A dilemma for the Fed. “It is easier to forecast stagflation than live it I real time…” Dealing with the Federal Reserve’s now dueling mandate reveals divisions. kathleenhays.substack.com/p/swonk-sees...

Coming up on Bloomberg at 10 est.

My take on the jobless boom we are riding is here. A rising tide fails to lift all boats… kpmg.com/us/en/articl...

Mortgage winter got about 🥶 Avg age first-time buyers jumped to 40 from 38 in NAR survey, oldest on record back to 1980s. Hard even as some markets hottest post pandemic markets experiencing price drops. Insurance & taxes hurt affordability more than mortgage rates. share.google/XwCFhqj82war...

Working on a new piece laying out why we are experiencing a jobless boom. Research by JP Morgan suggests that AI and related investment in infrastructure accounted for 3/4 of the 1.6% average growth of the first half of the year.

My take on a contensious rate cut by the Fed. Powell waffles on December cut. Dissonance within ranks of the Fed getting louder. Not yet deafening but moving in that direction. Mild bout of stagflation proven easier to forecast than live. Odd press conference. kpmg.com/us/en/articl...

Meant to post this sooner. Inflation hit 3% Y/Y. Not as hot as could have been but still warm. Troubling that 40% of the data are now imputed due to staffing shortages prior to shutdown. kpmg.com/us/en/articl...

This research from the Boston Fed suggests that inflation expectations may becoming unmoored. That means higher inflation is becoming normalized, which could be own self-fulfilling prophecy on a more sustained bout of inflation. Here are key takeaways:

Fed’s Beige Book survey of economic conditions is out. Lots of dissonance for the Fed. The low hire/low fire environment persists, along with pockets of labor shortages.

Powell: We do not have a view on immigration - we take it as it arrives. The changes are larger than expected with only beginning to see the effects. Big economic factor - fewer people to work and pockets of labor shortages are emerging. New people create supply and demand.

Powell embraces “healthy debate” about the tensions we are facing in. When I was an investor, I hated when everyone agreed. Debate at moment within the Fed are some of the richest and should be healthy given we have two things happening at once - inflation & weak employment.

Chair Powell receives the Adam Smith award. Data limited but outlook for employment and inflation not changed. In person Powell emphasizes MAYBE we have seen growth pick up. Learn more dovish than his text, with rising downside risks to employment. BUT evolving outcomes - more caution next year

Prez Anna Paulson, who rotated on to the FOMC voting committee next year, supports two additional rate cuts this year but caution next year. Worries ab employment & risk to low income households. Economy carried by affluent. BUT cautious cuts in 2026.

Halloween scare. Discussion of debt and deficits: AI can’t save us - debt and deficits on unsustainable path & crisis risks rising. Quote of day: “We might find someone who argues we are on a sustainable path, but they would not be qualified to speak on this panel.

Salim Ramji, CEO of Vanguard lays out the need for access to wealth accumulation for individual investors as a key equalizer. Investors do not know what they can spend & how to limit need to borrow or liquidate their 401Ks, which set them back. Leans into fixed incomes markets.

The hallowing out of the middle class and the economy. We are at a precipice. My take here. kpmg.com/us/en/articl...

More on inequality to come. Some recent studies worth thinking about. The age group with the most wealth over time is those over 75. A compounding of financial market returns and the equity in their homes are the primary reason. nber.org/papers/w34131#…

Some level of inequality is expected and aspirational in a market-based economy. Everything from skills, luck and grit can create inequality. Extreme inequality is not and can dampen growth and leave large swaths of the population desperate rather than aspiring.

Revisions to ADP payrolls reveal more weakness in private sector hiring, although the payroll company said the granularity on the Census data required more estimates. The ADP confirms other data on the labor market that is weak.

Why do economists care about inequality in incomes and wealth? 1) Inequality tends to dampen overall economic performance. One of most immediacy effects is on consumer spending. Low-and middle-income households spend a larger percentage of each dollar that they earn when more spending is in…

Wealth has become more concentrated among the top 0.1% - 10% of households. This data is from the @federalreserve Top 10% hold a whopping 67.4% of all wealth in the US as of the second quarter. Bottom 50% hold 2.5% - mostly in their home.

Highly educated women w/children under five are dropping out of the labor force and 2X pace of less educated women, reversing post pandemic trend. My colleague Matt Nestler’s work on what reason reveals escalating childcare costs as a major factor. Women w/high school or less are cutting hours.

New from ADP and Nela Richardson “…And by August 2025, the gap was nearly 5.3, or 530 percent, close to the record hit in May 2025. In short, even though their pay continues to grow faster than that of other cohorts, the lowest-wage workers continue to lose ground” Why do we care?

Powell corralled the cats & achieved an unusual amount of unity amidst a high level of uncertainty about the outlook. The Fed cut by a quarter point, but there was only one dissent by newly appt Gov Miran, who wanted a more aggressive half percent cut.

9/11. 24 years & cancer but I am still here. Time is best shared instead of spent. Random acts of kindness are underrated. Break bread not ties. Be kind; pay it forward. Thank you to those who remembered. Touched. ❤️‍🩹

Producers prices reveal margin compression, consumer prices moving higher. That is what the Fed forecast would happen in 2025. Proven harder to live with increases in inflation & unemployment in real time. Goods and services both risking, with affluent households buoying travel costs.

Birds of a feather no longer flock together. The Fed and whether we are about to see a rate cutting cycle unfold. Debate within the Fed’s leadership is spilling out into the open. kpmg.com/us/en/articl...

The US trade deficit nearly doubled with China in July, the most recent month for data. Read about the US trade situation more widely here in analysis written by senior economist Meagan Martin-Schoenberger at KPMG. kpmg.com/us/en/articl...

Cracks in the labor market are deepening, said Diane Swonk chief economist of KPMG US. #nonfarm #payrolls

Cracks in the labor market are deepening, said Diane Swonk chief economist of KPMG US. #nonfarm #payrolls

The overall labor market is starting to seize up, said Diane Swonk chief economist at KPMG US.

No question they (Fed) will cut a quarter point, said Diane Swonk chief economist with KPMG about the September meeting.

Labor market freezing those w/a job in place, those who want a job out. Long-term unemployment ballooned to highest levels since late 2021. Same with stress measure of unemployment, which jumped to 8.1%. Vacation leave dropped to second lowest August on record & half historic norm. Inequality worse.

Watch @YahooFinance at the top of the hour to hear labor economist @DianeSwonk @KPMG_US explain why the August jobs report came in so weak, and what she sees ahead.

A day to remember my dad who grew up near this beach. He loved the sunsets & the rare moments you could see Chicago. He left this earth this day in 2018. I will always miss you & carry your spirit with me. Be kind; pay it forward. Some things can be too short for this world. ❤️

Powell opens door to calibration in rates in September in Jackson Hole Speech. The challenge the Fed faces is to tame inflation, which has moved up again & been above the Fed’s 2% target for more than four years without too much additional weakening in the labor market.

Locked in and locked out. This article underscores a major structural shift in the economy I have been thinking about for some time now. We are losing mobility & with those shifts dynamism has dropped. www.wsj.com/economy/amer...

Good news. Inflation comes in as expected with more drag from shelter costs. Rents are cooling and hotel room rates continued to plummet in July. The sticking point is the Core CPI, which was up 0.3% but rounded to a 3.1% gain from a year ago. Highest since Feb.

From Wall Street Journal What could go wrong? Heard on the Street: The resilience of individual investors may signal something more than just misplaced optimism as a new generation of “buy the dip” investors is propping up the market

The number of Americans receiving unemployment benefits for at least a week rose to the highest level since late 2021, according to Labor Department data.

Watch PBS Newshour tonight to hear KPMG US chief economist Diane Swonk explain the latest twists and turns in the economic landscape.

Tapped into Ancient Astronomy for this month’s take on the economy. Sirius, the Dog Star, was once beloved to trigger the unbearable heat, lethargy, bad luck and uncertainty…seemed apt metaphor for economy as effects of tariffs start to show.

Listen to KPMG chief economist Diane Swonk explain to the Wall Street Journal why the economy feels OK, but cracks are showing. www.wsj.com/video/series...

Federal workers are down by 81K since the start of the year. Those losses largely reflect retirement amidst a hiring freeze. More to come on that front as severances lapse in the fall. @AtlantaFed had estimated that spillover effects to local ecosystems could hit 1.2M.

The employment cost index rose 0.9% in second quarter, matching the pace of the first quarter. That pushed overall compensation for civilian workers up 3.6% from a year ago, the same as the first quarter. The composition of gains shifted. Wages rebounded but benefits slowed.

ummer heatwave Today’s revisions for PCE index changes the narrative on inflation a bit. Upward revisions show more inflation in the second quarter and in June. The increase was driven by a jump in goods inflation.

Growth whipsawed by mother of all front running cycles. Underlying economy weak with inflation. Tough for Fed.

Wow. GDP whipsawed by tariff front running. Real GDP rebounded at 3% annualized rate in the second quarter after dropping 0.3% in the second quarter. That puts that average for the first half at 1.3%, less than half the 2.8% we saw in second half 2024.

EU tariff deal provides some sense of an end game on where tariffs will land, albeit short on details. The rise in tariffs by year end still stunning from below 3% at start of year to close to 20% by yearend. Markets have been relieved to see an end point in sight but have yet to price costs.

The mother of all front running cycles. Late last year imports starter to pick up, notably from China. The 2018 continued through the next administration but many firms rightly bet that it would escalate via much higher tariffs w/the president’s return. Gains were turbocharged as…