Is the job market still growing?
How happy are US consumers?
After the first quarter, did the economy grow again in the second quarter?
You will receive answers to these questions and more this week. However, most analysts only predict small changes from the previous month. Only exception: GDP. It fell in the first quarter as companies stocked imports ahead of President Donald Trump’s new tariff policy.
As the week closes, tariffs and their impacts could be the biggest problem in the US economy. It’s a big enough unknown, so few interest rate traders hope that Fed Jerome Powell and the remaining traders on the remaining policy-making committee will announce interest rate cuts at 2pm on Wednesday.
Will the Fed cut interest rates this week?
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The chart below may not match the level of detail used by Fed officials, but they still provide valuable insight into the broader economic landscape. Among them is the Consumer Price Index (CPI). This is not the Fed’s preferred inflation gauge, but it is still a closely monitored indicator. A June CPI report released on July 15th showed that inflation continues to rise. This trend could further complicate President Donald Trump’s repeated calls for the Fed to continue cutting short-term interest rates.
How’s the US economy?
What is the unemployment rate in the United States?
The US unemployment rate fell to 4.1% in June. When the July employment report was released on Friday, August 1, the monthly number, representing the percentage of unemployed people and those looking for a job, is expected to return to 4.2%.
What the data shows: Over the past year, unemployment has been relatively stable, hovering a median monthly of 4.1% over the past decade. Economists such as Oxford Economics’ Nancy Vandenheuten speculate that corporate decision makers are being hampered by the uncertainty surrounding tariffs.
Employment is also steadily taking place throughout the year, far below the 10-year median employment rate of 226,000 people. Analysts expect Friday’s employment report shows the economy added around 100,000 jobs in July.
How big is the US economy?
The US economy produced roughly $30 trillion in the first quarter on an inflation-adjusted annual basis, but real GDP, the value of goods adjusted for inflation, fell 0.5% in the quarter as imports subtracted from GDP jumped more than 50%.
What the data shows: Economists predict that the economy will say it grew in the second quarter when the Bureau of Labor Statistics released its report on Wednesday. Much of that “growth” could come from a decline in spending on imports.
How high is inflation?
Inflation, a sustained rise in prices across the economy, reached a median of 2.3% in April for 10 years. Fed policymakers say they can “make sound decisions regarding savings, borrowing and investments” because they prefer 2% or “low and stable” inflation.
What the data shows: Inflation has dropped significantly, but remains above the 2% covered by the Fed. The annual inflation rate, measured by the consumer price index, rose from 2.4% in May to 2.7% in June. The July CPI report will be released on August 12th.
Are consumers still buying?
US consumers make up $7 for every $10 spent on the US economy. The median monthly increase in retail sales has been around 0.4% over the past decade. That’s not much until you think that the 0.6% increase in June would amount to an additional $4.6 billion expenditure.
What the data shows: It purchased $720 billion worth of the US economy in June on a seasonally adjusted basis. This was a big swing from a -0.9% decline in May. We will check on August 15th to see if they continued their days in July.
Why are gas prices falling?
Buying gasoline is not the majority of the budget, but it is difficult to overlook the big numbers outside every station, and there is no emotional response to their fluctuations. It can have a psychological impact on our spending. One report showed that recent improvements in consumer sentiment are closely correlated with lower gas prices.
What the data shows: We are in the middle of the summer driving season when gasoline prices are usually peaking, but we have a stable normal gas of just under a few cents below last year’s prices.
So, how confident are US consumers now?
The University of Michigan measures US consumer sentiment each month. The index went 101 ahead of the February 2020 pandemic, lowering as 50 when inflation peaked at 9.1% in June 2022.
What the data shows: Since it fell from the bottom in May, consumer sentiment has ceased. Michigan will release its final measure of July sentiment on Friday.
The current mortgage rate is still rising
The Fed’s interest rate determination does not directly affect mortgage rates, but it spread through the economy, making mathematics even more difficult for home buyers.
What the data shows: According to the Freddie Mac’s weekly mortgage rate survey, since November, mortgage rates have moved into a relatively narrow range (6.6% to 7%), well above the 10-year median. Prices have fallen significantly from the November 2023 peak of 7.8%.
The higher the mortgage rate, the heavier the home sales.
Existing home sales are the majority of homes sold each month. NAR reports monthly sales at a seasonally adjusted annual rate. Annual home sales peaked in 2005 at 708 million units. In September 2024, that number fell to 3.9 million units. It was lower than annual sales after the financial crisis.
What the data shows: Not surprisingly, existing home sales have been reduced as mortgage interest rates rose. At the same time, the average home prices are also rising due to fewer homes on the market. The speculation is that homeowners don’t want to sell low-cost mortgages and give up.
So, how do investors see this information?
The country’s stock market is not an economy, but their movements reflect the combination bets investors are making in the economy. Investors have a keen eye for data points like the chart above. A significant change in our spending, or even thought, could potentially affect the company’s profits in the coming quarter.
What the data shows: After reducing DIP in early April due to tariff-related uncertainty, the S&P 500 has steadily risen, reaching several new highs since June. The upward trend could suggest that, as investors once feared, they are confident that the ultimate tariff contract will not weigh down the economy.
