The Ides of September are Upon Us! The Fed, Jobs, Credit, CPI, PPI, AI, and Rates
Last Week and the Economy
There was a lot of information that came out last week that warrants mention, so I’ll try to keep this brief.
Let’s start with Consumer Credit:
Revolving credit increased at an annual rate of 9.7%. While significant, this is not alarming. Yet. It is tough to see a trend as the covid years throw the numbers all over the place. However, it’s the highest increase since 2023 and something to keep an eye on.
Total consumer credit is $5,060,000,000,000.
It was $4,197,000,000,000 at the end of 2019.
Like I said, it’s something to keep an eye on.
The NFIB optimism index continued to increase, NFIB meaning the National Federation of Independent Business. There are 10 categories that are measured. 4 went up, 4 went down, and 2 stayed the same.
The expectation of increasing retail sales was the largest ‘up’ driver. That’s good.
The uncertainty index, comprising financing expectations and planned capital expenditures, had the largest impact on the downside.
Uncertainty is a plague once it sets in.
Of course, labor quality remained one of the top concerns. 32% of small business owners reported job openings they could not fill.
If only those prospective employees could just work from home…
CPI – Consumer Price Index – and the PPI – Producer Price Index, were a bit at odds with each other.
The CPI, year over year, was at an expected 2.9%, up from 2.7% the month before. Core prices, without food and fuel, matched expectations and the previous month at 3.1%.
That means in the grand scheme of products, food and fuel costs are increasing less (or actually decreasing) than the core products.
The PPI dropped from 3.1% to 2.6%, and the core PPI went from 2.7% in July to 2.8% this month.
Producers (manufacturers) have had prices increase less than consumers, and it is evident that stabilized prices for food and fuel are keeping the overall PPI from rising significantly.
Finally, consumer sentiment did fall again based on job worries.
One day I’ll have to dig into that. Perhaps when I get a couple of graduate assistants.
This Week and the Fed
It’s the big day, folks! September 17. That’s when the Fed will issue its decision (proclamation?) to maintain rates as is, or lower them.
Odds are good they will be lowered. Why?
Jobs.
In his address at Jackson Hole about a month ago, Jay (Jerome Powell, Chair of the Federal Reserve; those of us on his speed-dial refer to him as Jay) said that the Board would be putting more emphasis on jobs, instead of inflation.
That’s odd, you say. Hasn’t it always been about inflation? Yes, but this time it’s different.
The Fed feels that the recent increases in the CPI – Consumer Price Index – and the PCE – Personal Consumption Expenditures – index, are due to tariffs.
Thank you, Captain Obvious.
My apologies, I am overly punchy this week… back to the discussion.
As such, they are temporary, and once the tariffs are set (assuming that happens), that will be the end of the product price increases.
Had there not been tariffs, price increases for products may have continued to decline.
Please note that I said that the increases would decline and not that prices themselves would decline. Big difference.
Once prices go up, it’s pretty hard for them to actually decline, other than some food and energy products like eggs and gas.
Going to jobs, the BLS - Bureau of Labor Statistics – revised the jobs numbers from April 2024 to May 2025. Instead of 1,790,000 new jobs during that time, it was 847,000.
That is about 911,000 fewer jobs than previously thought.
When you throw in the revisions for June and July, the job market turned out to be a lot weaker than expected.
And that is what concerns the Fed.
Given the back-and-forth tug-of-war between jobs and interest rates, the concern over the weak jobs report outweighs the concern for the one-time increase in prices due to tariffs.
The last time the Fed dropped rates it was September 18, 2024. And they dropped rates by 0.50%, or 50 basis points for us finance snobs.
Look for another drop on Wednesday.
Most folks are expecting a 25-basis point cut, from 4.5% to 4.25%. Just for grins and because no one quotes me ever, I’m going for 50 basis points down to 4%!
Either way, it’ll save you some money on your line of credit.
Ethics and AI
Anthropic just paid $1,500,000,000 to settle a class-action lawsuit from authors over copyright infringement.
The first question is, what is an Anthropic?
Well, its main product is Claude.
Remember the time when what a company did was part of its name? Like Boeing Aircraft, Ace Hardware, and Bank of Italy? Sigh.
Anthropic is an AI company that was formed by a few folks who left OpenAI, aka ChatGPT, in 2021.
It was started with the intention of creating AI systems that are safer and better aligned with human intentions. Like violating copyright laws.
Evidently, they used about 500,000 written works to train Claude and now have to pay $3000 to each author of the works they used.
AI has learned the human intention to ask for forgiveness rather than permission.
I wonder how Claude feels about that.
Speaking of AI
Which of the following are AI companies?
Cohere, Mistral AI, Stability AI, Runway, Hugging Face, Adept AI, Perplexity…
Yep, all of them, and their focus is on different applications.
Just wait until the quantum computer companies start getting money thrown at them.
Oops. Too late. $2,000,000,000,000 has already been thrown at a bunch of start-ups.
There is a lot of data in this week’s report, so I apologize for that. However, it is data that drives the Fed and it’s data that should drive your business. Something I didn’t mention in the last couple of weeks is the number of workers that are underemployed or have given up looking for a job. That is 8.1%. As a small business owner, this may be an opportunity for you to attract some talented employees who would normally prefer working in a Fortune 1000 company. However, with the right amount of coaxing, they can be persuaded to work at your small property management company, manufacturing company, or distributorship.
Think about it, and keep your nose to the grindstone or keep swimming. Whatever keeps you focused.
Have a good week, everyone.
