It appears that the Trump administration is quite perplexed by the early leak of the US intelligence analysis regarding the Iranian raids, and of course, have been backtracking ever since. We now know that more reports indicate that, at best, the Iranian development of a nuclear weapon is a year or two off but may well be a much shorter period since we do not actually know what damage was done to their facility, that is the capacity to produce the products necessary to develop a bomb, and the development of a bomb.
The US economy contracted half a percentage point in the first quarter, more than previously estimated as updated data shows. The US labor market is now beginning to show signs of cracks, although with the decline in jobs by about 140,000 based upon the actual job loss of 33,000 and the anticipated job increase of 115,000, we are in the range of 150,000. Conversely, other reports indicate a job gain of 147,000, however a deeper look at that number indicates that more than half of those jobs came from state and local governments, with an actual decline in the private sector. We also know that payrolls declined in the private sector. So, we’re seeing some significant activity that in fact, remains unclear.
A recent story in the New York Times pointed out that a majority of states find that the largest employer in the state and the largest contributor to their GDP is healthcare. This certainly makes sense given the age of the baby boomers and advances in technology. It also means with the cuts to Medicaid in the Big Beautiful Bill, that there will clearly be a decline in that sector and therefore a decline in many states. Of course, Republicans are saying that that will not be the case as they are only going after waste fraud and abuse. However, when you eliminate people from coverage, and that range is somewhere between 8.7 million and 17 million depending on who’s counting, that reimbursement to hospitals and doctors. Obviously, there will be a decline in revenue without a concomitant decline in expense because the care will still have to be given, in ERs most likely, which is the most expensive.
The brave tough sounding Republicans in the House and in the Seante all caved. They did not have the fortitude to stand by their positions. In actuality, not a surprise. This was all a show to get soundbites on television and say how hard they fought, but yet, not have to take the difficult step of actually voting No.
Mr. Trump and some of his cabinet members promised 90 trade deals in 90 days and to date, more than 70 days in, there have been 2 announced. England and Vietnam, plus some sort of a Chinese deal. Obviously, Vietnam is a relatively small trade agreement. Canada is also in the mix, but in a confusing way and it is hard to tell where Canada is and whether or not it will be again whipsawed by the imposition of tariffs on either July 9th or August 1st. Japan has basically rebuffed much of what Mr. Trump is offering so they remain outside the fold and will likely be hit with heavy tariffs. The uncertainty in the trade arena is certainly contributing to some of the inconsistencies we see in the economic data. You will note that Mr. Trump rarely speaks now about the trade deals that he is working on, has made, or the great progress that they are having with reshoring. Even if Mr. Trump is correct, reshoring is going to take several years to take hold and many, many more years to see any significant reshoring that results in good paying American jobs. And again, as we’ve pointed out, there have to be people who want to work in those jobs and that seems a little thin right now. In other words, this is all hyperbole of the Trump variety with little substance.
In looking at some of the things the Big Bill hit, we find 3,000,000 losing food stamps, 18,000,000 children lost school lunches, and an increase in the deficit of 3.5 trillion which does not include, let me emphasize that, does not include the cost of renewing the tax cuts. The Republicans with a fiscal trick said that number was 0. We all know that is not true, so I think when deficits are counted in the next several years, they will be even higher than 3.5 trillion.
We also saw the dollar decline to 10.5% last month, which is the largest decline on record for the first half of any calendar year. I’d also point out that job openings increased and hiring fell in May, as noted earlier, in the private sector. As Mr. Powell attempts to determine how to proceed with interest rates, all of this confusing economic data will play out in their discussions. I would not want to be a member of the Fed trying to figure out exactly where we are going and whether or not interest rates should be held steady. My vote – hold them steady because we don’t know what horse we are actually on.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
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