The Federal Reserve lowered its key interest rate by a quarter-point, projecting two more cuts this year due to concerns about the labor market’s health. This move, the first since December, reflects a shift from focusing on inflation to employment, as hiring slows. While the Fed aims to boost growth and hiring, the decision faced dissent from a newly appointed policymaker favoring a larger cut. Despite some internal differences, officials still anticipate further rate reductions, although less than Wall Street had anticipated. The Fed faces the challenges of a weakening economy and external pressures on its independence, particularly regarding the attempt to remove a Fed governor.
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On Wednesday, the Bank of Canada reduced its key interest rate by 25 basis points to 2.5 per cent, marking its first cut since March. This decision was made due to a weakening economy, softening job market, and reduced inflation risks, which the central bank believes are now more “contained”. The U.S. trade war continues to impact the Canadian economy, specifically in tariff-exposed industries. Despite a stronger-than-expected consumer spending in the second quarter, the central bank decided that a rate cut was still appropriate to better balance the risks going forward.
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The Wall Street Journal’s editorial board has cautioned President Trump that blaming Joe Biden for negative economic news is becoming unsustainable. The board cited recent revisions to job creation data and the slow pace of economic progress, arguing that Trump’s policies are hindering growth. They also noted that the president’s anti-growth measures, like border taxes and deportations, are contributing to inflation and higher prices. The editorial concluded that Trump should change his economic policies to help businesses, workers, and consumers, as ignoring these economic indicators could be politically damaging.
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A recent Labor Department report revealed that the labor market created significantly fewer jobs than initially reported, with revisions showing a decrease of 911,000 jobs from the prior year. These downward revisions, the largest since 2002 and more than 50% higher than the previous year’s, indicated a weakening employment picture across various sectors, including leisure and hospitality, and professional and business services. The adjustments, based on quarterly census data, have sparked concerns about the economy’s health and have drawn criticism of the Bureau of Labor Statistics’ (BLS) data collection methods, leading to calls for new leadership. The White House has cited these revisions as evidence of economic struggles and increased pressure on the Federal Reserve to lower interest rates.
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President Trump’s political strategy hinges on projecting an image of strength and victory to maintain support. Following a disappointing July jobs report, Trump replaced the official overseeing the data to reframe the narrative. However, the August jobs report revealed a meager 22,000 jobs created, significantly less than the previous month, and a downward revision for June. Economists suggest the impact of Trump’s trade policies, specifically tariffs, played a significant role in the economic slowdown, despite the personnel change.
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In Ellabell, Georgia, a large-scale immigration raid at Hyundai’s construction site led to the arrest of 475 individuals, primarily Korean nationals. The raid, the largest of its kind during the President’s second term, halted construction and sparked concerns within the Korean community and among local business owners who relied on the migrant workforce. While the permanent impact on the local economy is yet to be seen, many workers were detained for visa violations, and there was a noticeable chilling effect on public discourse and commerce. The South Korean government expressed concern, and protests against the arrests have taken place. The raid exposed the reliance on a transient workforce and raised questions about the integration of the project into the community.
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Despite a significant setback in the Buenos Aires provincial election, President Javier Milei has affirmed that his free-market economic policies will remain unchanged. The center-left Peronist opposition secured a decisive victory, garnering approximately 47% of the votes, while Milei’s La Libertad Avanza party received around 34%. This defeat, with the majority of votes tallied, marks a challenge to the President’s agenda.
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The August jobs report revealed a significant economic downturn, with only 22,000 jobs added and the unemployment rate rising to 4.3%, the highest since 2021. These figures, released after President Trump fired the Bureau of Statistics Commissioner, further indicated that the jobs market is struggling. While Trump’s administration continues to push a narrative of economic prosperity, the numbers undercut those claims and could prompt the Federal Reserve to lower interest rates. The report has also caused the number of Americans who have been out of work for more than six months to reach 1.9 million.
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The latest jobs report revealed a struggling labor market, with only 22,000 jobs added in August and an unemployment rate increase to 4.3 percent, the highest since 2021. This downturn follows revisions to previous months, indicating negative job growth, exacerbated by the administration’s erratic economic policies. Imposing tariffs and causing economic uncertainty created a brutal post-COVID economy, and now, those factors have severely impacted job growth. Moreover, the administration’s response involves blaming others and attempting to downplay negative findings, while also implementing policies that have shrunk the workforce and reduced job opportunities.
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The U.S. trade deficit surged in July, exceeding $78 billion, marking a significant 32.5% increase from the previous month. This widening gap reflects the ongoing impact of President Trump’s tariffs on the global economy, with imports rising nearly 6% as businesses and consumers stocked up ahead of new tariffs. Small business owners have reported increased costs and challenges in selling products abroad due to tariffs on imported components, impacting their competitiveness. Furthermore, tariffs appear to have negatively affected the “Made-in-the-USA” brand, as indicated by declining global favorability ratings for the United States.
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John Q. Hosedrinker