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Latest Economic Report Is Another Blow To Biden-Harris

By Updated: Commentary

In August, inflation fell to its lowest level since February 2021, according to a Labor Department report released Wednesday. However, a key inflation measure came in higher than anticipated, suggesting the Federal Reserve might implement a quarter percentage point rate cut, handing more bad economic news to the Biden-Harris administration. The consumer price index, which tracks the cost of a wide range of goods and services across the U.S. economy, rose by 0.2% for the month, matching the Dow Jones consensus forecast, as reported by the Bureau of Labor Statistics. Overall, however, prices remain much higher than when then-President Donald Trump left office.



“That put the 12-month inflation rate at 2.5%, down 0.4 percentage point from the July level, slightly below the estimate for 2.6% and at its lowest level in 3½ years,” CNBC reported. “However, the core CPI, which excludes volatile food and energy prices, increased 0.3% for the month, slightly higher than the 0.2% estimate. The 12-month core inflation rate held at 3.2%, in line with the forecast. The slight uptick in core CPI keeps the Fed on defense against inflation, likely negating the probability of a more aggressive interest rate when policymakers meet next Tuesday and Wednesday.”

Seema Shah, chief global strategist at Principal Asset Management, told CNBC: “This isn’t the CPI report the market wanted to see. With core inflation coming in higher than expected, the Fed’s path to a 50 basis point cut has become more complicated. The number is certainly not an obstacle to policy action next week, but the hawks on the committee will likely seize on today’s CPI report as evidence that the last mile of inflation needs to be handled with care and caution – a formidable reason to default to a 25 basis points reduction.”

Lisa Sturtevant, chief economist at Bright ML, noted: “Although inflation has eased, it does not mean that the prices of things that people buy have actually fallen. It just means that prices are not increasing as fast. In fact, U.S. consumers now are paying more than 20% more for goods and services than they were before the pandemic.”

The U.S. economy, meanwhile, added fewer jobs than anticipated in August, signaling a slowing labor market and potentially setting the stage for the Federal Reserve to reduce interest rates later this month, along with bad news for Kamala Harris. Nonfarm payrolls increased by 142,000 in August, up from 89,000 in July but falling short of the Dow Jones consensus forecast of 161,000, according to a report from the Labor Department’s Bureau of Labor Statistics released on Friday, according to CNBC. At the same time, the unemployment rate ticked down to 4.2%, as expected, but there is more to that number than meets the eye.

The labor force grew by 120,000 in August, contributing to a tiny percentage-point drop in the unemployment rate, although the labor force participation rate remained steady at 62.7%. An alternative measure, which includes discouraged workers and those working only part-time jobs, rose to 7.9%, or the “real” unemployment rate — the highest level since October 2021. The household survey, which calculates the unemployment rate and tends to be more volatile than the establishment survey, indicated an employment increase of 168,000. However, the growth was predominantly in part-time jobs, which rose by 527,000, while full-time employment decreased by 438,000.

Although the August job numbers were near expectations, the previous two months saw significant downward revisions. The Bureau of Labor Statistics adjusted July’s total down by 25,000, and June’s figures were revised to 118,000, a reduction of 61,000. These reductions come after the Biden-Harris administration admitted that real job growth over the past couple of years was nearly 900,000 fewer than previously reported. “I don’t like this a whole lot. It’s not disaster, but it’s below expectations on the headline, and what really bothers me is the revisions,” Dan North, senior economist for North America at Allianz Trade, told CNBC. “This is certainly going the wrong way.”





Disclaimer: This article may contain commentary which reflects the author’s opinion.