By Gregory Heym, BHS Chief Economist and and host of Crossing The Line

This has been a huge week for economic data, so we will limit each section to three bullet points. Welcome to the "Gimme Three Points" edition of The Line. Hopefully, at least some of you got that Lynyrd Skynyrd reference. If you didn't, you need to listen to this.

Job Growth Down Sharply in July

• Payrolls rose by just 73,000 jobs last month, well below the 100,000 Dow Jones estimate.
• Even more depressing than that headline was the revisions to the May and June data, which subtracted 258,000 jobs from those months.
• This report, along with weakening consumer spending, has increased the odds of a Fed rate cut in September from 40% to 63%.

Economic Growth Better than Expected in the Second Quarter

• Gross domestic product rose at a 3% annual rate in 2Q25, easily beating the 2.3% estimate.
• While that sounds great, most of the increase was due to a sharp drop in imports after a surge in the first quarter before new tariffs took effect. So basically, you can throw out the GDP figures for the first half of this year.
• Consumer spending posted a decent 1.4% increase in the second quarter, but is moving in the wrong direction.

The Fed Leaves Rates Alone

• The Federal Reserve made no changes to the federal funds rate, a move that surprised nobody.
• Two Fed Governors opposed the decision and wanted a rate cut, the first time that has happened since 1993.
• In his press conference after their meeting, Chairman Powell implied that a September rate cut was not a certainty. But since he said that before the July jobs data came out, he may be more certain today.

Inflation Higher than Expected

• The Fed’s preferred inflation gauge—AKA the core personal consumption price index—rose 0.3% in June and was 2.8% higher than a year ago.
• The 0.3% monthly gain in the index was expected, but the annual increase was slightly higher than the 2.7% forecast. It’s worth noting that the annual increase was also 2.8% in May and has averaged 2.75% so far this year.
• Even though the Fed’s target for the annual increase in Core PCE is 2%, I wouldn’t worry too much about the June figure, as a big part of the uptick in the annual rate was due to an abnormally low reading one year ago.

Going to the Outlaw Music Festival tonight to see Willie and Dylan, hope you have a great weekend.

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