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US Macro Analysissee more…

  1. Macro Consensus Challenger: June CPI Benign but 2026 Risks Rising

    Dominique Dwor-Frecaut

    Summary June core CPI was below expectations. Passthrough from tariffs to goods was stronger this time but there was no evidence of inflation contagion to non-tariffed goods or to services. Medical care prices (largely administered) drove a limited acceleration in services inflation. Nevertheless, the pre-tariff trend of goods inflation acceleration resumed while inflation pressures from […]

  2. Macro Consensus Challenger: Balanced Weaknesses in Labour Demand and Supply

    Dominique Dwor-Frecaut

    Summary NFPs were higher than expected but half of the increase came from the government sector, with private NFPs below expectations. June’s labour supply continued weakening following the end of the immigration surge. Labour demand and supply weaknesses roughly balanced out with the unemployment rate 12bp lower. Wage growth slowed further, which made for slower […]

  3. Are Equity and Bond Markets Both Wrong?

    Dominique Dwor-Frecaut

    Summary Equity and bond market pricing of the US economic outlook could only be consistent under the ‘Goldilocks’ economic conditions prevailing during 2022-24’s immigration surge. But immigration has collapsed, which is likely to cause ‘stagflation-lite’ economic conditions. Soft private sector demand due to weak confidence will dampen inflationary pressures in 2025. The fiscal stimulus Congress […]

  1. Fed Likely to Look Through Oil Price Shock

    Dominique Dwor-Frecaut

    Summary The Middle East remains tense and hostilities could easily restart and cause an oil price shock. Because the US is a net energy exporter, but oil producers’ spending is limited, an oil price shock would likely see US income increase but US spending decrease, which would improve the external balance. Because of a tighter […]

  2. Dom’s Quick Take: New Indicator Highlights Recession Risks

    Dominique Dwor-Frecaut

    Summary The Richmond Fed has devised a recession indicator based on jobless claims that is more accurate and timelier than Sahm’s rule. Should continuing claims continue increasing at the pace of the past four weeks, the indicator would signal recession at end-October 2025. By contrast with 2008, this time a continued increase in claims would […]

  3. Macro Consensus Challenger: Inflation Keeps Surprising on Downside

    Dominique Dwor-Frecaut

    Summary May CPI was again below expectations. The print shows no sign of second-round effects. Non-tariffed goods and services prices were aligned with or below trend. Therefore, I keep my expectations that inflation will peak at end-2025 and slow thereafter, in line with consensus. Three scenarios would falsify my view: a worsening of the trade […]

Macro Consensus Challenger: Early US Labour Market Softening, Fed to Cut in September

Dominique Dwor-Frecaut

Summary May NFPs were higher than expected but employment growth is slowing once revisions are considered. Unemployment was unchanged based on poor quality household (HH) survey data. Other data from a variety of sources show the labour market has started loosening. This aligns with my expectations, so I still expect two-three Fed cuts in 2025. […]

Macro Consensus Is Inconsistent

Dominique Dwor-Frecaut

Summary The macro consensus assumes benign inflation and unemployment, which seems inconsistent with the large tariffs supply shock. The consensus seems overoptimistic on trade and fiscal policies, which carry downside growth risks. Weak growth will limit second-round effects from the tariffs, allowing the Fed to focus on employment weakness. The unemployment trajectory I expect suggests […]

  1. US Court Strikes Down ‘Liberation Day’ Tariffs

    Dominique Dwor-Frecaut

    Summary The US Court of International Trade has ruled most Trump 2.0 tariffs as illegal. However, the Trump administration has appealed and is likely to get a stay of the court decision until the case reaches the Supreme Court, which may not happen until autumn at the earliest. Meanwhile, the ruling adds to economic uncertainty […]

  2. A US Treasury Crisis Pre-Mortem

    Dominique Dwor-Frecaut

    Summary A US Treasury crisis is unlikely but not impossible. Here, I run a pre-mortem (i.e., assume a crisis has happened and work backward to identify likely causes). Two decades of loose fiscal policies and structural changes to the demand for Treasuries have placed the US in the danger zone, though that is not enough […]

  3. Change of Call: 2-3 Fed Cuts in 2025

    Dominique Dwor-Frecaut

    Summary Last week’s US-China deal has lowered tariffs but only dented policy uncertainty, which remains exceptional. As a result, I have lowered my probabilities of recession. There are early signs the tariff impact could be more benign than I expected. April CPI was below expectations largely due to still low tariffs, implementation lags, intermediaries absorbing […]

Inflation Monitor: Limited Tariff Passthrough So Far

Dominique Dwor-Frecaut

Summary April CPI was below expectations but higher MoM than in March. There was limited pass through from tariffs to core goods. The uptrend in goods prices flattened. OER continued slowing. Supercore inflation continued its marked slowdown, largely driven by airlines choosing volume over margins and by wage disinflation facilitated by falling energy prices. CPI […]

FOMC Review: A Resolutely Reactive Fed

Dominique Dwor-Frecaut

Summary The Fed remained on hold as expected, but the meeting’s tone was more hawkish than I anticipated. The Fed will not cut until soft data weaknesses appear clearly in hard economic data. This creates a risk of falling behind the curve and of perceptions of political bias. Market Implications My base case remains a […]

  1. FOMC: Scenario Analysis

    Antonio Del Favero, Dominique Dwor-Frecaut, Richard Jones

    Summary Our base case is no cut, but the Fed takes note of the greater downside risks to growth and signals it will remain well-positioned to address either leg of its mandate. Fed slows quantitative tightening (QT) to ease the funding strains emerging in the RP market. Despite low PCE and negative GDP, we think […]

  2. Labour Market Monitor: April’s NFP Reflects Old Trade Regime

    Dominique Dwor-Frecaut

    Summary April’s NFP do not tell us much about the new trade regime because the data was collected before the bulk of the tariffs were in effect. NFP were 177k, above consensus’ 138k. Migrant workers continued adding to labour supply as deportations are running below FY2024, but the long-term goals of immigration policy remain unclear. […]

  3. FOMC Preview: Fed to Turn Dovish

    Dominique Dwor-Frecaut

    Summary The Fed can focus on its mandate now Chair Powell is no longer at risk of getting fired, which increases the chance of a rate cut. It is unclear the Fed still needs to wait for more information on the Trump administration policies because no matter what these turn out to be, their impact […]

Dom’s Quick Take: MH Fed LLM Signals Rising Risks of June Fed Cut

Dominique Dwor-Frecaut

Summary Macro Hive’s Fed LLM Sentiment Index shows the Fed is turning more dovish, by contrast with earlier in the year when the Fed was noticeably more hawkish than the markets. This likely reflects three factors: Trump administration has turned the tables on the Fed. Benefits of the Fed’s ‘wait-and-see’ stance have become uncertain. Employment […]

End of Student Debt Forbearance to Add Downside Risks to Growth

Dominique Dwor-Frecaut

Summary The Trump administration is ending the forbearance on student loans. Student debt is falling. College is too expensive! Still, debt repayments could increase by about 0.75ppt of disposable income. I expect consumption to fall but by less than the increase in debt service, largely because many households barely get by and are likely to […]

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