Core inflation is running ~1 pp ABOVE Fed’s target. The reason to look at inflation & yet still cut would be BECAUSE you think inflation is being temporarily boosted by tariffs. If Miran doesn’t think it’s tariffs that are boosting inflation, surely that would make him MORE worried about inflation??

Core inflation is running ~1 pp ABOVE Fed’s target. The reason to look at inflation & yet still cut would be BECAUSE you think inflation is being temporarily boosted by tariffs. If Miran doesn’t think it’s tariffs that are boosting inflation, surely that would make him MORE worried about inflation??

In late 2024, many worried that Trump’s immigration policy would mean massive labor shortages & wage (& thus price) inflation. That would have meant output was above potential & the Fed would need restrictive policy. 1/4

If Trump wins SCOTUS case, he could claim cause to fire a Fed gov & gov couldn't serve while courts decide if there's really cause. (Cook's suit on that still open.) Yes, big deal. But even if he loses this, new reality for Fed officials unchanged: Trump will come after them with everything he has.

Since immigration’s effect on job growth is in the news: @taraelizwatson.bsky.social & @stanveuger.bsky.social and I explain how breakevens are affected by current immigration policy. There’s lots of uncertainty but my preferred estimates from the paper are in this table. www.aei.org/wp-content/u...

So, UI data will likely lead to downward revision of 0.9m to March 2025 employment level. In spirit of "maybe other data already reflected in policy pointed to a big revision": 3/25 emp (in CES) is running 1.6m higher than what household survey suggests. This revision would close much of that gap.

Reupping this @bencasselman.bsky.social @colbylsmith.bsky.social @nytimes.com piece from July that lays much of this out. www.nytimes.com/2025/07/02/b...

Reupping this @bencasselman.bsky.social @colbylsmith.bsky.social @nytimes.com piece from July that lays much of this out. www.nytimes.com/2025/07/02/b...

Many worried Trump’s immigration policy meant labor shortages & wage inflation, w/ presumably much lower UR. Co-authors & I argued ⬇️ immigration also ⬇️ spending & labor demand. Add tariff policy effects ➡️ labor demand & supply are about in balance. This labor mkt likely can’t manage much more demand

My posts have been too wonky so I‘ll say it plainly: This jobs report is healthy. It doesn’t mean a “worrying slowdown” or a recession. Despite the cognitive dissonance, a low UR/low job growth world will be our version of a healthy labor market for years to come under current immigration policy.

With @taraelizwatson.bsky.social and @stanveuger.bsky.social we explain how breakevens are affected by current immigration policy. There’s a lot of uncertainty but my preferred estimates from the paper are in the table here. www.aei.org/wp-content/u...

With immigration policy as it is, we need to radically adjust our expectations of the employment report. The reason that the unemployment rate can be at a low 4.3% with an increase in jobs of only 22,000 is because 22k is now a healthy payroll increase. And, that number is only going down.

The workers who are quitting accommodations and food services (eg, hotels and restaurants - disproportionately staffed by immigrants) are not being replaced. Here's job openings.

I think we're seeing evidence of ⬇️immigration & ⬆️deportations in the accommodation & food service sector. Seems we were at stable 550,000 monthly quits, then March to July: an astonishing extra 610,000 quits. The sector has fewer people to serve, helping to explain why wage growth remains modest.

The Bureau of Labor Statistics projects job growth will average 43,000 a month over the next decade cepr.net/publications... Few immigrants mean fewer workers.

Amplifying @econberger.bsky.social’s point. Waller isn’t right that expected ⬇️ revision to avg employment from 3/24-3/25 suggests weaker job growth in recent months let alone negative. New birth-death model might mean moderate ⬇️ revision, but would leave recent emp growth near my breakeven estimate.

Amplifying @econberger.bsky.social’s point. Waller isn’t right that expected ⬇️ revision to avg employment from 3/24-3/25 suggests weaker job growth in recent months let alone negative. New birth-death model might mean moderate ⬇️ revision, but would leave recent emp growth near my breakeven estimate.

It's remarkable to me that markets aren't pricing in monetary policy being set to achieve the goals & whims of the President, who has been clear he wants lower rates because he thinks that will save federal interest costs (true until the day infl expectations rise, pushing interest costs up wildly).

It's remarkable to me that markets aren't pricing in monetary policy being set to achieve the goals & whims of the President, who has been clear he wants lower rates because he thinks that will save federal interest costs (true until the day infl expectations rise, pushing interest costs up wildly).

What Trump is doing is irresponsible, but … In the spirit of assessing how bad things are and aren’t: not a lawyer, but it’s my reading that Trump has the prerogative to say he is firing a fed governor for cause. Then, if that governor sues, courts decide whether there is a legal basis for cause.

2 things to scream into the abyss re Governor Cook 1) to those who have been stressing legal constraints on Trump re Powell: Trump can create chaos without clear legal authority & without any process. 2) please don’t say - oh this will get really bad if he nominates x or y. It is really bad now.

Here’s the thing. As bad as Antoni is, the real damage was done when Trump fired McEntarfer. You think a qualified pick would make it all OK? Any pick would be perceived as in Trump’s pocket. And, since BLS staff is so good, bigger worry is subtle bias & public perception than outright data cooking.

Immigration! I don't see recession in this report. UR has moved sideways for a year at a low rate, meaning labor market health. With very low labor supply growth these are the sort of payroll numbers we'll see for the next *few years*. Juicing labor demand (say w/lower FFR) would raise inflation.

Immigration! It may well be that this is what a healthy labor market in the US looks like now. From @taraelizwatson.bsky.social, @stanveuger.bsky.social & me: www.aei.org/wp-content/u... Labor supply growth has come to a screaming halt. This is the emp growth the US can sustain right now.

The slowing in applications you see in this figure in May 2025 & the much higher denials rates under Trump are a strong sign labor supply growth will step down in coming months. That will mean a "good"/"not recessionary"/"full employment" monthly payroll number will be 10k to 40k in not too long.

Why do I think - even though immigration has significantly slowed - recent immigrants (those who came before Trump 2.0 and before summer 2024 changes in the rule) still pushed up labor supply in the first half of 2025? See this picture. Work permit applications were crazy high from Jan to April.

Emp growth has been ~150k a month Apr-June without a worrying amount of wage pressure. How's that possible? Immigrants who arrived since 2022 are still entering the labor force. But, this labor supply boost is ending. A "good" jobs number in coming months will be much lower, maybe ballpark of 30k.

One of the AEI report's authors, @wendyedelberg.bsky.social, argues the Fed's first assumption in the event of a slowdown should be that it reflects supply, not demand. But “Good luck with telling people that a payroll growth figure of 30,000 is nothing to be worried about."

How big an issue could this be? A new report from AEI estimates that by the end of this year, the breakeven rate could fall as low as 10k jobs/month. That means job growth could slow all the way to 50k or below and the labor market could actually be getting *tighter.* www.aei.org/research-pro...

So I agree with @wendyedelberg.bsky.social @stanveuger.bsky.social @taraelizwatson.bsky.social that actual net immigration in 2025 is almost surely lower than the Census 1.2-1.4m implication, and probably dramatically lower and possibly even negative. www.aei.org/research-pro...

AEI/Brookings study finds Trump II immigration policy will reduce GDP growth by 0.3–0.4 %age points in 2025, put significant downward pressure on growth in labor force and employment. Monthly payroll employment growth could be near zero or negative in the next few years. www.aei.org/research-pro...

ADP (no means a perfect read) suggests net LOSS of 33K jobs in June. But, my recent report w/@taraelizwatson.bsky.social & @stanveuger.bsky.social: www.aei.org/research-pro... explains how immigration policy will dramatically reduce what is a "good" number. Could fall to 10k a month later this year.

Report out w/ @taraelizwatson.bsky.social & @stanveuger.bsky.social: www.aei.org/wp-content/u.... We show what current immigration policy means: Our “low” scenario & indeed much of the expected range shows negative net migration. As July 4 approaches: What kind of country do we want the US to be?

Joint AEI/Brookings report by @wendyedelberg.bsky.social et al estimates net immigration will be zero or negative this year. That's lower than what Wall Street economists have and I'd guess it's because in published estimates, Wall Street economists are being overcareful. www.aei.org/research-pro...

Or maybe they do understand the consequences for the budget & are just super keen for a debt ceiling showdown in a few years to hold hostage everyone on the other side of an obligation owed by the federal government: social security recipients, Treasury holders, soldiers and federal workers & more.

Or maybe they do understand the consequences for the budget & are just super keen for a debt ceiling showdown in a few years to hold hostage everyone on the other side of an obligation owed by the federal government: social security recipients, Treasury holders, soldiers and federal workers & more.

You know how I know that Sen Rs don't appreciate what their fiscal policy goals mean for the budget? They're on track to raise the debt ceiling a measly $5 trillion. Instead, the tax & spending course they'd commit the U.S. to would require roughly $25 trillion in borrowing over the next decade.

Rappeport has nice debt ceiling piece www.nytimes.com/2025/06/19/b... & quotes Sen Paul: “Don’t have the Republicans own this monstrous debt.” But, bill's supporters do own the future of fiscal policy & should raise ceiling *$24 trillion* to finance it. I write www.washingtonpost.com/opinions/202...

The latest from @wendyedelberg.bsky.social of @brookings.edu: wapo.st/4jHDM1q

"What Congress is proposing to do today feels particularly egregious," @wendyedelberg.bsky.social of @brookings.edu writes. wapo.st/4jHDM1q

I wrote a @washingtonpost.com op-ed: www.washingtonpost.com/opinions/202... The GOP should raise the debt ceiling by $24 trillion. Their strategy in OBBBA is to set in motion that much in deficits through 2034 but then engineer debt ceiling fights when the UST needs to borrow. Insult, meet injury.

RE my recent obsession w/debt ceiling: R package raises it a mere $4T, meaning a ceiling fight in ~early '28 when, I bet, fiscal hawk Rs demand spending ✂️to⤴️it. But, Rs are RIGHT NOW locking in $25T in borrowing over 10 yrs w/their tax & spending policy. Rs should own that & ⤴️ceiling by $25T now.

Which is to say - let's stop the focus on the **incremental $4T increase** in borrowing over the next 10 years. The R package owns both the increment AND the baseline. They should commit to financing it - the whole kit and kaboodle.

RE my recent obsession w/debt ceiling: R package raises it a mere $4T, meaning a ceiling fight in ~early '28 when, I bet, fiscal hawk Rs demand spending ✂️to⤴️it. But, Rs are RIGHT NOW locking in $25T in borrowing over 10 yrs w/their tax & spending policy. Rs should own that & ⤴️ceiling by $25T now.

I don’t like the R package for economic & political reasons. But - separately - the fact that deficits rise a lot over 10 years is neither surprising nor (on its own) crisis-making. Just think policymakers should be honest about it and stop looking away. Raise the debt ceiling by $25.3 trillion.

House reconciliation package commits US to an additional $25.3 trillion in borrowing over 10 yrs. It should also raise the debt ceiling by $25.3T. Tax & spending policy lock in borrowing needs. If package writers want this world through 2034, they should also authorize needed $25.3T to finance it.

As much as Moodys analysis underlying the ratings downgrade makes sense to me, the downgrade itself does not. Ultimately, it reflects bad vibes not higher risk of default. For what they & you should worry about instead of vibes or grindingly higher debt, read: www.brookings.edu/articles/wha....

As much as Moodys analysis underlying the ratings downgrade makes sense to me, the downgrade itself does not. Ultimately, it reflects bad vibes not higher risk of default. For what they & you should worry about instead of vibes or grindingly higher debt, read: www.brookings.edu/articles/wha....

House reconciliation package commits US to an additional $25.3 trillion in borrowing over 10 yrs. It should also raise the debt ceiling by $25.3T. Tax & spending policy lock in borrowing needs. If package writers want this world through 2034, they should also authorize needed $25.3T to finance it.

On Tuesday at noon, at AEI, I will discuss the economic consequences of the administration’s immigration policies with @wendyedelberg.bsky.social of @brookings.edu and Pia Orrenius of the Dallas Fed.