Does the Fed Love Inflation?

 Popular Economics Weekly

“The Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.” FOMC

FREDfedfunds

 

The Fed’s October Federal Open Market Committee meeting resulted in no change in its Fed Funds rate of 3.75-4.0%.

Why are they holding their rate when the higher tariffs and Iran war behind the inflation surge have no end in sight? Wouldn’t it have been better to raise interest rates, their main inflation fighter now, to maintain credibility?

They may have to love inflation for the moment because there is little chance of taming it when they can’t control rising prices from the tariffs and Iran war energy shortages driving it.

Or, they may be more concerned the U.S. economy is on a short fuse from President Trump’s irrational policies that are damaging economic growth. Why raise tariffs on Canadian steel, aluminum, lumber and electricity, our main trading partner so important to American businesses, for instance?

The Fed’s key may be “they are “maintaining ample reserves,” to do what?  lower their rates later and pump more money into the economy because of the danger of recession?

The FOMC is saying likes our current economy and wants to keep it growing:

“While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little”

So don’t rock the boat just yet? Maybe, but if we allow higher interestrates and inflation to continue it becomes embedded, which means it affects future growth decisions of industries and consumers (slower).

And wartime spending is going through the roof, as is the A.I. investment frenzy, which is raising our federal government’s annual interest payments above $1trillion. How much more can we afford?

 And, will we ever see a Fed 2% inflation target rate again?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://x.com/HGreen97180/

Poor Retail Sales

Popular Economics

“Advance estimates of U.S. retail and food services sales for July 2026, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $763.6 billion, down 0.6 percent (±0.4 percent) from the previous month, but up 5.0 percent (±0.5 percent) from July 2025.” Census.gov

FREDretailsales

The alarming FRED retail sales graph above showed sales had plunged in August after a spending surge earlier in the year. Consumers had already spent the tax perks from Trump’s Big Beautiful Tax Bill. 

The U.S. economy is shrinking. Does this signal a breaking point, are consumers shopping less to preserve some of their declining savings? It is already happening, shown in part by consumer sentiment surveys.

The University of Michigan survey showed a sharp decline in their finances.

“Consumer sentiment fell about 8% this August, ending two consecutive months of improvement,” said Survey Director Joanne Hsu. “While views of personal finances saw only minor declines, expected business conditions sank 11% for the short run and 17% for the long run. Decreases in sentiment were seen across the political spectrum, with Republicans exhibiting the strongest month-to-month decline in August.”

If so, it’s a major danger signal that consumers, who account for two-thirds of economic activity, can no longer support as much economic growth. That leaves investment activity from the record corporate profits the sole leg propping up the financial markets’ record levels.

The retail sales decline is also another sign the U.S. population is no longer growing, and the immigration deportations will only make it worse because immigrants, legal or illegal, are shoppers.

The U.S. Census Bureau reports our population grew at a much slower rate between July 2024 and July 2025 than from 2023 to 2024 (when it increased by 1.0%, or 3.2 million people). “The slowdown is largely due to lower levels of net international migration.”

Consumers’ incomes are not keeping up with inflation as well. Wages rose 3.2 percent per annum whereas retail inflation rose 3.5 percent in the latest month. So, shoppers must now borrow more to keep up their standard of living, which takes a bigger slice of their incomes.

So the job market is shrinking, to no one’s surprise. But July’s catastrophic unemployment report tells us the loss of -23,000 payroll jobs was particularly alarming. Will the $trillions in AI investment replace those jobs and keep inflation from rising more?

I doubt it, since most of the inflation is due to the Trump administration’s tariffs and two wars still raging. It’s the stagflation scenario of the 1970s all other again—energy shortages + higher inflation = stagnant economic growth for years to come.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

"The only thing we have to fear is fear itself." Roosevelt

 Popular Economics

FREDpayrolljobs

The job market is shrinking, to no one’s surprise. But July’s catastrophic unemployment report tells us the loss of -23,000 payroll was particularly horrific. Yet +214,000 jobs were created in March, and the economy was perhaps on its way to decent growth this year.

It’s been downhill ever since. More workers are leaving the workforce than are being hired—and 234,000 left the workforce in July—because companies are leery of Trump’s anti-growth policies.

In fact, the sharp drop in payroll hiring began with Trump’s start of the Iran War, as can be seen in the FRED chart. There may have been other factors, such as higher tariffs and threats to invade other countries as well.

But economies don’t like wars begun with no advance notice or preparation, nor does congress, or employers, or most Americans. Tolerating such an ongoing war tells us that many Americans are now living in a country ruled by almost constant fear, under a president who is a convicted felon acting like a mob boss who is ignoring laws and the congress while making decisions through threats and intimidation.

Why did this happen? President Roosevelt faced much larger fears that he addressed in his famous 1933 inauguration speech when 25 percent of Americans were unemployed. And because of such conditions, created the modern social safety net—including social security, union protections, and unemployment insurance—to recover from the Great Depression.

But many of those guarantees have been watered down or eliminated for many Americans since then. We are the only developed country without universal health care, tuition free public college, mandated paid vacations and paid child leave, among other benefits, all major indicators of social well-being.

And Americans suffer from the greatest income inequality in the developed world, engineered by successive conservative governments who have made a concerted effort to roll back President Roosevelt’s New Deal.

They have been so effective, particularly since 1980 and Ronald Reagan’s trickle-down economic policies, that many Americans no longer feel safe, have lost faith in democratic government, and have elected to live in an autocracy—particularly in red states ruled by Republicans—in desperate fear of not only losing their vocations, but their health care and retirement pensions, including social security.

Fear is contagious, but as President Roosevelt knew, was faced down when our government reclaimed its role as a public service that protected all Americans, not just the privileged few.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Where are the Jobs?

 Financial FAQs

“The number of job openings was little changed at 7.4 million in June, the U.S. Bureau of Labor Statistics reported today. Hires were unchanged at 5.3 million, while total separations changed little at 5.4 million.” BLS

FREDjolts

The job market is shrinking, contributing to the slower economic growth we are seeing this year. For instance, fewer job vacancies are being reported by the Job Openings and Labor Turnover (JOLTS) report, a survey that measures the monthly number of available jobs.

And fewer workers means less will be produced. The JOLTS report also tells us there are more separations–workers leaving the workforce for a variety of reasons than hires.

That’s probably why Q1 2026 GDP growth was just 2.1 percent, and the advance Q2 estimate was 1.5 percent. But there are indications that the AI construction may cause third quarter GDP growth to be higher, as much as 3 per cent with the huge surge in AI spending.

The number of job openings increased in transportation, warehousing, and utilities (+97,000) and in federal government (+39,000). Job openings decreased in wholesale trade (-74,000), nondurable goods manufacturing (-55,000), and mining and logging (-9,000), per the JOLTS report.

The question will be why the reluctance to hire more workers in other sectors? Is it AI? We know that as much as $800 billion is being invested in AI infrastructure and might replace a lot of jobs. So companies may have frozen the number of new hires until they know more about AI’s potential.

What are employers still looking for? The upcoming ‘official’ U.S. unemployment report out in days will also show a shrinking labor force. It’s a huge debate. Firstly, companies have no way yet of measuring what AI may earn on their investments.

“It’s a currency where you have no instinct to know what you are using, and the accounting practices aren’t even there,” said an economist cited by the NYTimes. “The AI stuff is being treated as an investment right now, but it’s a risky investment in case it has no returns.”

It’s not all bad news. The larger, lower paying, service sector economy is still growing. Service companies such as banks, retailers and restaurants expanded last month at an accelerated rate for the sixth month in a row. An index produced by the Institute for Supply Management inched up to 54.1% from 54.0% in the prior month, said MarketWatch’s Jeffry Bartash.

The manufacturing sector is also growing because of the AI buildout. “In July, U.S. manufacturing activity remained in expansion territory, growing at its fastest rate in more than four years,” reports Susan Spence, MBA, Chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee.

But AI is still muddying the job creation picture. It is the sixth year of this expansion, so AI will determine if this is an ongoing boom, or a bust economy. The record DOW and S&P indexes are predicting boom times ahead, but that’s in part because Wall Street and financial markets are counting on the Mideast wars to be settled, Trump to stop levying illegal tariffs, and there are no prolonged energy shortages.

Will that happen? Or do we need a few more election cycles to determine what laws and regulations will govern this emerging economy?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Defeating The Greater Lawlessness

 Popular Economics Weekly

“The Republicans’ hunger for power has now reached such a point that they have selected and continue to support a president who has lied and cheated his whole adult life; from Trump Casinos to Trump Towers, from stiffing bankers and his workers to cooking the books.” H Green/Huffington Post

NYTimes

We knew as long ago as Nixon’s Watergate that the Republican Party harbored a lawless tendency when it suited them. Why else would President Reagan engineer the illicit Iran contra arms deal with Khomeini, or President GW Bush invade Iraq when UN inspectors already knew Saddam Hussein had destroyed his weapons of mass destruction a decade earlier, I said in 2017?

Now we have illegal tariffs and an unpopular war with Iran, one that will drive inflation even higher and might take years to return to the Federal Reserve’s 2 percent target to fulfill its mandate of full employment with stable prices.

The result? Another recession, sooner or later, as happened during Presidents Reagan (2) and GW Bush terms. In Bush’s case, he managed to turn four years of Clinton budget surpluses (1996-2000) that could have kept social security and Medicare solvent for decades into a worldwide Great Recession (2008-09), the worst since the Great Depression, according to most economists.

President Trump’s Republicans are following the same path with his huge tax cuts while borrowing $trillions to fight his wars, cutting public services to the bone and closing whole departments by firing more than 300,000 federal employees.

Republicans have doubled down on their lawlessness by allowing his illegal wars and tariffs, and maybe what could precipitate the next recession; their determination to deport as many undocumented immigrants as possible without allowing them due process or a legal pathway to citizenship.

Immigrants are taxpayers that add workers to our shrinking population, and their loss is depriving our economy of essential services—agricultural workers that supply our groceries, for starters, but also a large part of construction, healthcare, transportation and lower paying service workers in leisure and hospitality.

This can only be done because Trump’s Republicans either ignore or disregard the civil laws, as well as economic laws, and even the constitution in their hunger for power. This is impoverishing more Americans, not to speak of turning a blind eye to the illegal enrichment of the Trump family and their supporters.

What can be done to return the $trillions in wealth and power that Republicans have taken away from the American people via their massive tax cuts to corporations and wars that were never paid and ignore the most basic rules of capitalist enterprise, such as debts must be paid, contracts and treaties honored?

The sad fact is that the Iran war wasn’t necessary because President Obama had already negotiated a nuclear arms agreement with Iran and Trump’s tariffs have been mostly based on ignorance of foreign trade tradeoffs, not unfair trade practices.

The history of greater lawlessness and hunger for more power is leading to a massive disruption in foreign trade which is the life blood of the world’s economies. It is repeating the mistakes that choked off world trade in 1930 and led to the Great Depression.

The question is how much longer will consumers and voters tolerate the record of Republicans’ failures that have led to four recessions just since 1980 that were the result of their hunger for more power?

Polls are showing that ordinary Americans are beginning to understand what it means.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen