For three days starting Thursday, some of the biggest names in the world of finance and economics will gather in Wyoming, US for the most hotly-watched central banking conference. Organised by the Federal Reserve Bank of Kansas City, the Jackson Hole Economic Policy Symposium has become a crucial policy event ever since it was first held in 1978 in Kansas City. Interestingly, the theme of that edition — World Agricultural Trade: The Potential for Growth — remains as relevant as ever nearly 50 years later.
This week, however, some of the world’s most important central bankers, academics, government officials, and leaders from the financial industry will instead discuss ‘Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.’
The 2025 edition of the Jackson Hole meetings comes even as the American labour market data is facing a torrent of abuse — from the US government itself. On August 1, US President Donald Trump sacked Erika McEntarfer, the Commissioner of the Bureau of Labor Statistics (BLS), after the agency said that non-farm payrolls — or new jobs outside of agriculture — rose by just 73,000 in July, while the numbers for the previous two months were revised downwards by more than a quarter of a million to a mere 19,000 for May and 14,000 for June. Trump claimed the jobs numbers were being “rigged” to make him and the Republican party “look bad”. McEntarfer’s successor EJ Antoni, meanwhile, has called for the suspension of the monthly jobs data until it is “corrected”.
Ironically, the bad jobs numbers is one of the reasons why markets are expecting the US Federal Reserve to cut interest rates by 25 basis points to 4-4.25 per cent next month — something Trump has been aggressively demanding for some time now. But for those who were waiting for the sky to fall on the US due to the Trump administration’s tariff war, some other recent sets of numbers point to emerging cracks in the American economy.
Tariff impact on prices
The US Consumer Price Index (CPI) data for July, released on August 12, was largely in line with expectations, with retail prices rising 2.7 per cent year-on-year and 0.2 per cent month-on-month. Meanwhile, core CPI was up 3.1 per cent year-on-year and 0.3 per cent from June.
According to Taimur Baig, DBS Bank’s chief economist, should Fed officials “remain focused on inflation, they will find areas to worry about”, with the ‘tariff playbook’ of US firms involving squeezing of suppliers, taking a balance sheet hit, and passing on some of the tariff to consumers. While the first two are “most visible now”, Baig thinks the third “is also materialising, in a protracted manner”.
But two days later, BLS data showed that US wholesale prices rose much faster than expected, with the Producer Price Index (PPI) up 0.9 per cent — the largest month-on-month gain in three years. Compared to a year ago, the PPI in July was 3.3 per cent higher. With wholesale prices rising faster than their retail counterparts in July, the indications are that American importers are absorbing Trump’s tariffs. At least for now.
Sales and sentiment
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A day after the US PPI data was released, on August 15 the Commerce Department data showed retail sales rose 0.5 per cent month-on-month in July. However, the same day, the University of Michigan’s keenly-eyed consumer survey showed sentiment in July fell for the first time since April, with the proportion of consumers expecting unemployment to worsen over the coming year at about 60 per cent — a “reading last seen in the Great Recession”.
But things are worse for the poorest Americans. On August 12, the Bank of America said its credit and debit card spending data for July showed expenditure was “flat” among lower-income households from a year ago compared to a growth of 1 per cent and 1.8 per cent for middle- and higher-income households, respectively.
These, and much more, will have the US Federal Reserve thinking, and all eyes will be on Chair Jerome Powell, who will speak at Jackson Hole on August 22. In the past, Fed officials have used the conference to hint at future moves. While a rate cut is expected in September, it may not be as large as the 50 bps the Trump administration wants.
According to analysts at Japanese investment bank Nomura, Powell is expected to “signal that policy easing is likely…without committing explicitly to a September rate cut or multiple rate cuts this year”.
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“The current view among Fed members remains mixed, though more views are converging on a rate cut view following the poor July nonfarm payroll report. It is unlikely Powell will be as candid as he was last year. He may say that more policy easing is likely this year but not commit to a specific time,” ANZ economists said in a note on August 18.
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