Okay, so there will be rate cut soon and the USD will become even weaker, right? Then with those tariffs, which are consumption tax on imports, will become even more pronounced as US added value part will be smaller percentage of the overall final price tag. So everything will be quite expensive if people still have money to pay, if not the margins and as a result the profits of businesses will go down.
Is this an attempt to reduce the infamous American consumerism?
Also maybe force companies to build more in US but wouldn't that require strong immigration as the unemployment is actually still quite low and those who lost jobs wouldn't be plug-n-play employees for manufacturing jobs that didn't exist before.
This is an attempt to do repeat what countries like Turkey like tried. They often think cut interest rates -> increase demand -> better employment.
But often they find that combination of worsening inflation and unemployment matched with cutting interest rates is a bad situation to be in. There is often no good way to come out of this. You end up in a cycle of : High unemployment -> cut rates -> employment improves but causes hyperinflation -> increase rates to cool markets -> high employment.
Blunt tariffs is playing a large part. and once Jerome Powell leaves and replaced by a crony is when the real problem will start.
I believe in zero-sum economics, I.E, I don't believe that there can be a "global market crash", all crashes have an equal and opposite effect somewhere else. I'm expecting to hear that jobs are booming in some other countries. In fact, there is data on this.
Those of you who experienced Silicon Valley at its height, I hope that this means we get to experience the next iteration of that, even if it's somewhere random on the planet.
When we were kids, my dad felt like he was always the last one to buy into the stock market. He would buy, it would peak, and then it would crater.
I was gonna buy in when the tariff shock hit, but it started to rebound before I got in. The 40% rise since then feels so irrational (though it's "only" 20% if you ignore the tariff shock).
I feel like I'm about to be my dad - watch the whole climb going "it's gotta come down, right?", capitulate at the top, and then have the bottom fall out.
Apart from the infamous timing the market, there are two adages to keep in mind - the stock market is not the economy and markets can remain irrational for a long time.
The whole tariff cycle has been irrational move. The tariffs were supposedly "removed" even when it was not - there was always a 10% default tariff. Maybe everyone is expecting a rate cut due to this tariff madness.
This is "bad reporting", in my view, because it (intentionally) baits readers into drawing sweeping conclusions ("Trumps policies have been a complete disaster, I knew it!") from very little data and small effect sizes.
This happens a ton on both sides of the political spectrum and I hate it.
On the topic itself:
If you want to bring formerly offshored industries back at scale (a overall dubious plan in my opinion), then high unemployment is a good starting point because it helps avoid labor shortages and price spikes in unrelated industries.
But what CNN reports is too small to have much of an effect on that.
This paragraph from the article is probably a bigger story than the August headline:
> August’s job report also included a downward revision to June, which showed the US economy lost 13,000 jobs that month. It’s the first negative employment month since December 2020, and it brings to an end what was the second-longest period of employment expansion on record.
"...boosted expectations that the Federal Reserve will cut interest rates in September to stimulate the economy"
The new unemployment rate is 4.3% That's above the Fed's 4% target for full employment, but not all that high above it.
By contrast, inflation is about 3% -- a full percentage point above the target of 2%, and 50% higher.
Lowering target rates is supposed to lower unemployment and raise inflation. Once you hit full employment, additional money for wages increases money supply without increasing product supply.
The Fed, of course, has more precise models than I've just described. But these numbers suggest to me that the Fed should leave rates as they are; they aren't any kind of emergency or pending emergency. The market is at or near record highs; it doesn't need its bubble expanded.
I know the the Fed is under political pressure because politicians like soaring stock markets. And the pressure is now verging on threats. But it still seems unlikely that the Fed will cave quite so soon when the numbers say to do just the opposite.
Let's be honest: the trouble here is that both of those numbers are wrong.
They have been changing and adding exceptions to the basket of goods measuring inflation for many years now.
Unemployment statistics have a long series of problems that have to do with considering who is counted.
The current administration is actively putting pressure on the staff publishing these numbers and replacing key stats people.
You gain a competitive power advantage through information asymmetry. It comes at great cost to the overall economy but it seems to be too juicy for politicians to ignore at this point.
The jobs reports are bad, yes, but cutting interest rates is not gonna have any effect there. Companies are actively trimming their workforce or not hiring for macroeconomic/policy reasons like tariffs that have nothing to do with the FED. There simply isn't any meaningful connection between unemployment and rate cuts. No executive is sitting around waiting for a .25 rate cut to hire a bunch of employees when all the other economic data is flashing red.
Hell, even the FED themselves say this and point out correctly that lowering interest rates to "help" employment doesn't work especially in an elevated inflation environment.
"When discussing this trade-off, it is important to emphasize that, since the stagflation of 1970s, the consensus position among macroeconomists is that loose monetary policy can easily lead to high inflation without persistent gains in lowering unemployment rates. Therefore, a guiding principle of post-1980s monetary policy has been that it should not be used to try to achieve permanently higher employment."
https://www.richmondfed.org/publications/research/economic_b...
But of course, we have already passed through the authoritarian looking glass and the Trump regime doesn't even bother to lie badly about their justifications at this point. Trump wants lower interest rates therefore they should happen. Anything else is noise.
Tech sector is very frothy at the moment with bloated staffing. It’s going to get worse before it gets better.
Big tech has been doing slow layoffs and would be surprised to see much bigger rounds soon as shops shut down unprofitable projects and expect those left to do more with less. The use of RTO and other means to force folks out has squeezed out what’s gonna get squeezed out so now expect a shift to just flat layoffs.
Some of the big tech companies have so many people that frankly aren’t needed. A ton of folks hired into vaguely defined “AI” roles doing “solutions” and product management nonsense that is ripe to be blown up the second the current hype slows just a bit.
Heading into a period where that needs to get cleaned up. It’s not going to be via “AI” (although that’s the PR spin) but just old fashion slash and burn.
1. Tariff uncerainty. Businesses love instability and inability to plan ahead
2. Mass adoption and prioritization of AI
3. Bullying and trying to take over the fed by the executive
4. Large scale downsizing of the government workforce
5. Government contract cuts, which trickle down to the private sector in multiple ways
The executive branch is at war with the world and the middle and lower class of the US. They’re not even doing many favors for the upper class, the decisions aren’t even helping them a lot of the time
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[ 3.1 ms ] story [ 51.6 ms ] thread* https://old.reddit.com/r/badeconomics/comments/1n23ixd/ej_an...
Is this an attempt to reduce the infamous American consumerism? Also maybe force companies to build more in US but wouldn't that require strong immigration as the unemployment is actually still quite low and those who lost jobs wouldn't be plug-n-play employees for manufacturing jobs that didn't exist before.
But often they find that combination of worsening inflation and unemployment matched with cutting interest rates is a bad situation to be in. There is often no good way to come out of this. You end up in a cycle of : High unemployment -> cut rates -> employment improves but causes hyperinflation -> increase rates to cool markets -> high employment.
Blunt tariffs is playing a large part. and once Jerome Powell leaves and replaced by a crony is when the real problem will start.
Those of you who experienced Silicon Valley at its height, I hope that this means we get to experience the next iteration of that, even if it's somewhere random on the planet.
I was gonna buy in when the tariff shock hit, but it started to rebound before I got in. The 40% rise since then feels so irrational (though it's "only" 20% if you ignore the tariff shock).
I feel like I'm about to be my dad - watch the whole climb going "it's gotta come down, right?", capitulate at the top, and then have the bottom fall out.
The whole tariff cycle has been irrational move. The tariffs were supposedly "removed" even when it was not - there was always a 10% default tariff. Maybe everyone is expecting a rate cut due to this tariff madness.
I'm not sure what else you'd expect.
This happens a ton on both sides of the political spectrum and I hate it.
On the topic itself:
If you want to bring formerly offshored industries back at scale (a overall dubious plan in my opinion), then high unemployment is a good starting point because it helps avoid labor shortages and price spikes in unrelated industries.
But what CNN reports is too small to have much of an effect on that.
> August’s job report also included a downward revision to June, which showed the US economy lost 13,000 jobs that month. It’s the first negative employment month since December 2020, and it brings to an end what was the second-longest period of employment expansion on record.
Oof. This sounds particularly bad, not just for the economy, but for workers, no?
DOGE savings: ~$205B, ~$1,273 per taxpayer.
DOGE direct layoffs: ~68K, total federal departures ~178K; corresponding to savings of ~$1.15M per departure.
The new unemployment rate is 4.3% That's above the Fed's 4% target for full employment, but not all that high above it.
By contrast, inflation is about 3% -- a full percentage point above the target of 2%, and 50% higher.
Lowering target rates is supposed to lower unemployment and raise inflation. Once you hit full employment, additional money for wages increases money supply without increasing product supply.
The Fed, of course, has more precise models than I've just described. But these numbers suggest to me that the Fed should leave rates as they are; they aren't any kind of emergency or pending emergency. The market is at or near record highs; it doesn't need its bubble expanded.
I know the the Fed is under political pressure because politicians like soaring stock markets. And the pressure is now verging on threats. But it still seems unlikely that the Fed will cave quite so soon when the numbers say to do just the opposite.
They have been changing and adding exceptions to the basket of goods measuring inflation for many years now.
Unemployment statistics have a long series of problems that have to do with considering who is counted.
The current administration is actively putting pressure on the staff publishing these numbers and replacing key stats people.
You gain a competitive power advantage through information asymmetry. It comes at great cost to the overall economy but it seems to be too juicy for politicians to ignore at this point.
Inflation is either staying elevated or slightly increasing. https://www.cnbc.com/2025/08/29/pce-inflation-report-july-20...
The jobs reports are bad, yes, but cutting interest rates is not gonna have any effect there. Companies are actively trimming their workforce or not hiring for macroeconomic/policy reasons like tariffs that have nothing to do with the FED. There simply isn't any meaningful connection between unemployment and rate cuts. No executive is sitting around waiting for a .25 rate cut to hire a bunch of employees when all the other economic data is flashing red. Hell, even the FED themselves say this and point out correctly that lowering interest rates to "help" employment doesn't work especially in an elevated inflation environment.
"When discussing this trade-off, it is important to emphasize that, since the stagflation of 1970s, the consensus position among macroeconomists is that loose monetary policy can easily lead to high inflation without persistent gains in lowering unemployment rates. Therefore, a guiding principle of post-1980s monetary policy has been that it should not be used to try to achieve permanently higher employment." https://www.richmondfed.org/publications/research/economic_b...
But of course, we have already passed through the authoritarian looking glass and the Trump regime doesn't even bother to lie badly about their justifications at this point. Trump wants lower interest rates therefore they should happen. Anything else is noise.
Big tech has been doing slow layoffs and would be surprised to see much bigger rounds soon as shops shut down unprofitable projects and expect those left to do more with less. The use of RTO and other means to force folks out has squeezed out what’s gonna get squeezed out so now expect a shift to just flat layoffs.
Some of the big tech companies have so many people that frankly aren’t needed. A ton of folks hired into vaguely defined “AI” roles doing “solutions” and product management nonsense that is ripe to be blown up the second the current hype slows just a bit.
Heading into a period where that needs to get cleaned up. It’s not going to be via “AI” (although that’s the PR spin) but just old fashion slash and burn.
1. Tariff uncerainty. Businesses love instability and inability to plan ahead 2. Mass adoption and prioritization of AI 3. Bullying and trying to take over the fed by the executive 4. Large scale downsizing of the government workforce 5. Government contract cuts, which trickle down to the private sector in multiple ways
The executive branch is at war with the world and the middle and lower class of the US. They’re not even doing many favors for the upper class, the decisions aren’t even helping them a lot of the time
And Obama's.