Comments based on information available as of 7:30am CT on 8/8/2025
Growth: What If May And June Were The Low For The Economy? 
Stagflation is in the air. That’s the toxic combination of stagnation (low growth) and high inflation. But the July payrolls number showed an improvement from the near-recession levels of job growth in May and June. We can’t ignore the possibility that peak uncertainty around trade and tariffs corresponded with a trough in economic activity. In other words, maybe the worst is behind us instead of in front of us.
Inflation: A Broad Umbrella
In July, ISM’s Services Index showed prices rising faster than in June. Many companies blamed tariffs. Services aren’t usually seen as tariff-sensitive, but they can be. Services are more than haircuts and banking. Many services companies rely on imported supplies, like healthcare and restaurants. ISM’s definition of services is a broad umbrella term that includes construction, mining, and agriculture. Most people might not consider those services, which is why ISM used to call their services index “non-manufacturing” instead.
Policy: If They Knew Then What They Know Now
Fed officials may have wished they had waited a week to meet. Then they would have seen the labor report along with its large revisions to May and June numbers. Rarely do so many Fed officials change their tunes so much in such a short period of time. The Fed isn’t “data point” dependent, but the latest jobs data changes a lot about what they thought they knew. As Mark Twain said, “It ain’t what you don’t know that gets you into trouble, it’s what you know for sure that just ain’t so.”
Looking Ahead: Passing The Baton
The year began with big unknowns in tax, trade, and Fed policy. Those are largely settled. Now the question is how the economy absorbs them. September rate cuts look likely. From here, stocks may stop moving in sync and start trading on who’s ready to win—or lose—under the new rules.
