The massive downward revisions (-258k) are puzzling. Even as someone who long believes payrolls are overstated by massive amount, these downward revisions are anormay large outside of benchmark month or weather related events. The downward revision are largest for state and local government, but also broad based. So far we can rule out the following explanations: 1. Seasonal adjustment. The revisions are mostly NSA. 2. Collection rate of the survey. The collection rate not abnormally low and in fact higher than last year’s may to july. 3. Birth and death model revisions. But BD is for private payrolls not government. Plus the published page got BD shows estimates were unchanged. Notably government payrolls are not connected from survey but from administrative data. Why the administrative data is missing by so much is a quandary.

GDP release today flag hot core PCE reading. For core PCE inflation tomorrow, we are expecting upward revisions particularly in May, 0.18 —>0.24. And a 0.32 for June.

For those who like to nerd out, @chrisgcollins1 from Bloomberg Economics US team did a deep dive debunking the idea that ice deportation fears was behind the drop in labor force participation. @TheTerminal :

Today is a rare FOMC where market actually think Powell is hawkish.

Credit where it is due—this is from @atanzi who is currently in our team.

Our FOMC preview on @TheTerminal

Brad’s spidery sense of this is second to none, and this is coming from my unbiased opinion of having worked for him. (And he is usually right)

My reaction after a preliminary forecast to next week’s NFP: nothing about it is intuitive.

On how much Chinese goods vacated by US demand will hit EU, my colleagues @RushEconomics and Maeva Cousin estimated that $75 billion will be looking to EU. Turns out EU and US buy similar stuff from China. And this is not yet looking at the production similarity between EU And China. @TheTerminal :

China faces domestic demand problems from multiple directions. At the same time its costs advantage over the rest of the world is surging: 1. Popping of a real estate overhang that will exert downward pressure on demand and prices for many years to come. Negative wealth effects continue to drag on the relative well off. 2. Adoption of AI is fast. But so is the at least short term destabilizing impact on jobs (particularly entry level jobs), and jobs security. 3. There are well documented gaps in social security net for the massive aging rural population. 4. Deflation means that domestic competition, which was already cutthroat, becomes more cutthroat. Firms are drawn outwards to exports market for fatter margins, aided by domestic deflation and increasing direct to consumer tactics that cut out many foreign intermediaries that traditionally benefited from trade in previous wave of globalization. My view is that the world will have trouble absorbing the goods vacated by US demand.