The economy continues flying at a very low altitude, as tariffs and international strife keep employers on the sidelines. The latest proof: job growth was an anemic 22,000 in August, and manufacturing remained in contraction mode for the sixth consecutive month, according to the ISM’s Purchasing Manager Index, registering 48.7. While new orders grew last month, production contracted.
Meanwhile, while the Personal Consumption Expenditures (PCE) price index increased 2.6% in July, holding steady from the previous month, core PCE (which excludes food and energy costs) rose 2.9%, up from 2.8% in June — the fourth straight month of increases. The question is, which data point will steer the Federal Open Market Committee in mid-September as it ponders a cut in the federal funds rate from its current 4.25 - 4.5%?
And while economic indicators are weak, some economists suspect that much of the economic stall is due to a wait-and-see attitude gauging consumers’ reaction to the new world trade order. "What if companies are poised to start hiring after a policy-driven wait-and-see start in 2025?" posed Stuart Kaiser, Citi's head of equity trading strategy, according to Axios.
Note: The economic policy situation increased in complexity in late August as an appeals court ruled the Administration exceeded its authority in imposing tariffs under the International Emergency Economic Powers Act. The court stayed the tariff regime through mid-October, to allow the government to file an appeal. Yet another case that will inevitably end up at the Supreme Court.
Don’t forget to check out our new quarterly business cycle index here.
(Updated 9/5/25)
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