Weekly Research Briefing: So Many Pickles

As Powell explained, the Fed is grappling with conflicting information and heightened uncertainty. Economic growth has slowed in recent months, the pace of hiring has cooled and data published after the Fed’s decision showed that the unemployment rate edged up in July. Even so, inflation continues to run faster than the bank’s 2% target (core inflation was 2.8% in the year to June), it’s too soon to say how much the administration’s new tariffs will push up prices, and last month’s jobless rate of 4.2% still squares with policymakers’ “maximum employment” mandate.

In other words, there was no urgency to alter course. At the Fed’s next policy meeting, six weeks from now, things should be clearer.

While investors had expected no immediate change in the policy rate of 4.25% to 4.5%, many had hoped for a clearer signal of a cut next time. Yet, as Powell explained, it’s impossible to know how the calculation will shift — whether the risk to prices from tariffs will outweigh the risk to jobs from a policy rate that’s “modestly” higher than neutral. As things stand, the Fed had no good basis for hinting what it might do next time.

“There’s a lot of consumer anxiety,” said Dirk Van de Put, chief executive of Mondelez International, which makes Oreo cookies, Ritz crackers and Cadbury chocolate. Global sales of snacks rose last quarter, but U.S. sales fell a lot.

After spending lavishly through the post-pandemic years on everything from home improvement to travel, U.S. consumers find themselves in a summer of economic uncertainty. Beef prices are the highest on record. Daily latte habits now face as much as an additional 50% tariff on coffee. Ford Motor, which makes the most popular vehicle in the U.S.—the F-150 truck—said the Trump administration’s flurry of trade deals have heaped a punishing level of duties on the automaker. It has already raised prices on some cars and trucks to help cover the added costs.

Shoppers, wary about inflation, job expectations and their personal finances, are dialing down their spending to focus on the essentials and forego the extras, executives said. The company behind Invisalign said patients are putting off orthodontic treatment and choosing metal braces over pricier clear alternatives.

P&G, which sells daily-use items such as Tide, Charmin and Pantene, said it is noticing signs of slower spending across essential products, too.

Consumers on both ends of the spectrum—low income and higher income—are reacting to the current volatility they are experiencing, P&G Chief Financial Officer Andre Schulten said, “We see consumption trends consistently decelerating.”

@KevRGordon: 10 mentions of "tariff/tariffs" in the ISM Manufacturing comments section in July

Friday’s jobs numbers reinforced our view that US growth is near stall speed—a pace below which the labor market weakens in a self-reinforcing fashion. So far, the unemployment rate has only risen modestly, from an average of 4.1% in Q1 to 4.248% in July. But our estimate of underlying monthly job growth—which is based on moving averages of real-time gains in the establishment survey and the household survey—has plummeted from 206k in Q1 to just 28k in July, well below our 90k estimate of the current breakeven pace. The slowdown reflects weakness in both surveys for July as well as downward revisions to the establishment survey for May and June.

"You do see a slowing in job creation, but also a slowing in the supply of workers. So you’ve got a labor market that’s in balance, albeit partially because both demand and supply for workers is coming down at the same pace. And that’s why the unemployment rate has remained roughly stable. Which is why I said there – we do see downside risk in the labor market...You know, the main number you have to look at now is the unemployment rate." – Fed Chair Jerome Powell

Timiraos: We received a payroll number this morning. Can the labor market still be described as solid?

Williams: Obviously, I would start with the point I like to make, which is we have to look at the totality of the data. So when I think about ‘Is the labor market solid?’ I would say yes. And that’s really looking at a wide range of indicators of the level or the state of the labor market.

So if you look at the unemployment rate, which is 4.2%, basically where it was a year ago, if you look at a whole bunch of other indicators that we think captures the state of labor market, whether it’s unemployment claims, whether it’s job vacancies, quits, even the surveys, which I’ve always found useful of looking at how hard is it to find a job, how hard is it to fill a position, those are all or generally still indicating a solid labor market. And so I still think that’s true.

I do think that in looking at the payroll numbers, it’s definitely showing the moderation is slowing in the pace of job gains. And you see that in the private-sector numbers, which have slowed quite a bit, slowed in a way that we’ve seen before at different times including last year. But again, I would say the state of the labor market is one [that] still I would describe as solid, but we’re definitely seeing [a] slowing of job growth.

The challenge in interpreting—that is, we know that there’s a slowing of the growth of labor supply, especially due to the slower labor growth through reduced immigration—and other factors, I think, are very important, affecting labor supply growth relative to the last several years. But we’re also seeing a slowing of labor demand.

B of A: “.. inflation is stuck above target, with risks of a larger and more persistent shock after the latest tariff hikes. The Fed is still missing by a lot more on inflation than its labor mandate.”

@NickTimiraos: Core goods is up 3.7% on a three-month annualized basis, the highest in nearly three years. Services continue to dis-inflate.

"Cumulative [homeowners] insurance rate increases since 2019 are as high as 80% in some states, and over 50% in the fastest growing parts of the country (e.g. Fl and Tx)."

President Donald Trump on Friday said he ordered the dismissal of the official in charge of compiling basic statistics about the U.S. economy after the release of a soft jobs report that showed lackluster July employment growth and revealed large downward revisions for hiring in May and June…

Trump, who announced McEntarfer’s ouster on social media, criticized her as a Biden appointee overseeing what he falsely called “faked” jobs numbers. He said he would replace McEntarfer with someone “more competent and qualified.”

Without evidence, he alleged the jobs numbers had been manipulated for political purposes…

“The president is just shooting the messenger, it’s not more complicated than that,” said Doug Holtz-Eakin, president of the right-leaning American Action Forum and a former director of the Congressional Budget Office. “The data that were released today conformed in every way to the standards of past employment reports.”…

One BLS employee, who spoke on condition of anonymity because they fear retaliation for speaking to the media, said that McEntarfer is well liked, good at her job, and widely viewed as non-partisan among agency staffers.

“I have not met anyone that dislikes her,” the staffer said. “She’s straight up with the fact that this is an apolitical agency. That we produce data; we don’t produce politics.”

Concerning news from the BLS

Friday’s presidential removal of Bureau of Labor Statistics (BLS) Commissioner McEntarfer presents risks to the conduct of monetary policy, to financial stability, and to the economic outlook. Potential politicization of the Fed has been much discussed over the past several months, but the risk of politicizing the data collection process should not be overlooked. To borrow from the soft-landing analogy, having a flawed instrument panel can be just as dangerous as having an obediently partisan pilot.

Moreover, one should not be under the illusion that the proliferation of private sector “big data” indicators over the past decade can substitute for high quality federal data. In almost all cases these indicators are benchmarked to the federal data, as private sector data are very rarely nationally representative. And, as users of those data sets know, even small changes in the market share of private data providers can distort the signal on the national economy (a non-issue for federal data).

The $2.1 trillion market for TIPS is built on a foundation of trust in the construction of the CPI data, which is produced by the BLS. As such, the integrity of this data is at least as important as the employment data. Here, even seemingly innocuous technical changes can matter. For example, calculating CPI using an HICP concept (after all, the Europeans do it) would shave about 20 basis points off annual inflation.

It appears that McEntarfer’s dismissal was effective Friday evening, and that William Wiatrowski—a career civil servant—will serve as acting Commissioner. There is no word yet on who the White House will choose to replace McEntarfer. So given the timing, it seems unlikely that the new commissioner could be in place as soon as the July CPI report, which is released August 12th.

Don't shoot the messenger

The US public statistics represent the gold standard. Calling them into question just because they tell you something you don't like undercuts market confidence.

This is the same BLS that published the inflation reports earlier in the year that the administration touted. This is the same BLS that published the rise in motor vehicle manufacturing employment that the administration touted with a "see! it's already working!" The BLS also notes that much of the downward revision to employment today was in the public sector. I thought we wanted that?

More importantly, it is not just the BLS that is reporting weaker labor markets; private surveys confirm this insight too. We just had a really weak ISM manufacturing employment index. Is President Trump going to fire the head of the Conference Board with the Labor Differential at lows? The public is not exactly enthusiastic about the jobs market right now.

At any rate, if the administration wants to do something about this, the best thing to do would be to fund our statistical agencies and focus cost-cutting efforts elsewhere. In the meantime, my sincere hope is that Scott Bessent, our great Treasury Secretary and noted adult, tells the President that this is a fruitless course of action.

If they are going to Make America Great Again, they won't be able to do it just on vibes, they'll need the data to back them up!

For over a century, the integrity of U.S. economic data has rested on a fragile but vital precept: independence. Agencies like the Bureau of Labor Statistics, the Census Bureau and the Bureau of Economic Analysis operate under the executive branch, but their mandates are to serve the truth, not the administration. Their job is to report what is, not what the White House wishes were true.

Yes, legally, the president can fire the bureau’s commissioner. The position is not protected by statute. But like many pillars of democracy — free press, fair elections, impartial courts — what protects the Bureau of Labor Statistics is not law but a common set of assumptions about how government should function. A basic idea that says: Presidents don’t manipulate the scoreboard.

Past presidents respected this boundary. Ronald Reagan didn’t fire the head of the agency when it reported double-digit unemployment during his first term. Bill Clinton, George W. Bush and Barack Obama took bad news from official statistics on the chin. Mr. Trump has charted a different course. This is not his first tangle with truth. He has questioned unemployment numbers and dismissed Covid fatality figures as inflated. Removing the Bureau of Labor Statistics chief because the numbers were off narrative is a new breach. It is not only attacking the game; it is removing the referee.

Trying to intimidate the Bureau of Labor Statistics is the policy equivalent of smashing your bathroom scale. It’s banana republic stuff, and it won’t work any better in the United States.

On the margin, a few voters might be fooled into thinking economic conditions are better than they really are. But the trick can work only so far — as the Biden administration found out when it tried to gaslight voters into believing that everything in the White House was going just great. The people most susceptible to the spin fall into two groups: the president’s base, who don’t need it, and high-information voters who pay close attention to economic data, many of whom will understand how the numbers have been juked, and most of whom probably already know which side they’re voting for next time around.

Everyone will be paying closer attention to what’s happening in their own experience. Are wages rising? Are their friends and relatives being laid off? Is it easy to find another job? If they’re getting the wrong answers to these questions, it really doesn’t matter what numbers the bureau is putting out.

That is, it doesn’t matter politically. Bureau of Labor Statistics numbers matter tremendously in other ways. They feed into a great deal of market activity as well as vital social science, both of which are possible only if the numbers are trustworthy. The statistics are also, of course, one of the president’s essential guides to economic policy.

This guide is now telling the administration that it is moving in the wrong direction. A wise politician would take heed and course-correct to avoid bumbling deeper into the woods. Instead, Trump wants to shoot the messenger so his supporters won’t realize he’s led them astray.

@RenMacLLC: So far this year, AI capex, which we define as information processing equipment plus software has added more to GDP growth than consumers' spending.

For years, investors loved those companies because they were “asset-light.” They earned their profits on intangible assets such as intellectual property, software, and digital platforms with “network effects.” Users flocked to Facebook, Google, the iPhone, and Windows because other users did. Adding revenue required little in the way of more buildings and equipment, making them cash-generating machines.

This can be seen in a metric called free cash flow, roughly defined as cash flow from operations minus capital expenditures. It excludes things such as noncash impairment charges that can distort net income. This is arguably the purest measure of a business’s underlying cash-generating potential. Amazon, for example, tells investors: “Our financial focus is on long-term, sustainable growth in free cash flow.”

From 2016 through 2023, free cash flow and net earnings of Alphabet, Amazon, Meta and Microsoft grew roughly in tandem. But since 2023, the two have diverged. The four companies’ combined net income is up 73%, to $91 billion, in the second quarter from two years earlier, while free cash flow is down 30% to $40 billion, according to FactSet data. Apple, a relative piker on capital spending, has also seen free cash flow lag behind.

For all of AI’s obvious economic potential, the financial return remains a question mark. OpenAI and Anthropic, the two leading stand-alone developers of large language models, though growing fast, are losing money.

‪@seanbrodrick.bsky.social: U.S. electricity demand hits an all-time high.

‪"Turning to IPOs in the second quarter, we welcomed 38 new operating companies to Nasdaq. Importantly, the strong performance of recent listings, especially of large-cap companies has raised optimism on the IPO outlook for the remainder of this year and into 2026." – Nasdaq CEO Adena Friedman

‪Figma closed its first day of trading on Thursday with a market capitalization of nearly $68 billion, more than triple what it would have gotten in a failed sale to Adobe announced in 2022. That jump in value is one for the ages — and gives Figma more firepower to strike its own takeovers.

The company’s stock soared 250 percent on Thursday, closing at $115.50. It priced its I.P.O. at $33 a share — an eye-watering “pop,” Wall Street lingo for how much a stock jumps on its first day of trading.

Figma’s pop is the biggest for a billion-dollar I.P.O. in at least 30 years, according to Renaissance Capital. Only two other offerings that raised at least $500 million broke 150 percent: Circle, the stablecoin issuer that went public in June (168 percent), and Palm, the onetime maker of personal digital assistants, at the height of the dot-com boom in 2000 (150 percent).

US leveraged-loan issuance skyrocketed in July as junk-rated borrowers flocked to the market largely to reprice debt, saving companies millions in interest expenses. July set a fresh record with $222.2 billion in loans launched, surpassing the prior $206.7 billion high set in January, according to data compiled by Bloomberg. During the month, more than 180 new leveraged-loan tranches came through the market, the data showed.

Late summer is typically one of the slowest times for dealmakers. Not this one.

A sudden rebound in corporate tie-ups has bankers and lawyers scrambling. Vacation homes are sitting empty, families are being left in the lurch—and dealmakers are more energized than they have been in years.

The past week alone was the highest-volume week for mergers and acquisitions for U.S. companies since 2021, according to LSEG.

“There’s a lot of dialogue taking place on large transactions that had been a glimmer in people’s eyes for a long while,” said Tony Kim, co-president of Centerview Partners. He said this is likely going to be the busiest August the firm has had in years…

One banker said his wife and young children are in Europe without him. He originally planned to join them for most of August but now has a packed calendar of deal pitches. Another was hoping to check on the progress of a new beach home she is building in the Florida Panhandle but sent her husband down instead.

Executives and advisers attribute the renewed confidence to strike deals to the relatively strong economy, despite some hiccups, and expectation of lower rates. A flurry of trade pacts out of Washington added momentum.

“You have the right formula now for increasing M&A activity,” said Frank Aquila, a senior M&A partner at Sullivan & Cromwell. He expects things to be busier than usual in August and even busier after Labor Day. “Luckily, I took an early vacation this year, so I’m ready,” he said.

Our Co-CEO, Erik Hirsch, joined Bloomberg’s Masters in Business podcast, where he shared his professional journey, the evolution of Hamilton Lane and the shifting dynamics of the private markets landscape—including the future of private credit, private equity, and the growing role of retail investors. As co-CEO, he is responsible for the firm’s strategic direction and operations. Erik is also Vice Chairman and a trustee of the University of Virginia’s College Foundation, and serves on the board of the Philadelphia 76ers Youth Foundation. (July 31, 2025)