Fed Watch – 8/8/2025

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.

Hi, I’m Lauren Saidel-Baker, and thank you so much for joining me for this August 8 edition of Fed Watch. It has been a roller coaster week for Fed watchers everywhere, starting with last Friday when we got the jobs report. Now we didn’t focus on this last week, so let’s dig a little bit into those numbers.

Headlines are blaring that this was a huge miss, huge weakness, and Fed rate cut odds really increased after that result came out. But if we look at this data, not on a seasonally adjusted basis, as you might know, we really prefer to look at things here at ITR economics on a not seasonally adjusted basis, it takes out some of that skew, some of that kind of normal seasonality, and it also makes those revisions a little bit less impactful. So a not seasonally adjusted basis, we found that that July number, it was actually on the low side, but still well within seasonal norms. We did not see this jobs number as being the bottom falling out from the market. Yes, the data was a little bit soft and we did get some downside revisions to the prior two month releases, but this is not a sharp turn, a pivot in the labor market.

We still see a general balance that is roughly one unemployed worker for each available job opening. That number in June, the most recently available data, it was 1.04 unemployed workers per available job. So that still is a general point of balance. What we do see today though is just lower numbers on both sides, job seekers and job openings. Job seekers, we’ve talked a lot about these demographic trends. What is keeping labor availability just a little softer here in the near to medium term versus on the job hiring side, the job creation side of things, businesses are still contending with a lot of uncertainty. So maybe they’re not going out and firing their workforce, but they’re also not opening the floodgates to a lot of new hiring. What that means is there is still general balance, but at just a much more subdued level, no one side or the other is significantly out of skew.

So we’ll take that jobs number again, the headlines were pretty dismal, and the number was seen as bad enough for President Trump to even fire the commissioner of the Bureau of Labor Statistics. Now, this is a political move, you know, we don’t talk politics from a data validity standpoint, we don’t see the commissioner as being impactful to the actual numbers, that is, they’re not involved in the data preparation or collection on the ground. So both the prior commissioner and any new appointee, we don’t really see that as the thing tilting the scales into how much we would trust this data going forward.

I’m personally a little bit more concerned still about the workforce reductions at the Bureau of Labor Statistics. Those are just causing some problems in terms of data collection. In the most recent CPI data, we saw that over a third of those data points were imputed. So starting to look for other signals, that’s what we’re doing here at ITR Economics. We’re broadening the scope of the types of data points that we typically use just to back up the official government data, which has historically been our gold standard.

But let’s take this back to the Fed. While those jobs numbers did cause a bit of a shift in expectations for a September rate cut, we also got another big headline item with Governor Kugler resigning. Now, she had been expected to run out her term. She was out in January, it would have been, but now President Trump has that additional seat to be filling. We’ve seen some names come across. No decision has been made as of yet. At the end of the day, keep in mind this is just one more seat on that board of governors. With the staggered structure of terms from these governors, there’s no way for President Trump to make a sudden and dramatic shift in policy direction. So we’re still watching those names come through for who will be the next Fed chair, who will fill this new vacant seat. At the end of the day, Fed independence does matter. We say this for either political party. Any politician is going to prioritize short-term economic growth, but the Fed’s job is to remain independent and really look to the long-term for financial stability reasons.

So at the end of the day, where does that leave us on this broad roller coaster ride? Well, we’re watching the data closely, watching even more data points a little bit more closely than we had been. But while a September cut is marginally more likely today than it was one week ago, this 25, maybe 50 basis point change in things, that is not going to be sufficiently stimulative to change our economic outlook. These cuts are not going to be the thing that brings back a glut of new CapEx spending of new business investment. Yes, maybe it will move the needle on on certain highly interest rate sensitive sectors. But at the end of the day, as we look at the broad industrial economy, the manufacturing economy, the fundamentals are still going to win out.

So ride that roller coaster with us, but stay the course in terms of business planning. We’ll be back next week with the next bump in the roller coaster. Until then, thanks so much for joining us on ITR Fed Watch. Thank you.