is really considerable.”

Another stalwart is the Public Interest Legal Foundation, whose director Lauren Bowman Bis is quoted as saying that there have “been a lot of questions” for the 2020 election, continuing the mythology of a stolen election that defeated Trump, and she has claimed that she”has gone to cemeteries in Michigan, she said, she has seen name of active voters on tombstones.”

This group has outposts in Hawaii, Michigan and South Carolina, and “they have successfully sued Illinois and Maryland and gained access to those state’ voter lists,” reported the Reflector.

Their reach has even extended as far north as Maine, in another successful lawsuit to gain access to voter rolls.

The Voter Reference Foundation, sued Pennsylvania in February to gain similar access, and as with the others claiming that their goal is voter integrity, but at question is with the methodology, where outdated rolls are used in comparison to current data, a not so sleight of hand trick to make false claims.

Another route is using change of address forms when mail is forwarded, with current rolls but as the Brennan Center for Justice has stated, there is no accounting for people with the same names. But, they point out that “the good news is that county election boards have consistently rejected these challenges of the last few years. Over and over, the boards said that challengers don't provide enough evidence to remove anyone from the rolls.”

While these groups are undeterred, says the Center, it’s also obvious that in an already close presidential election with a history of the GOP using obfuscation, and falsehoods, which resulted in violence with the January 6th Capitol riots, that the road ahead is littered with minefields, and have stretched from voter access to disenfranchisement that will increasingly become difficult for some voters, who may feel hesitant to vote, especially with some vigilante groups predicting violence at the polls.

Adding even more fuel to the fire was a recent proposal by the Georgia Election Board requring that the computerized ballot boxes be broken open and that each ballot be handcounted to match the electronic tally, a move that Democrats and poll workers feel would unnecessarily delay the certification of the votes, but also that worker fatigue might result in errors.

The GEB is dominated by Trump loyalists and the proposal, while not welcome, is not entirely surpising.

Two Georgia judges recently reversed that move; one with a temporary bock and the other with a final order. As Reuters reported, in part: "Superior Court Judge Robert McBurney said in his decision on Tuesday that it was appropriate to pause the vote counting rule because it introduced fresh uncertainty into the process just weeks before Election Day."

"Anything that adds uncertainty and disorder to the electoral process disserves the public," according to the decision.

Furthermore: "The administrative chaos that will - not may - ensue is entirely inconsistent with the obligations of our boards of elections (and the State Election Board) to ensure that our elections are fair, legal, and orderly," the judge wrote.

While an appeal is expected, the block prevents another obstacle in the free and fair elections in the US.

Updated Oct. 25, 2024, 2:36 p.m. CDT

August Jobs Report shows a cooling job market

The August Jobs Report released on Friday by the US ,Bureau of Labor and Statistics brought a certain measure of concern from both economists and laypeople alike, with 142.000 non farm jobs, after an expected 160,000, but while there was some wringing of hands, it was a fair assessment of what was expected after the immediate post pandemic figures of 939.000 jobs, a high that was bound to come down, and the unemployment rate was a modest 4.2 percent.

While some US employers may have hoarded workers to avoid layoffs and downward trends in profit, this reluctance did not translate into the doom and gloom some observers might have seen it as,but rather as Jeffry Roach, chief economist at LPL Financial noted to Reuters, “Businesses are still adding to payrolls,but not as indiscriminately.”

Certain key features of this report showed a level of stasis in both labor force participation, little changed from previously at 62.7, and 4.8 million people working part time for economic reasons.

Equally, there were 24,000 people that wanted a job, virtually unchanged from the July report.

All things considered this report showed solid growth, despite some concern about employment in some areas, but notable is that wages have kept up for most workers with inflation, as we also saw in July; but, this month average hourly earnings for all private non farm payrolls rose by “14 cents, or 0.4 percent, to $35.21. Over the past 12 months, average hourly earnings have increased by 3.8 percent”

There were some economists that showed a level of concern with the June revisions, a standard for these reports, due to reporting time; and June is now 118,000 jobs gained, and this, too, shows a stable pattern.

As Reuters reported, these revisions are not atypical and are representative of 10 of the last 13 years of job reports. But, some are seeing this as not only a cause for concern but signs of a recession, a durable position taken by some.

Areas that have peaked from this report are somewhat similar to earlier reports: Construction which has been a constant, reaching 34,000, and “higher than the average monthly gain of 19,000 over the prior 12 months,” health care at 31,000, but half than the average monthly gain of 60,000 from the previous 12 months.

Manufacturing, a cause of concern of the presidential candidates in the November election, edged down, says the report, but noted that, “manufacturing employment has shown little net change over the year,” and, social assistance continued its upward trend, over 13,000, “but at a slower pace than the average monthly gain over the past 12 months,” perhaps reflecting a greater investment in some communities.

What we didn't see was the usual back to school bump in education employment, but that might be due to the end of the collection period, and might be reflected in the September report.

Of course, no discussion of the monthly jobs report would be complete without the elephant in the room, inflation, and its effects on consumers, and their actions in the national economy.

While there has been a downward trend in inflation, 2.9 percent for August, and that rate has prompted Federal Reserve Chair Jerome Powell to say,that, “the time has come for policy to adjust,” at last month's meeting at Jackson Hole Wyoming; that said, much of the American public is focused on higher grocery prices, nearly obfuscating his anticipated actions in September to lower interest rates.

Predictions are for at least a 0.25 percent reduction

That aside, the main drivers of inflation, and its contributing factors tilt towards the costs of shelter, transportation and vehicle insurance, as the average person attempts to balance their monthly budgets. 

It’s a tight squeeze and the cooling, no matter how slight in the job market, and current interest rates, prices in some key areas will continue to rise, allowing for seasonal variations, as federal departments don’t seasonally adjust every consumer item, and experts advise that examining annual rates allow for a better picture; but, it’s also a good bet that most consumers are not going to look into, or take the time, to examine those detailed reports.

Inflation does have deleterious effects in many areas, but two key effects are in retirement savings, and savings accounts, but consumers do feel hamstrung between the higher prices of many common grocery items from frankfurters to instant coffee.

All in all, as Mark Hamrick, senior economist analyst at Bankrate, said to The Hill, “The August snapshot is consistent with other data pointing to a weakening job market, including a reduction in job openings pointing to relative balance between the supply and demand of labor.”

It also underscores the job that Powell and the Federal Reserve have done at balancing movements at calibrating between too much or too little action to preserve its traditional path at keeping inflation at 2 percent and the nation at full employment, a data driven task, but one that seems to have been met.