29 Sept 2025
Recent economic data indicates persistent inflationary pressures and a growing sense of recession in the services sector. Controversies surrounding the dismissal of the Bureau of Labor Statistics head highlight concerns over data integrity and potential governmental influence on economic reporting.
The latest ISM Services PMI report reveals that prices continue their upward trend, particularly in healthcare, indicating a likely increase in inflationary pressures. New orders have decreased, contributing to a sense of recession within the services sector. Combining this with manufacturing PMI data suggests a continuing probability of recession accompanied by inflationary pressures for the US economy.
The controversial dismissal of the Bureau of Labor Statistics (BLS) head, occurring immediately after a crucial Non-Farm Payrolls (NFP) data release, raises significant concerns. This action creates suspicion that the government may be attempting to control economic data, especially given the BLS head's 45-year tenure of presenting clear and uncontroversial data. Accusations from former President Trump, implying political manipulation of data to harm him, further undermine the integrity and independence of the BLS. Additionally, the data itself is facing criticism due to worsening collection issues, leading to significant revisions, a lower reporting standard, and a lack of a clear method for data time estimation. Such data releases often occur at economic turning points, suggesting a fundamental shift in the economy that current data struggles to reflect accurately; therefore, these revisions require thorough examination.
Recent data indicates a weakening economy, notable because it shows signs of decline without yet signaling a full recession. If these figures had been available before the recent Federal Reserve meeting, economists and analysts suggest the probability of a rate cut would have been significantly higher.
Debate persists regarding a one-step or two-step rate cut at the Federal Reserve's September meeting. Given the Fed's historical pattern of making significant adjustments during rate hikes (e.g., pausing for one month then a 0.5% increase), a 50 basis point (two-step) reduction is plausible. If economic conditions are deemed unfavorable, despite upcoming crucial data releases like NFP, CPI, PPI, and PCE, the Fed is likely to consider such a substantial cut.
Discussion continues regarding the individual who will fill the vacant Federal Reserve governor position, following a recent withdrawal. Former President Trump announced four candidates for various roles, with one senator declining, and hinted at additional nominees. It is widely speculated that whoever secures this specific Fed seat could be a contender for the next Fed Chair. Governor Waller, among the potential candidates, explicitly opposed the Fed's recent decision and advocated for rate cuts, a stance likely aimed at attracting Trump's attention. Waller's strong background and experience within the Fed make him a suitable candidate for the Chairmanship.
Significant discussion surrounds the possibility of Chairman Jerome Powell's early resignation. Many analysts argue that the longer he remains in office, the more the government will seek reasons for his dismissal, thereby increasing pressure on the Fed's independence and ultimately weakening the institution. While consensus generally holds that Powell should complete his term if not for political pressures from the current administration, some suggest that his resignation might be a more appropriate course of action when the Fed's independence is under attack. Opinions on this matter remain contradictory.
The AI revolution exhibits significant unevenness, impacting the stock market. While some technology companies, such as Palantir, have successfully generated revenue from AI, numerous others are still investing heavily in the sector without achieving monetization. This disparity creates concern for the stock market, as some companies remain resistant to leveraging AI for productivity gains, while others are significantly advanced in their AI adoption and revenue generation. Despite ongoing talks about an AI-driven market bubble, fundamental differences between AI and the dot-com bubble make it difficult to definitively declare a bubble. Companies lagging in AI adoption may exert pressure on the stock market, while the burden falls on the fewer, successful AI companies to sustain market optimism. This scenario likely contributes to a summer lull or a range-bound period in the stock market.
Today's retail sales data was released close to previous figures, with details pertaining to June. The Producer Price Index (PPI) data showed that energy prices increased by 3.2%; however, excluding the energy component, PPI actually decreased by 0.1%. The retail sales data received limited market attention because previous month's figures were revised upward, and the June data is considered outdated. Despite this, most sectors, particularly food/beverages and automotive parts, showed notable increases.
Further news, statements, or tweets from former President Trump are anticipated throughout the day.
The sudden dismissal of the Bureau of Labor Statistics head, coupled with controversies surrounding data collection and integrity, suggests a fundamental shift in the economy that official data struggles to capture, signaling a weakening yet not recessionary economic landscape.
| Key Area | Insight |
|---|---|
| ISM Services PMI | Services sector indicates continued inflationary pressures, particularly in prices, and a decline in new orders, suggesting a growing risk of recession alongside inflation for the US. |
| BLS Head Dismissal Controversy | The sudden removal of the BLS head, following a critical NFP release, raises severe concerns about governmental interference with economic data integrity and the independence of key institutions. |
| Economic State & Outlook | Official data points to a weakening economy, yet it does not signal an immediate recession, which is a crucial distinction influencing potential Federal Reserve actions. |
| Federal Reserve's September Policy | Given the Fed's historical precedents for significant adjustments and existing economic conditions, a 50 basis point rate cut at the September meeting is considered a plausible outcome. |
| Fed Leadership & Political Influence | Discussions about filling a vacant Fed governor position and the implications for the next Fed Chair, alongside political statements from former President Trump, highlight increasing pressure on the Fed's autonomy. |
| Jerome Powell's Tenure | Debate persists regarding Chairman Powell's early resignation, with arguments suggesting his continued presence under political attack could further erode the Federal Reserve's independence. |
| AI Revolution in Market | The AI revolution demonstrates an uneven impact, with some companies monetizing AI while many others are still investing without revenue, creating market uncertainty and concerns about a potential bubble. |
| Stock Market Performance | The stock market is likely experiencing a summer lull, with ongoing discussions about an AI-driven bubble, though market dynamics are complex and differ from past bubbles. |
