Federal Reserve Chair Jerome Powell began a capitulation to the appointments warfare and lawfare from the White House, by stating in his Aug. 22 Jackson Hole speech, that “circumstances may warrant” interest rate cuts, perhaps “to begin in September,” supposedly to buck up failing national employment. Half of Powell’s board was already prepared to vote for one, thanks to two additions by President Trump this year—Michelle Bowman as Governor for Bank Supervision in June, and Trump’s economic advisor/hedge fund libertarian Stephen Miran in August.
In fact, the September FOMC vote may still be a fight over the interpretation of the August reports on inflation and non-farm employment to be published in the first half of September. But few will know how much those reports have been “reshaped,” shall we say, given that Trump fired the head of the Bureau of Labor Statistics (BLS) after the July report, and replaced her with a billionaire-versteher from the Heritage Foundation. The President will want low inflation and middling new employment reported, in order to get an immediate half-point rate cut or a commitment to a steady series of cuts.
Bloomberg News on Aug. 23 carried an anecdotal account of Wall Street firms deciding to turn, for data on jobs, layoffs, business investment and outlook, etc., to other sources than the, perhaps captive, BLS. This will only compound the fact that BLS monthly employment reports have been deteriorating for years and have already become inscrutable.
President Trump is thus close to achieving the aims of the chairman of the Council of Economic Advisors Stephen Miran, the dreamer of “Mar-a-Lago Accords” to devalue the dollar. Trump appears close to bringing on a recession; he’ll be getting low interest rates; and the dollar has already dropped 10% against its index this year. Will America now return as a manufacturing superpower, as promised?
Despite all the vaunting reports of massive investments in the sector, manufacturing employment is continuing to fall. Tariff inflation may be brief, but it will hurt. Hiring for new jobs is at a low level, as is capital investment, and the housing market remains frozen. Interestingly, the Democrats are overheard starting to shift from, “Dictator Trump is violating all our laws and rights!,” to “Dictator Trump is trying to hide his economic failure by violating all our laws and rights!”
