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If youre interested in understanding the current state of the U.S. economy and corporate America, and what the rest of the year might look like (and who isnt?), this was the week for youwith five days packed full of earnings reports, policy announcements, and economic data. And although the picture that emerged from all that information was arguably more fuzzy than sharp, a couple of things do seem clear: The economy is limping, not booming, and the impact of tariffs is finally being felt. The most important data point of the week came on Friday morning, when the Bureau of Labor Statistics reported that the U.S. economy created just 73,000 jobs in July. More importantly, the BLS also said that the jobs numbers for May and June had been revised dramatically downward: The May number went from an estimated 144,000 jobs created to just 19,000 jobs, while the estimate of jobs created in June fell from 147,000 jobs to just 14,000. Even assuming that the July number is correct (and that it wont eventually be revised downward as well), that means that the U.S. economy created just 35,000 jobs a month, on average, over the past three months, compared with 168,000 jobs a month last year. Employers pump the brakes on hiring The current jobs numbers are not quite as terrible as that comparison suggests, since a drop in immigration and the continued aging of the population mean that the economy needs to create fewer jobs in order to stay at full employment. (Unemployment in Fridays report was still just 4.2%.) But the jobs number does suggest that, at the very least, businesses are being far more cautious about adding jobs. And thats only confirmed when you look at the details of the jobs report: The U.S. lost manufacturing jobs in each of the past three months, while essentially all of the private-sector job growth since May has come in healthcare and social services. Not all the news this week was bad: On Wednesday, gross domestic product (GDP) growth in the second quarter came in at a solid 3%. That was a big jump from the negative number we got in the first quarter, even if it still means GDP grew in the first half of the year at a below-average 1.2%. Average hourly earnings are up 3.9% year over year. And earnings reports gave us blowout earnings numbers from Microsoft and Meta, good numbers from Apple and Amazon and, perhaps most interestingly, excellent numbers from Mastercard, which suggests consumers are continuing to spend. Still, there were reasons for concern, particularly with that 3% GDP number. Private purchaseswhich are generally thought of as a good measure of domestic demandwere up just 1.2% year over year. Consumption rose 1.4%, which is respectable but not impressive. Business investmentparticularly investment in everything other than computer equipmentactually fell. And spending on imports tumbled sharply. The AI boom is fueling massive investment in technology and computer equipment, which is boosting overall GDP. But while Big Tech is roaring, much of the rest of the economy seems to be drifting in the doldrums. Normally, that would have made a strong case for the Federal Reserve to cut interest rates at its meeting this week (it didn’t), just as President Donald Trump has been berating Fed chair Jerome Powell to do. The problem for the Fed is that even as the economy seems to be stalling, or at least slowing down, inflation has shown no sign of going away and, in fact, it may be picking up. In addition to all the other data this week, we heard news about the personal consumption expenditures price indexthe Fed’s preferred measure of inflationwhich jumped 0.3% in July and is now up 2.6% year over year, well ahead of the Feds 2% inflation target. So the Fed is looking at a weak job market and stubbornly high inflation: not a great place to be in. The elephant in the room The big complicating factor in all this, of course, is the tariffs that Trump has imposed, paused, rolled back, and now is preparing to impose again. To begin with, the tariffsand how businesses have responded to themhave a lot to do with those big swings in GDP growth we saw in the first half of the year. Imports spiked in the first quarter as businesses loaded up on inventory before the tariffs hit, helping shrink the GDP. Then they plummeted in the second quarter as businesses worked through that inventory, giving GDP an artificial boost. The tariffs are also eating into company profits. This week, Black & Decker, Ford, and Procter & Gamble all said that tariffs had hurt their earnings. And theyre starting to feed into inflation: Adidas said this week that it may hike prices to deal with higher costs, and P&G said it would be raising prices on 25% of its products. The impact of tariffs could also be seen in this weeks economic reports: Goods prices (the prices that tariffs would have the most direct impact on) were up 3% year over year. The uncertainty surrounding Trumps tariff policyand where rates are going to end uphas also made it difficult for companies to plan and to invest. And theyve made consumersalready unhappy with inflationmore cautious, which you can see in consumer sentiment numbers. The current University of Michigan consumer sentiment index, which was released on Friday, shows that consumer sentiment, while better than it was in April, is still broadly negative, down 7% from a year ago. And consumer expectations of the future are even worse, down 16% year over year. All of this arguably helps explain why so many businesses seem to have been in a holding pattern: Caution is a logical response to uncertainty. Trump removed some of that uncertainty Thursday night when he issued a new executive order imposing new tariff rates on almost every country in the worldrates that are scheduled to go into effect on August 7. The rates are in most cases 15%, and often higher. (A few countries got a 10% rate.) Thats better than the original tariff rates that Trump had imposed on what he called Liberation Day back in April. But they still represent a massive hike in import costs from last year. To be sure, nothing we saw this week says that the economy is headed for disaster. But, at the very least, this weeks numbers make it very hard to be bullish (except, of course, about Big Tech). The U.S. is stuck in neutral, and neither the Trump administration nor the Federal Reserve is doing much to get it back in gear.
Category:
E-Commerce
Millions of student loan borrowers are about to see a jump in their monthly payments. That’s because an interest-free pause under the Saving on a Valuable Education (SAVE) plan has ended as of Aug. 1. SAVE, rolled out in 2023 under Biden, brought many borrowers’ payments down to $0 a month, ensured borrowers’ balance wouldn’t grow as long as they made timely payments, and massively cut undergraduate loan balances. 7.7 million federal student borrowers enrolled in the plan. But now, the end to a pause in interest under Trumps “Big, Beautiful Bill” means, interest will begin accruing once again on loans. In a press release earlier this month, announcing the upcoming end to the pause, U.S. Secretary of Education Linda McMahon called the SAVE program “unlawful.” McMahon asserted, “Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead.” McMahon continued, “Since day one of the Trump Administration, weve focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers. As part of this effort, the Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan such as the Income-Based Repayment Plan (IBR).” What should SAVE enrollees expect? Starting Friday, SAVE participants will see interest charges, even if they arent making payments. The added interest means monthly bills will be higher, but how much higher depends on income. However, if they switch plans to the IBR plan McMahon referenced, borrowers may see their monthly bills rise drastically. While SAVE calculated monthly payments based on 5% of a borrower’s income, the IBR plan takes 10%. For older loans, it ticks up to 15%. (Student loan forgiveness for those with IBR plans was also recently paused under Trump). Some experts believe the transition will pose a massive challenge for borrowers, as they switch to other repayment plans. Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York City, said, per CNBC, In severe cases, it could result in people being forced to move, or they will just resign themselves to default and involuntary collections.” Are there any new plans in place? In addition to IBR plans, borrowers will have access to a new republican-led plan, Repayment Assistance Plan (RAP), but not until next July. Under the new plan, payments will range from 1% to 10% of a borrower’s earnings, with bills rising the more they earn. Unlike IBR plans, RAP does not shield a portion of the borrower’s income, and is based on total earnings before taxes. According to the National Consumer Law Center, the RAP plan is “significantly more expensive for borrowers than the SAVE plan, but will also be more expensive than the other existing IBR plans for low-income borrowers” What should SAVE enrollees do? The Department of Education said earlier this month that it will begin contacting SAVE enrollees about next steps and that participants should begin determining which plan best suits their needs. “To compare available repayment plans, the Department encourages borrowers with loans in the SAVE Plan to use the Loan Simulator to estimate monthly payments under available repayment plans, determine repayment eligibility, and learn which option best meets their repayment goals,” it said. The department also noted that in May, it resumed collections on delinquent loans, saying it has “emailed more than 23 million borrowers reminding them of their legal obligation to repay their loans as well as the benefits of making regular progress toward repayment.”SAVE participants also have the option to stay in forbearance, however, the interest they accrue could be significant. Some experts say, in that case, making interest-only payments can help stave off mounting balances down the road. If you know its going to really financially hurt you to start making payments, then just stay in the forbearance, Megan Walter, senior policy analyst at the National Association of Financial Aid Administrators, said per CNBC. If you can at least pay the interest, I would do that. Borrowers who can’t afford their monthly payments, can also apply for forbearance or deferment. SAVE will officially shutter in July 2028.
Category:
E-Commerce
Coinbase, the largest U.S.-based cryptocurrency exchange, reported second quarter earnings on Thursday. Why is the stock tumbling? Here’s what to know. What happened? Shares of Coinbase Global (NASDAQ: COIN) were down 15% in morning and midday trading on Friday, the lowest price the stock has hit in more than a month, after it reported lower-than-expected second quarter adjusted profit due to a slowdown in trading, according to Reuters. Coinbase earnings Revenue came in at $1.5 billion, which missed analyst expectations of $1.6 billion, while revenue tied to transactions came in at $764 million, missing StreetAccount estimates of $787 million, according to CNBC. However, other earnings numbers came in strong. In the three months ending June 30, Coinbase net income rose to $1.43 billion, to deliver earnings per share (EPS) of $5.14. A further look at Coinbase’s EPS shows the company beat analyst expectations $1.51 by $3.65. Subscriptions and services offerings which include stablecoins, staking, interest income, and custody grew 9% from the same period a year ago to $655.8 million, short of analysts projection of $705.9 million. Analysts told Reuters that Coinbase could see trading volume improve, according to the company’s revenue estimates. The earnings follow a surge in crypto spurrred on by the Genius Act‘s signing into law. Coinbase on S&P 500 Coinbase joined the S&P 500 stock market index in May, replacing Discover; it is the first time a crypto company has been included on the index. The S&P 500 is one of the worlds best-known stock market indexes.
Category:
E-Commerce
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