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August Employment Reports and more ?4

12:37 05-Sep-25

One wonders who Trump will fire today...

It's amusing, yes, but more seriously, I expect his narrative about this will be that the Fed acted too late and it's their fault.  We'll see how much that actually bolsters his case for eroding Fed independence and enabling my Volcker scenario.

It didn't take long for that prediction to manifest in social media, and I'll follow up with some trade notes detailing how this plays out in the market.  The initial American dollar weakness noted below has developed a notable exception in its Canadian counterpart, in what looks like a somewhat delayed reaction to an even worse jobs report north of the border.

The preference for safe high yield picks in the main service is now being validated, as what it wrote back in February comes to pass:

This will probably lead the supposedly independent Fed to crumble to political pressure and initially cut rates, but I think no matter what choices it makes, stagflation is the best possible outcome.

Indexes will be harmed in this scenario, which is made all the more likely by the political differences that will continue to exacerbate trade wars.  The latest example is the EU fining Google almost €3b over the advertising monopoly that CrowdWisers reminded is still pending in America, and more important than the Mehta ruling.  Commodities also offer even less protection than usual as oil takes yet another step down the road this service has long predicted, in the face of OPEC+ pumping what it can while it can.

As feared, the job market cratered further in August, adding just 22K roles, which is less than a third of what was expected.  The unemployment rate rose to 4.3% and hourly earnings rose 0.3%, both  as expected.  The Participation Rate ticked up a tenth to 62.3%, while the Employment Population Ratio remained unchanged at 59.6%.  According to FedWatch, market participants had already been completely sure of a quarter point cut a week from Wednesday, and are now beginning to price in a 2% chance of a half point cut.  Accordingly, American market futures have remained positive and the dollar is weaker across the board.  As this service has long projected, the question will be what happens to inflation if the FOMC starts making such larger cuts.

We also got news of immigration agents raiding a Hyundai plant in Georgia yesterday, detaining about 450 people and stopping work there.  South Korea is being cautious in its response, but such actions and continued tariff uncertainty should slow any efforts to free up the job market, thereby increasing the chances of a Fed overshoot.

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