December rate cut: A holiday gift from the Federal Reserve

Wednesday's rate cut by the Federal Reserve had been anticipated by some in our earlier coverage, but seeing is believing, and that news came with no data from the Bureau of Labor and Statistics due to the government shutdown, so the Federal Opens Market Committee made the decision with one armed tied behind their collective backs.

Consequently they also faced the dilemma of trying to meet its mandate of full employment and inflation at the rate of 2 percent creating division among its members, with some saying hold back on a cut, and full steam ahead by others, creating a first for that body.

The drop in the rate went down to a range: 3.5 to 3.75, to 0.25 percentage points. And The Hill reported that, “The FOMC approved the rate cut by a vote of 9 to 3, a smaller margin than the typical Fed rate decision. Fed board member Stephen Miran preferred to cut rates by 0.5 percentage points, while Federal Reserve Bank of Chicago President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid called for no cut at all.”

It should be no surprise that Miran, an ally of President Trump, wanted the larger cuts a bone of contention between the president and Federal Reserve head Jerome Powell.

Even allowing for a plurality of views, “The unusual number and nature of Wednesday’s dissents revealed how hard it could be for Fed Chair Jerome Powell — and his eventual successor — to keep the FOMC united with the economy at a foggy crossroads” reported The Hill and added,”The last time three FOMC members voted against a Fed move was in September 2019, when the Fed cut interest rates to unwind a series of previous increases meant to stave off inflation that never materialized."

At Wednesday’s press conference, Powell said,“Everyone agrees that inflation is too high, and we want it to come down, and agree that the labor market has softened and that there’s further risk. Everyone agrees on that.” 

Other reports from officials say that inflation might be acceptable at 3 percent as a new standard, yet that shift might be more philosophical than reflection of a true policy, beyond the traditional mandate of the Federal Reserve.

With perhaps the greatest understatement he added: “Where the difference is, is how do you weigh those risks? And what does your forecast look like?”

Powell’s term ends in May of 2026, and Trump is expected to name his successor in the near future; and, it’s no secret that the two have differed on the role and size of rate cuts, and the president did give some of his characteristic verbal bludgeoning to the Chair for the past several months.

The dilemma that Powell has faced, as we have noted many times before, is the balancing act between meeting the mandate and taking stock of inflation, plus the adjoining employment rate. While inflation has rebounded from earlier years when it was over 3 percent, especially in a post pandemic world, the current rate is still high, and is especially felt by low income Americans during their weekly grocery shopping; and, many are feeling that the president has not kept his campaign promise of lowering those prices, inasmuch as any president can.

Meanwhile employment has remained resilient, if shaky, in the face of economic uncertainty, mostly attributable to the billions of dollars in tariffs imposed by the president, what an earlier era called protectionism; and, the effect on hiring is significant as employers are trying to make do with what they have on payroll, and increasing hiring only when necessary, creating a slowdown in many areas, health care and hospitality excepted.

Consumer confidence has taken a hit, as are the poll ratings for the president now at 36 percent. And, while he has portrayed affordability as a Democratic hoax, the reality of higher prices and the ever increasing costs of housing have many American working families deeply worried about their economic future, not to mention meeting monthly bills, and feeding their children.

There is some optimism by some economists that consumer spending is steady but it;s important to note, as we did last month, that the increased spending is supported by high income earners, but lower income individuals and families face the above challenges, thus the infamous K shaped economy.

Currently it is estimated that there is $150 billion in tariff money sitting in reserve and the the president has said that some might be given to Americans in the form of a check, or to help pay for health care, but economists don’t see that as a viable option in either case, with the latter forcing people to confront, on their own, the behemoth of American health care giants.

The role of politics cannot be underestimated in examining the American economy but there are fears that many hardworking Americans may be caught in the middle.

On Thursday there were the initial jobless claims and while there was an increase to the tune of 236,000 and allowing for some holiday volatility, following previously lower numbers of 191,000, there are cautionary notes, according to Claudia Sahm, a former Fed economist, who told Fortune magazine that, “Initial claims don’t give you a sense of what’s coming,” she said. They’re what economists like to call a lagging indicator, meaning they tend to spike after a recession is underway, not before it. Recent weekly readings, distorted by holidays and special factors, are even less informative.”

Nevertheless, as Yahoo Finance reported, “Weekly initial claims tend to be choppy around the holidays and will likely continue to fluctuate through the end of the year, but Thursday’s figures are toward the higher end of readings seen in 2025. Companies like PepsiCo Inc. and HP Inc. have laid out plans to reduce headcount in recent weeks, and nationwide layoffs in October were the highest since early 2023.”

The future is on the minds of many and Powell, playing close to the vest, feels at best that shifting into neutral gear may be the best option but then again, as The New York Times opined, ”If there are signs that the unemployment rate might surge, that would probably prompt more officials to embrace the need to cut rates. So far, though, most policymakers do not appear worried, nor do they appear to be downbeat about growth. Projections released on Wednesday showed that most officials expected the unemployment rate to peak at 4.5 percent in 2025, before declining.”

Tariffs are still on the chart and it seems that Powell, and others, are waiting for the first quarter of 2026 to make an assessment, perhaps a code word for “wait and see.”

Updated on December 15, 2025

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August Jobs Report: Cooling becomes a chill

In yet another sign of a cooling jobs market The Labor Dept in its monthly report for August, released on Friday, showed that non-farm payrolls were only 22,000 non-farm jobs rather than the expected 75,000 a figure that belies President Trump's glowing statements of a booming economy. And, it also shows that while the expectations were high, the pattern that has emerged is of a country that has not kept up with population growth, and puts more pressure on the Federal Reserve to lower interest rates at its September meeting.

Still on the scenario is economic uncertainty, with the tariffs, on over 90 countries, that Trump has put in place, and once again, the effect on the domestic market is that employers are not going to increase hiring with the prospect of having to increase prices on goods purchased in whole, or in part from foreign markets; and also places the global economy in jeopardy as we have seen since that April announcement in the White House Rose Garden and now India, an important trading partner, faces an eye watering 50 percent tariff on its goods.

Earlier this year American companies relying on imported goods, or parts, stockpiled them to delay passing the cost of tariffs onto customers, but that stockpile may be running out and some American manufacturers reliant on everything from foreign made zippers are becoming increasingly nervous on how and when they have to increase customer prices.

Meanwhile higher income earners and households are managing, due to higher wages that increased by 0.3 percent, or $36.53, that are keeping pace with inflation, while the threat to lower income households is dire as they face those still high grocery prices;  and, with the increased tariffs on Brazil of 40 percent, that morning cup of coffee, whether made at home, or bought at a coffee shop is going to cost a good 30 percent more.

This week an appeals court found that some of the Trump tariffs are illegal and while the case is going to the Supreme Court, on appeal by the White House, it’s no sure bet; and, in such a high stakes area, that the Court, filled with many Trump loyalists, will rule against him; but,Trump has until October 15 for that appeal process to begin.

If he loses there are still workarounds that he can effect tariffs but with Congressional oversight, and not the free hand that he wants. But, it’s also important to keep in mind that in nearly all areas since his second term has begun, the president has ignored the courts and with the help of other GOP stalwarts has placed many loyalists on the courts, not just the Supreme Court, and  he will undoubtedly try to wrangle a victory somehow to keep these tariffs in place.

Globally the United States has taken a hit on its once international dominance gained after World War II, (an 80 year period) and is now over, opined the Financial Times in May, where the author noted, “President Donald Trump is tearing down what remains of the edifice with unparalleled speed and recklessness. Even in the unlikely event that American democracy emerges unscathed from four years of Trumpian revolution, so far as relations between the US and its allies are concerned it will be “never glad confident morning again” (to quote Robert Browning's The Lost Leader).

Domestically, the heavy hitters are health care that logged in at 31,00 but also well below the national average gain of 42,000 over the previous 12 months and significantly there were increases of 13,000 in ambulatory health care services burying, care services and facilities at 9,000 and at the same rate for hospitals, perhaps a reflection of the aging of America, a fact that will only increase with many people living much longer lives than their predecessors.

Notably with the drastic cuts in federal employment there has been a continued decline, at a loss of 15,000 and down by 97,000 since its peak in January and, as noted in prior months, manufacturing declined at 12,000 down by 78,000 over the year.

An important demographic for these firings are Black professional women many of them with decades of experience and the requisite degrees to support their work, and as a recent New York Times piece noted:

“While tens of thousands of employees have lost their jobs in Mr. Trump’s slash-and-burn approach to shrinking the federal work force, experts say the cuts disproportionately affect Black employees — and Black women in particular. Black women make up 12 percent of the federal work force, nearly double their share of the labor force overall.”

“The most recent labor statistics show that nationwide, Black women lost 319,000 jobs in the public and private sectors between February and July of this year, the only major female demographic to experience significant job losses during this five-month period, according to an analysis by Katica Roy, a gender economist.

While on the surface, the administration has said these hirings were reflective of DEI hires, in reality, “The department, [Education] more than a quarter of whose work force was Black women, suspended dozens of people whose job titles and official duties had no connection to D.E.I. Their only apparent exposure to D.E.I. initiatives came in the form of trainings encouraged by their managers — including Mr. Trump’s former education secretary, Betsy DeVos.”

“The A.C.L.U. and a group of employment attorneys alleged that among other things, the dismissals “disproportionately singled out federal workers who were not male or white,” in violation of Title VII of the Civil Rights Act.”

Furthermore, “Kelly Dermody, one of the lawyers representing the plaintiffs, said that of the workers who sought legal help to challenge their dismissals, 80 percent were people of color, and the majority were Black women.”

“When an organization goes after really, really highly competent, singularly great, Black women — the message it sends, the terror it sends to every other professional woman, person of color, really is so profound,” she said.”

Returning to the report, one figure that is closely watched, the labor force participation remained little changed at 62.3 percent, and is bound to be considered by the Federal Reserve as it continues its twin mandate of inflation at below 2 percent, and full employment but, while this figure has not wavered much, currently at 2.7 percent, the overall cooling of the jobs market cannot be overlooked.

It should be noted that the White House in the person of Trump fired the BLS manager, Dr. Erika McEntarfer last month because he felt, without evidence, that last month’s figures, which showed the beginning of the cooling down, and revisions of early reports were cooked, to reflect a bias against him; and, to that effect has nominated a new commissioner, EJ Antoni, a proven loyalist.

CNBC reported. “Earlier Friday, Commerce Secretary Howard Lutnick told CNBC’s “Squawk Box” that BLS jobs reports will be more accurate with McEntarfer gone, because “you’ll take out the people who are just trying to create noise against the president.”

Taking an overall view of why the jobs market is cooling are not only the role of tariffs but the loss of workers, not simply those who are on the margins, seeking work but also the drain from the deportation of immigrant labor, both legal and undocumented, and as Pew Research has shown, significant areas where they dominate, but overall, represent 20 percent of the US workforce, and notably 30 percent in construction, 45 percent of agricultural workers, and 24 percent of all service workers.

Costs, even on a one time basis, for the deportations will cost the US a total of $315 billion dollars as Newsweek reported, from the American Immigration Council, with others estimating a cost of $88 billion per year.

Taking the above into consideration, we are seeing a 4.3 unemployment force with a net reduction of immigrant labor, plus reluctant employers holding off on hiring, which gives a lowered unemployment figure that a casual reader might not be aware of; with a total loss of 750,000 immigrant workers.

The bull in the china shop is inflation, and with next Thursday’s report all eyes will be laser focused on the Fed, as it makes any interest rate decisions.

As has been well known the president is after Federal Reserve Chair Jerome Powell to lower interest rates and has resorted to public name calling, accusations of cost overruns on the headquarters, and in his latest move to wrest control of the Reserve from, its traditional independence from politics, has fired Lisa Cook, the first Black woman to serve as a Reserve governor on a past mortgage application, a charge that she denies, and as The New York Times reported “by forcing out sitting governors, the president could appoint a set of loyalists who share his desire to lower interest rates which the central bank has kept steady in response to persistent concerns about inflation.”

The 3 percent reduction from its current range of 4.25 to 4.6 that the president wants could lead, say many economists, to stagflation, “where prices spike, companies lay off workers, and consumption craters. In that scenario, the Fed would be left with two bad choices. It could cut interest rates to shore up the economy, and risk stoking inflation. Or let the labor market flounder, while getting inflation under control.” said the Times.

Ms. Cook has said she has “no intention of being bullied,” and there are doubts whether Trump could fire her under current legal parameters.

Meanwhile Powell has hinted, say some, that there could be a lowering of interest rates based on the report and dial back on earlier restraints that had been in place, although it’s clear the “soft landing” that he had earlier desired was achieved and gave the US economy stability.

July Jobs Report: A downward slide

With the release of the July Jobs Report from the US Labor Dept. on Friday there was an unexpected dip in the number of non-farm jobs for the country, a departure from what economists expected, and one that some have said was bound to happen with the economic uncertainty brought by the on again, off again tariffs from President Trump. In response, employers have been reluctant to hire new workers, but Trump has said, "The good news is that tariffs are bringing billions of dollars into the USA.”

In total, there were 73,000 jobs created, but one of the more revealing, and controversial, aspects of the report was the downward revisions for May, and June, a natural occurrence due to the collection period by Labor, specifically the Bureau of Labor and Statistics; but, these revisions were more severe than prior reports have shown: for June, 14,000, and for May 19,000, giving an overall picture of a declining, but not dismal, picture of the American jobs market.

“It’s hard to pull the trigger on hiring when you’re uncertain about where tariffs are going to land,” said Diane Swonk, chief economist at KPMG, to The New York Times.

Trump, who pegged much of his election campaign on increasing jobs for the US, was furious, and fired the BLS commissioner, saying without evidence that Dr. Erika McEntarfar, a Biden appointee, had rigged the numbers to make him look bad, and that she would be replaced for someone that would provide more accurate numbers.

Moving away from that controversial firing, this report was not entirely unexpected, some say, considering the uncertainty that has roiled both the domestic and the global financial communities, and the effect of tariffs on the American consumer, the main drivers of the economy. And, if there is a pull back on spending, then the consequences will be significant, but currently, with the average wage increasing by 0.3 percent, and reaching a total for the year of 3.9 percent, and $36.44 for July, it exceeds the rate of inflation of 2.8 percent, so consumer spending has not taken a nosedive.

The banner rate of unemployment was 4.2, a tad above the previous rate of 4.1, and the labor force participation rate was little changed from June, at 62.2 percent; and, while this is a closely watched figure by economists and legislators, future monitoring will be increased to make sure that there is no need of a fix, by either the Federal Reserve, or market enhancement tools.

What has become problematic is that the Trump administration has not made clear what the end goals are for tariffs, and for global markets, using his April calculations (which many economists question) could interrupt trade relations with some of America's closest allies, such as Canada, Mexico; not to mention the European Union, whose recent acquiescence has increased their tariffs from a previous low of 2.5 to 15 percent, but leaving a 50% tariff on steel and aluminum, components that are featured in many consumer goods for the US, not only cars, but appliances such as washing machines and refrigerators, to name but a few.

For those countries that have not negotiated with Trump they face even higher tariffs, up to 35 percent on August 7.

Switzerland, whose exports reach the US in luxury watches, chocolates, and components, such as the above, and who claimed a close trading relationship with them, was hit with a baffling 39 percent, slowing trade, and creating a probable black hole for later trade agreements; but, hitting the market for luxury goods among wealthy Americans.

Consistent with earlier reports the heavy hitters are: health care at 55,400 jobs, retail at 15,700, and leisure and hospitality at 5,000; but the demise of manufacturing and construction have continued, as both industries struggle with tariffs and supply chain issues, coupled with the high cost of building housing, in an underperforming area, 11,000 and 12,000 respectively.

Well known, but now firmly established is the loss of 12,000 federal jobs resulting from the earlier firings, orchestrated by presidential advisor Elon Musk, and the Department of Government Efficiency, which had been previously thought to have swelled the ranks of local and state governments, but with the revision are far less.

Reaction from economists has been swift, and Olivia Allen, senior economist at Parthenon, said, “After this report, it doesn’t look like a particularly healthy job market,”

Overall, job growth has not kept up with population growth in the US, and 80,000 to 100,000 are needed, noted Laura Williams, director of economic research for North America, at the jobs site Indeed.com, reported CNBC.  In fact, the country has only created 106,000 jobs since May, “a three month total barely enough to sustain the labor market.”

Cost of goods,specially groceries, were a deep concern for consumers when inflation was near 9 percent, and while it has come significantly down, there are still concerns, especially when Trump was running for his second term, and said, in effect, everything was going to be cheaper, a promise that he found difficult to keep, and admitted after 30 days in office, that it was harder than he thought.

Egg prices, that bugaboo in the run up to election day, have come down by 23.8 percent because of successful attempts to tame bird flu, and separate healthy chickens from sick ones; gasoline is up partially due to summer demand, but also varies according to the price of crude oil, and formularies used both in production and distribution, with an average per gallon price of $3.49, relatively tame by those standards.

Grocery prices do vary, by region, and retailer, but core inflation which strips out volatile gas and energy products is up from January to June by 0.8 percent; and, while some areas might not be affected, depending upon income, lower income families may be the most challenged, especially with the shortage of affordable housing, and congressional cuts to the Supplemental Nutrition Assistance Program, and taking into account that grocery prices are up 0.6 percent, according to the CPI report from BLS.

The Budget Lab at Yale University has predicted that with the Trump tariffs groceries will increase by 3.7 percent in a year, or two; and, 3.2 percent over the next 5 to 10 years.

The moves of the Federal Reserve in their recent meeting, has kept the interest rate of 5.33 percent, citing, once again, economic uncertainty of the Trump tariffs, much to the ire of the president as he has continued to excoriate Chair Jerome Powell, calling him on Truth Social, “Too Little, Too Late Jerome” and has wavered between name calling, or threatening to fire him; and, recently, attacking him for cost overruns on the Reserve building, conflating a five year old project with a current renovation; all designed in an effort to discredit him, since the Supreme Court has said that he cannot be fired.

Powell stated last Wednesday, “If you move too soon, you wind up maybe not getting inflation all the way fixed and you have to come back. That’s inefficient. If you move too late, you might do unnecessary damage to the labor market.”

There seems to be no predictable end in sight for the American economy, and employment stability; and, together with tight global markets makes for a very worrisome economic future, plus with politicization on the forefront, the risks for consumers are enormous.

March Jobs Report: the calm before the storm

For many economists the March Jobs Report released on Friday by the US Bureau of Labor and Statistics gave some restrained  squeals of delight, since it showed a higher than expected gain of 228,000 jobs, far less than the 135,000 many expected, and it also gave some concern for the future of two key areas: interest rate changes from the Federal Reserve, and the heavily promoted, but not yet announced, tariff program by President Donald Trump, and there was a collective tension among those whose job is to take the temperature on the American economy, the largest in the world; and, that palpable tension could be felt across the nation.

In and of itself, the report showed an unemployment rate of 4.2 percent, steady, slightly higher than previous months, but enough to give a measure of satisfaction, and against a background of interest rates holding steady at 4.25 to 4.5 percent created a background of sureness to those same observers.

There were some patterns that remained the same, ebbing and flowing, but fairly predictable in light of previous reports: government employment, swelling to 6,000; retail at 24,000 (in part ot the retreat of severe winter weather); 54,000 in health care; 23,000 for transportation and warehousing,all giving rise to a predictable report.

Wages were also up 0.3 percent with a year on year total of 3.8 percent year over year, and with current inflation, those would keep many heads above water, for the moment,

Trump weighed in, expressing joy, and in a post on social media, reported by The New York Times, saying in his characteristic all caps: GREAT JOB NUMBERS FAR BETTER THAN EXPECTED. IT’S ALREADY WORKING.”

This may have been premature but it is a typical response from the president, but like those prior months we see the main drivers leading in health care and social assistance, giving “a combined gain of 78,000”.

Revisions, which are a typical pattern by the BLS, now have January and February,  net gains of 45,000, but perhaps Joe Brusuelas, chief economist at the consulting firm RSM,who told the Times, possibly the best remark, avoiding optimism, and said, “What we are really seeing is the calm before the storm.”

That storm came swiftly on April 2, Liberation Day, as the White House titled the announcements of tariffs pegged to the US trade imbalance of 10 to 50 percent across the board and a hefty 25 percent on all foreign cars, pending the following week.

Reactions across the US and abroad were swift and negative, as it threw the global economy into disarray, and the specter of a possible recession; and the net results will affect not not only the tariffs that are paid by US importers; but most importantly, passed onto American consumers in the form of higher prices.

Just beyond, but no less significant, is the threat to long standing alliances with foreign countries, further jeopardizing future interactions with global trade.

Adding tariffs on steel and aluminum will crush the American, Canadian and Mexican auto industry with higher prices, and an exchange of  foreign parts, the result will be higher than average car prices, exceeding the average new US car price of $50,000.

While the Trump administration says its goal is to even the playing field and force foreign companies to make their products in the United States, that goal is hardly feasible, with tariff retaliation, and the near impossibility of suddenly reformatting global supply chains, which in the best case scenario could take years, and considerable expense.

There has been growth in some industries manufacturing in the US, under the Biden administration, yet that hasn't been mentioned by the Trump administration, as it steadfastly clings to its goals.

Considering the massive layoffs in the federal workforce, not reflected in this report since the BLS gathers its data points in the first two weeks of each month, it’s equally important to note that, while some are not technically fired, yet, due to being placed on administrative leave, caused by the Department of Government Efficiency, as a goal of firing even more federal workers.

 After the initial decimation of the US Agency for International Development there are planned workforce reductions of 83,000 employees of the Department of Veteran Affairs by the end of September of this year; 20,000 for the Internal Revenue Service, and a possible 1,155 for the Environmental Protection Agency, among many others with a possible total of 40,000 workers, 80% of them living and working outside of Washington, DC, with a resulting devastation not only to working families, but their local economies.

While there has been rampant criticism of the influx of cheap Chinese goods to the US yet many of them principally clothes, from tee shirts to sweaters have actually been a gain for lower income families, and as an earlier report from the Times noted, “lower prices are in effect a pay increase, leaving consumers with more money to spend on goods and services.”

With widespread price increases, low income families, the poorest, will see a double whammy and Marketplace.org reported, “The Yale Budget Lab also estimated [among other cost increases] that Trump’s tariffs alone will slash disposable income in the poorest households by at least $,1700 a year. Simply put. The lowest income households spend more money on necessities.”

Furthermore, they added how higher grocery prices will affect the same households, noting that the top half of higher income households spend about “10% of their income on food,” but noted Tim Richards, an agribusiness professor at Arizona State University, “But, if you look at the lowest 20% of income earners, they spend 30% of their income on food.”

The national media has been awash in criticisms of the president, but even some conservatives have criticized the formula that the White House has used and as Axios has reported:

• “The administration's calculation assigns a value of 0.25 to that variable, which in the math of price elasticity suggests most of the tariff impact does not hit the import price of an item as it enters the country.

• But the AEI paper says they used the wrong value for import prices, and instead used the value for a retail price, or what happens to the final consumer price after the good is imported and distributed.

• They argue, instead, that the right value is 0.945 — in other words, almost all of the tariff hits the import price of a good as it's brought into the country.

• "It is inconsistent to multiply the elasticity of import demand with respect to import prices by the elasticity of retail prices with respect to tariffs," the authors write.

Supporting the formulaic errors, FactCheck.org discussing tariffs, expanded these assertions by claiming that the formula used on the chart that Trump held aloft in the Rose Garden, is self created,”Those listed numbers are simply not tariffs, but some other made up measure based on a formulaic trade deficit calculation,” noted Kimberly Clausing, a nonresident fellow at the Peterson Institute for International Economics, told us via email. “In almost every instance countries’ true trade barriers are far, far lower.”

What worries people most, not only in the US, but across the world is that these tariffs will create a global recession, and as we have seen the stock market drop in the thousands, not seen in 5 years, these fears are justified.

Paradoxically the president said on Monday, from Air Force One, that he doesn't want to see “anything go down,” but suggested that we have to take a little bad medicine to make things good.

Commerce Secretary Howard Lutnick has said that these tariffs and fiscal policies are “worth it” even if they cause a recession, reported the Times, and his position was seconded by Treasury Secretary Scott Bessent who added that the economy might need a ‘“detox period” after becoming dependent on government spending.”

Good, however, may be a relative term with many working families, and even the more affluent facing financial  challenges that will affect retirement savings, children, or grandchildren’s education, among other things.