July jobs mediocre, but revisions show US economy stalled out

It was the first Friday of the month, and I happened to be on line at 7:30 yesterday morning, so I figured I’d check in on the US jobs report for July. And by looking at the topline, I said…meh.

Total nonfarm payroll employment changed little in July (+73,000) and has shown little change since April, the U.S. Bureau of Labor Statistics (BLS) reported today. The unemployment rate, at 4.2 percent, also changed little in July. Employment continued to trend up in health care and in social assistance. Federal government continued to lose jobs.

Not great, but not awful and not much different than we would have thought. But then my eyes went to this picture, and it changed my opinion.

See that dropoff on the right end of the graph? I knew that the most recent jobs reports hadn’t said this when they were first released (the media generally said the June report was "better than expected" and that job growth was holding up). So what’s up with this?

Revisions for May and June were larger than normal. The change in total nonfarm payroll employment for May was revised down by 125,000, from +144,000 to +19,000, and the change for June was revised down by 133,000, from +147,000 to +14,000. With these revisions, employment in May and June combined is 258,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)

WELL THEN!

Factor in that jobs for the previous 2 months were revised down by 258,000, and we have 185,000 fewer jobs than we thought we did yesterday. That’s a big recalibration on where the jobs market stands, but it also matches up with several other recent economic reports that would indicate the real US economy has stalled out in the middle of 2025.

And those downward revisions were widespread. They show up in the public and private sectors, and in goods and services.

Interestingly, job cuts in the federal government had already been registered in May and June. But what got revised down in the public sector were jobs in state and local government (likely related to getting more information on education jobs as the school years end).

These newly revised numbers are reminiscent of the slump that hit private sector job growth in June, July and August 2024. But the difference then is that government employment was going up (+107,000 over those 3 months), and now it’s declining (down 49,000 total over the most recent 3 months). In addition, consumer spending growth is also weaker than it was last Summer.

In this time of a softening economy, we need a leader that needs to deal with this weakening and makes the necessary adjustments. So President Trump, what's the plan?

Unquestionably the most dangerous and corrupt attack on the independence of US economic data in American history. Trump is firing the head of the BLS, a longtime civil servant confirmed 86-8 by the Senate, simply because the job numbers came in below his expectations today

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— Joey Politano🏳️‍🌈 (@josephpolitano.bsky.social) August 1, 2025 at 1:25 PM

So shoot the messenger and create alternative numbers and spin? So policymakers become less likely to trust the data coming from the BLS after this? If anything, this would make the Fed less likely to pull the trigger on rate cuts, because they can't trust inflation and jobs data they’re getting from the BLS, and have to rely more on anecdotes and other sources.

It ain’t the messengers, Donnie. It’s the fact that your pointless austerity and poser tariff moves have halted the already-moderated growth that we had in 2024. And no numbers that you make up will change the reality when people can see jobs are being lost and the costs of groceries and health care premiums going up.

I'll let this guy sum up how incoherent TrumpWorld is on the jobs market and the economy are these days.

The economy is so good that I'm firing the BLS Commissioner for reporting numbers so grim I refuse to believe them, and also demanding the Fed cut rates typically seen during a recession.

— Justin Wolfers (@justinwolfers.bsky.social) August 2, 2025 at 6:28 AM

3% GDP for Q2 is actually a show of weakness

We got our first look at how the overall US economy did from April to June with the release of GDP for Q2 2025 on Wednesday. And with Trump/GOP struggling, they were desperate to hang their hats on any good news.

Retweeted Joe Weisenthal: Q2 GDP surges to record 3.0%, crushing expectations! The Trump economy is on fire, delivering big wins for the American worker! 🇺🇸

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— 🇺🇦 Senate Republicans (mirror) (@senategop.govpeeps.us) July 30, 2025 at 12:13 PM

Oh, well I guess all those worries about tariffs and a Trump Slump are over?

Far from it, and the reaction to Tariff Man's trade decisions are a big reason behind that "growth".

Nothing confusing here... Q2 GDP @ 3.0%

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— Mike Madowitz (@mikemadowitz.bsky.social) July 30, 2025 at 7:32 AM

That huge increase from imports is due to fewer imports, not any underlying growth in activity. And we got another indication of that earlier in the week, with a shrinking trade deficit in goods for June. And not for the "good reason", but instead it is due to imports going down more than exports did.

The international trade deficit was $86.0 billion in June, down $10.4 billion from $96.4 billion in May. Exports of goods for June were $178.2 billion, $1.1 billion less than May exports. Imports of goods for June were $264.2 billion, $11.5 billion less than May imports.

This means the decline in imported goods now matches the decline in exported goods that we’ve seen since April, with the trade deficit for goods back to where it was in the first month after President Trump’s new tariffs started to be in full effect.

As mentioned before, the shrinking trade deficit unwound the drag it caused on 1st Quarter GDP, and causing deceivingly higher numbers for Q2.

Net change to total GDP Q1 2025
Trade -4.61%
Inventories +2.59%

Q2 2025
Trade +4.99%
Inventories -3.17%

A better way to evaluate true economic growth can be to take out trade, inventories and government spending, to see what’s going on at the basic levels of the economy. If you do that, there is weakening in both Q1 and Q2 from where we were at the end of 2024, and for the last 2 years of the Biden Admin in general.

So don’t get fooled by any Trump/GOP attempts to promote this 2nd Quarter growth number. Know that it is all due to lower amounts of trade both coming and going as a result of Tariff Man’s moves, and that domestic GDP growth is actually stalling out at the halfway mark of 2025. This 3% growth isn't anything close to the 3% growth we had in the middle of 2024, and I strongly suspect we won't see a repeat of it in Q3 2025, or anything close to that figure.

Business owners see inflation in July, with consumers not spending much. This won't end well

Near the end of this week S&P released its Purchasing Managers' Index report for July. And while this report showed weakness in manufacturing, it also said the services economy was the strongest its been for all of 2025.

The headline S&P Global US PMI Composite Output Index rose sharply from 52.9 in June to 54.6 in July, according to the 'flash' reading (based on about 85% of usual survey responses). The latest reading signalled the fastest rate of growth recorded so far this year, with output having now increased continually for 30 months.

July’s expansion was powered by the services economy, where business activity rose at a rate not seen since last December. Although manufacturing output also rose, up for a second successive month, the rate of production growth moderated to signal only a modest expansion

But a big red flag in this report was that purchasing managers were telling S&P that prices are definitely on the rise, with tariffs a main reason why.

Price pressures intensified across both manufacturing and service sectors during July, widely blamed on higher goods prices due to tariffs but also in some cases due to rising labor costs. Average prices charged for goods and services rose at a rate just shy of May’s recent high to register the second-strongest monthly increase since September 2022….

Input cost inflation also picked up again, having eased slightly in June, registering the second-steepest rise since January 2023. The rate of input cost inflation remained especially sharp in manufacturing, despite cooling compared to June’s post-pandemic peak, and accelerated in services.

Close to two-thirds of all manufacturers reporting higher input costs attributed these to tariffs, whilst just under half of respondents explicitly linked their increased selling prices to tariffs. However, the tariff impact was by no means limited to factories, as around 40% of service providers reporting higher selling prices explicitly mentioned tariffs.

How is that not going to be passed onto consumers for the rest of the Summer and likely for the rest of 2025 (if they can get away with it)? In a logical economic world, the 0.3% increase in the CPI for June should continue at a similar rate for the coming months, shouldn't it?

And it's not like other parts of the underlying economy were doing well before July. UW-Madison Professor Menzie Chinn has a post at Econbrowser that shows a stagnation and/or slow declines in a number of key statistics in the US economy since Spring.

Sure, we may see a decent GDP number for Q2 when that gets released in the later part of next week. But don't forget, that will be entirely due to the "recovery" that reflects the unwinding of the pre-tariff import surge that reduced GDP in Q1. Almost all of the GDP increase for Q2 will not be because of an actual increase in economic activity.

And yet the stock market keeps rising to new records, with no real reason given, and unemployment claims are staying near historically low levels. With the combination of higher prices for businesses and eroding consumer demand, I just don't see how this ends well, and that it seems likely to end sooner than later.

So it won't be Three-Term Tony

Oh, it's a message getting forwarded on BlueSky from our Guv? Well let's see what he's got to say!

A love letter from me to Kathy and my family—and to you, Wisconsin. youtu.be/b0_45uWyYA8

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— Governor Tony Evers (@govevers.wisconsin.gov) July 24, 2025 at 12:01 PM

Bummer. Tony would have won easily. But he's had a good run in office and this state is a whole lot better off than where it was under the Former Guy. He's in his 70s and doesn't owe us anything if he doesn't want it.

Now it'll take a little more work. But losing's not an option, because this state can't afford even 4 years of the train wreck that would result from having some WisGOP fool at the Governor's mansion (I mean, look at what kind of garbage goes on in red states. Forget it). And I think most understand that. Plus, I'd much rather have the WisDem's bench than whatever is coming from WisGOP at this point.

Especially if it's this washed-up fuckface.

This is going to be an exhausting year, isn’t it

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— Jaymes (@jaymesl.bsky.social) July 24, 2025 at 2:29 PM

Yeah, that guy ain't running. Partly because he isn't giving up the 6-figure Koched-up grift that he has going on, and partly because it would be a Dem landslide because every Dem voter would want to get one last shot at Scotty. And for Republicans, Walker is a has-been loser who hasn't won anything in the decade-plus that Donald Trump has been a thing in politics, with some epic failures that have aged terribly. There would be no enthusiasm whatsoever.

Even without Walker being the GOP's losing canddiate, it's still set up for a Dem win up top and at the Legislative level. We just have to now figure out who the standard bearer will be at the top of that ticket. We got a year to have it play out, and I'm interested in seeing how it develops.

In budget deal, long-overdue help for Madison and other towns that can't tax state buildings

In an update on an issue I discussed at some length last September, the recently-signed Wisconsin state budget includes a long-overdue boost in state payments to local communities for providing services to state facilities.

State buildings are exempt from property taxes, but Wisconsin does compensate the cities, villages and townships where those facilities are located. The increased funding will affect hundreds of communities that house state facilities ranging from prisons to universities to office buildings.

The payouts partially cover the cost of providing garbage pickup, police response and fire and ambulance services. Under the preexisting budget, those payments were enough to offset roughly 37 percent of those estimated costs to local communities.

Wisconsin’s recently-enacted two-year budget allocates about $25 million [annually] for the Municipal Services Payment Program, which amounts to a statewide increase of about $7 million per fiscal year.

It’s the first time the state has increased its allocation for those municipal service payments in more than two decades. Under the changes, communities will be reimbursed for about half of their police, fire and garbage costs at state facilities.

Those payments should get coverage up to somewhere around 55-60% of costs, and don’t count toward state levy limits for local governments, which gets us back toward a percentage of coverage that we had around 15 years ago.

This a particularly big help to cities like Madison, where state-owned buildings would add a whole lot of property value to their communities if they counted, and who have been shortchanged on the amount of extra services their community has to take on because these facilities pay no property tax.

As part of that deal, it also looks like communities are getting an additional $3.34 million that helps pay for services to state facilities that don't use general tax dollars, such as Camp Randall Stadium and UW-System dorms. So it’s really a boost of a little over $10 million compared to where we were.

Now, one can argue that having state government services in a community allows for a larger pool of job opportunities than other places, and results in a bigger private sector tax base than would otherwise exist, as state employees like me own houses and spend money at private sector establishments like anyone else. But state employees like me pay taxes just like everyone else does, and it’s nice to see at least some of those funds going back to lessen my community’s need to rely on property taxes.

I also note that the local government fund that gives shared revenues is projected to give out an additional 4% over the next 2 years (a total increase of just over $83 million). So while the increases in shared revenues 2025-27 still doesn’t come close to making up for well over a decade of flat payments from the state as inflation led to costs going up, it’s at least a start in filling the gap, and hopefully it’ll limit the amount of cost cuts and tax-hiking referenda that we have seen in recent years across Wisconsin.

I just wish this City of Madison had held off for a year before putting a $22 million referendum on the ballot last November, because they now stand to have a few million more dollars coming in to prevent the need for such a tax increase (the hope that this would happen was a big reason why I voted no on the question).

But now that I think about it, maybe I'll drop my alder a line to let him know that maybe we don't need to tax to the max this year because the state finally gave some assistance to Madtown for having the city pick up the trash and help to provide safety services for the many state and university-owned buildings.

Consumers spent more at stores in June, but homebuilding sector is in trouble

After a couple of rough months of consumer spending, it looks like retail sales rebounded in June.

Retail sales rose 0.6% in June from the prior month, the Commerce Department said Thursday, rebounding from the steep 0.9% decline in May.

June’s number was much stronger than the 0.2% gain economists projected in a FactSet poll. Spending climbed across categories last month, including at car dealerships, which saw one of the biggest monthly increases. Those sales were up a robust 1.2% in June.

However, the figures aren’t adjusted for inflation, and some goods already began to get more expensive because of tariffs last month. After factoring in June’s 0.3% increase in consumer prices, retail sales were up a more modest 0.3%. Retail sales are adjusted for seasonal swings.

It’s a solid number, and should at least temporarily put off talk of a recession in consumer spending, which seemed possible after the decline in May. But I’ll add that we were still below March's level of spending, and that's before we account for any inflation that's happened over those 3 months.

And as Summer began, Americans did seem willing to still go out and spend, with strong gains in one discretionary area in particular.

…Sales at restaurants and bars — often seen as a barometer of discretionary spending — rose a solid 0.6% in June. Whenever consumers cut back, spending on eating out and alcoholic drinks is usually first on the chopping block.

A measure of retail spending that strips out sales at gas stations, car dealerships and of building materials — known as the “control group,” which provides a clearer picture of spending — was up 0.5% in June, also beating economists’ expectations.

So on the retail side, it seems like the economy resumed solid if not spectacular growth.

But the home construction sector seemed to remain in trouble as the 2nd Quarter of 2025 ended.

Building Permits
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,397,000. This is 0.2 percent above the revised May rate of 1,394,000, but is 4.4 percent below the June 2024 rate of 1,461,000. Single-family authorizations in June were at a rate of 866,000; this is 3.7 percent below the revised May figure of 899,000. Authorizations of units in buildings with five units or more were at a rate of 478,000 in June.

Housing Starts
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,321,000. This is 4.6 percent (±10.6 percent)* above the revised May estimate of 1,263,000, but is 0.5 percent (±9.9 percent)* below the June 2024 rate of 1,327,000. Single-family housing starts in June were at a rate of 883,000; this is 4.6 percent (±11.4 percent)* below the revised May figure of 926,000. The June rate for units in buildings with five units or more was 414,000.

Housing Completions
Privately-owned housing completions in June were at a seasonally adjusted annual rate of 1,314,000. This is 14.7 percent (±12.8 percent) below the revised May estimate of 1,540,000 and is 24.1 percent (±10.9 percent) below the June 2024 rate of 1,731,000. Single-family housing completions in June were at a rate of 908,000; this is 12.5 percent (±11.3 percent) below the revised May rate of 1,038,000. The June rate for units in buildings with five units or more was 383,000.

Even with the slight increase in permits and housing starts from May, the overall trend for 2025 is bad. Permits and starts are at the lowest non-COVID levels since 2019, and the number of houses being worked on and completed is at their lowest levels since 2021-2022.

Put all this together, and I don’t see where additional jobs for homebuilding will be coming from for the rest of 2025. And that’s before we account for higher prices to build homes because of tariffs on Canadian lumber and similar products, and the fact that tariff uncertainty should keep interest rates elevated for at least the next few months.

The retail sales report is another one from June that indicates “OK growth” over “recession”, but home construction continues to be on the decline, which isn’t a good sign for now or the future. It feels like there’s a sputtering momentum with consumer spending that’s still slightly going up vs down, but I keep trying to figure out why it keeps going up, and when things will stall out for good, leading to a more obvious economic downturn.

Inflation watch is...sort of back? But billions in tariffs still aren't affecting prices much

After Tuesday's release of the CPI for June, can we say that inflation watch is back?

The consumer price index, a broad-based measure of goods and services costs, increased 0.3% on the month, putting the 12-month inflation rate at 2.7%, the Bureau of Labor Statistics reported Tuesday. The numbers were right in line with the Dow Jones consensus, though the annual rate is the highest since February and still above the Federal Reserve’s 2% target.

Excluding volatile food and energy prices, core inflation picked up 0.2% on the month and an annual rate of 2.9%, with the annual rate in line with estimates. The monthly level was slightly below the outlook for a 0.3% gain.

Before June, inflation had been on a generally downward slope for the year, with the headline CPI at a 3% annual rate back in January and progressing gradually slower in the subsequent months despite fears that Trump’s trade war would drive prices higher.

As you can see, the year-over-year increase in overall consumer prices has been consistently between 2.4% and 3.0% for the last year, and the 12-month change in "core" prices has been just under 3.0% for most of 2025 after being slightly over 3% for the last half of 2024.

The higher inflation reading led to a 400+ point loss in the DOW Jones, and the 30-year bond yield to rise past 5%, as higher inflation can result in fewer interest rate cuts from the Fed. Some of the conjecture was that the cost of tariffs were starting to see their way onto store shelves, but June's larger increases in the CPI came from fruits and vegetables, gasoline, and hospital services, which aren't as susceptible to tariffs as other products.

I wanted to look into the next day's Producer Price Index report to see if tariffs were pushing up costs for businesses that might be importing products to be manufactured here, as that could tell us if we could expect those increased costs to be passed onto consumers in the months to follow. But at least for June, that wasn't happening.

A measure of wholesale prices showed no change in June, providing a conflicting sign over whether tariffs threaten to boost inflation in the coming months.

The producer price index was flat, according to seasonally adjusted numbers from the Bureau of Labor Statistics reported Wednesday. Economists surveyed by Dow Jones had been looking for an increase of 0.2%.

Though the numbers for headline and core wholesale inflation were subdued, final demand goods prices rose 0.3%, but were offset by a 0.1% fall in services. Within the goods category, tariff-sensitive communication equipment posted a gain of 0.8%. Core goods prices also rose 0.3%.

At the same time, the PPI level for May, initially reported as a 0.1% increase, saw an upward revision to a 0.3% gain. A 0.3% gain for goods is the biggest gain since February, the BLS reported.

So that's an interesting cross-pressure, and a sign of some weakness in the transport side of the economy, since the price of transportation and warehousing services for businesses saw a drop of 0.9% in June.

The part that makes me confused about the inflation numbers is that the US government has seen a significant increase in tariff revenue since Trump took office, including in June.

So the amount of tariffs paid in the US is 3-4 times what it was at the start of the year, but we have yet to see much of a significant increase in prices for products at the producer or consumer level - it's basically what it was before the tariffs hit. So are businesses eating a bunch of profits, or is worker productivity through the roof and allowing for unit labor costs to be less, which would make up for the cost of tariffs?

There's a disconnect going on here. Figuring out what the story is that puts these conflicting pieces together will tell us if our economy is heading toward inflation or stagflation. Or if we end up in some kind of positive situation that would fly in the face of almost all economic history that has happened when sizable levies are put onto an imported product in a country that has such a large amount of imports be part of its supply chain.

Maybe tomorrow's import price index report starts to fill in the blanks. Something should soon.