From Cavallo et al. (Aug. 2025): Source: Cavallo, et al. (Aug 2, 2025). Some data consistent with an impact of tariffs: Figure 1: PCE-durables deflator (blue), PCE-services deflator (tan), in logs 2025M01=0 Source: BEA.
Robert L. Borosage His policies are making Americans less safe, less healthy, and more dead. The post How the Constant Noise Distracts From the True Peril of Trump’s Misrule appeared first on The Nation.
This week’s livestream featuring Menzie Chinn and Lydia Cox, moderated by Mike Knetter, is Tuesday, Aug. 5, at 7 p.m. CDT (hosted by the Wisconsin Alumni Association): Register here. In the first half of the year, the Trump administration has reshaped many aspects of economic policy, often in ways that are at odds with the views of outside economists. As Trump’s economic agenda takes shape, many are wondering about its impact. How are tariffs affecting prices for consumers? Are the biggest impacts behind us or yet to come? How will the new federal budget affect the deficit? Will the administration exert more pressure on the Federal Reserve and its chair? And what does this all mean for the average American? My pictorial assessment: Figure 1: Nonfarm Payroll from CES (bold blue), implied NFP Bloomberg consensus as of 7/1 (blue +), civilian employment with smoothed population controls (orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold light green), manufacturing and trade sales in Ch.2017$ (black), consumption in Ch.2017$ (light blue), and monthly GDP in Ch.2017$ (pink), GDP (blue bars), all log normalized to 2021M11=0. Source: BLS via FRED, Federal Reserve, BEA 2025Q2 advance release, S&P Global Market Insights (nee Macroeconomic Advisers, IHS Markit) (7/1/2025 release), and author’s calculations. The labor market really does look like it’s slowing down… Figure 2: Private nonfarm payroll employment, July release (bold black), Jun release (purple), ADP July release (green), all s.a., in logs, 2025M01=0. Source: BLS, ADP via FRED, and author’s calculations.
Through 8/3: Figure 1: EPU (blue, left scale), EPU-trade (green, right scale). Source: policyuncertainty.com. Trade policy uncertainty, I can see why that’s risen. Economic Policy Uncertainty? Well, if you start disassembling the economic data infrastructure that underpins TIPS, Social Security COLAs, and inflation numbers necessary for private and public decision-making, maybe this is the least uncertainty you can expect.
From the NYT: Two days after President Trump fired the top labor official in charge of compiling statistics on employment, Kevin Hassett, the director of the White House National Economic Council, insisted on Sunday that the administration was “absolutely not” shooting the messenger on the heels of a poor jobs report. But Mr. Hassett repeatedly declined to furnish detailed evidence that would substantiate the president’s claims that the data had been rigged or manipulated to hurt him politically. … on “Fox News Sunday,” Mr. Hassett claimed there were “partisan patterns” in the jobless data, and said that “data can’t be propaganda.” It is important to recall that Dr. Hassett both authored Dow 36,000 in 1999, and applied a quadratic specification to predict covid fatalities.
Maybe, maybe not. With the employment release of Friday, here’re the pictures, first of NBER’s BCDC key indicators, and second of alternative indicators (recalling all the most recent data will be revised): Figure 1: Nonfarm Payroll from CES (bold blue), implied NFP Bloomberg consensus as of 7/1 (blue +), civilian employment with smoothed population controls (orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold light green), manufacturing and trade sales in Ch.2017$ (black), consumption in Ch.2017$ (light blue), and monthly GDP in Ch.2017$ (pink), GDP (blue bars), all log normalized to 2021M11=0. Source: BLS via FRED, Federal Reserve, BEA 2025Q2 advance release, S&P Global Market Insights (nee Macroeconomic Advisers, IHS Markit) (7/1/2025 release), and author’s calculations. The big NFP miss, usually not visible, is readily apparent in this graph. That’s because of the revisions to previous months. While small relative to annual benchmark revisions, they are noticeable here. Big downward revisions, if memory serves me correctly, are seen around turning points. If one were looking for succor in the household survey, one won’t find it. The civilian employment series has been flat for months. And if one believes trends in the household employment series presage recessions at an earlier point than the establishment series, then start worrying. Just to recap, consumption, personal income and monthly GDP are all below recent peaks. Here are some alternative monthly indicators (drawn on same vertical scale as Figure 2): Figure 2: Implied Nonfarm Payroll early benchmark (NFP) (bold blue), civilian employment adjusted to nonfarm payroll concept, with smoothed population controls (orange), manufacturing production (red), vehicle miles traveled (teal), real retail sales (black), and coincident index in Ch.2017$ (pink), BTS Freight Services Index (brown), GDO (blue bars), all log normalized to 2021M11=0. Retail sales deflated by chained CPI, seasonally Source: Philadelphia Fed [1], Philadelphia Fed [2], Federal Reserve via FRED, BEA 2025Q2 advance release, DoT BTS, and author’s calculations. As discussed here, Mr. Trump’s assertions of rigged data are wildly unjustified, given private NFP as measured by ADP shows the same pattern as the current BLS private NFP series, but on a lower trajectory. If anything, the pre-revision series was less plausible, given the ADP series trajectory. Retail sales, civilian employment adjusted to NFP concept, and manufacturing production are all below recent peak (albeit insignificantly in the latter case). The coincident index is the only series that is unambiguously rising. The coincident index is based labor market data, so as long as NFP is rising, it’ll rise. With revised employment data, the next iteration of of the coincident indicator will look noticeably different. So until the establishment series trend downwards, I reserve judgment.
Durables consumption has experienced extreme volatility over the last 9 months (since the election). However, services and nondurables should follow the permanent income hypothesis — at least halfway (DSGE’s usually incorporate about 50% hand-to-mouth consumers). So what do we see? Figure 1: Sum of nondurables and services consumption (blue, left log scale), 2023M11-2024M10 stochastic trend (light blue line, left scale),durables consumption (red, right log scale), 2023M11-2024M10 stochastic trend (light red, right scale), all in bn.Ch.2017$ SAAR. Orange shading denotes Trump 2.0 administration; orange dashed line at 2025M04. Source: BEA, July release, and author’s calculations. The gap between services consumption and trend is even larger. To the extent that services consumption is driven by the permanent income hypothesis (even if up to half of consumers are hand-to-mouth), this means there’s been downshift in perceived future stream of income.
Policy uncertainty through 8/1: Figure 1: EPU – trade (blue, left scale), EPU (green, right scale). Source: policyuncertainty.com.
CEA Chair Miran asserts that some of the surprise in the employment numbers is due issues of seasonality. Can we see that? I can’t… Here’s y/y growth rate of the official series and the seasonally adjusted series. Figure 1: Year-on-year growth rate in seasonally adjusted NFP (blue), and in not seasonally adjusted NFP (tan). Growth rates calculated using log differences. Source: BLS via FRED, and author’s calculations. The seasonally adjusted series is actually above the y/y not seasonally adjusted series! What about the level? Figure 2: Seasonally adjusted NFP (blue), not seasonally adjusted NFP (tan), not seasonally adjusted NFP adjusted by author using X-13 (in logs, 2021M07-2025M07) (green). Source: BLS via FRED, and author’s calculations. Another reason to think the BLS numbers have not been “massaged”: the July release numbers better track ADP, on private NFP. Figure 3: Private nonfarm payroll employment, July release (bold black), Jun release (purple), ADP July release (green), all s.a., in logs, 2025M01=0. Source: BLS, ADP via FRED, and author’s calculations. In any case, there are usually big NFP misses around turning points. Civilian employment — which is not revised month to month — peaked in April.
As of 1:35PM CT today, the President has fired the Commissioner of Labor Statistics, within 6 hours of the latest employment release. So what all of feared about the safety of the independence of our economic statistical agencies has come to pass. We might as well delegate the employment numbers to Kevin Hassett at the NEC. From NBC: President Donald Trump on Friday ordered the firing of the head of the Bureau of Labor Statistics, hours after a stunning government report showed that hiring had slowed down significantly over the past three months. Taking to Truth Social, he attacked Erika McEntarfer, the commissioner of the BLS. He claimed that the country’s jobs reports “are being produced by Biden appointee” and ordered his administration to terminate her. Needless to say, his assertions that the numbers were manipulated are without merit. With no hint of irony, he wrote: “We need accurate Jobs Numbers,” … “She will be replaced with someone much more competent and qualified. Important numbers like this must be fair and accurate, they can’t be manipulated for political purposes.” At this rate, if a recession occurs within the next 3.5 years, we’ll not see a negative GDP print let alone employment print. And if you thought this was unimportant to you, remember BLS calculates the CPI used for Social Security COLAs, as well as the headline CPI used to calculate TIPS yields. Oh, also the inflation adjustments to the marginal tax rate thresholds…
