Fed Is Now Worried Inflation and Jobs Not As Good As We Thought - Economic Update 04 July 2026

[00:00:00] Speaker 1: Here's the economic update for July 4th, 2026. It is now the 250th anniversary of the independence of the United States. And let's go through some of the economic data. So let's go through inflation numbers. The most recent data that we have is on June 11th. Our producer's price index was up 6.5%. And producer's price index core minus food and energy was at 5.1%. This is going up a bit quick. This is what the people that make your products have to pay basically before it goes to a shelf. On June 10th, we have our consumer price index. This is CPI. This is when you're going to the store and you would be, you know, looking at what the price is on the shelf. This is up 4.2%. And core, basically it's minus food and energy. And this is up 2.9%. June 25th, we had our personal consumption expenditures. This is after you paid for it, what it actually reflects. So it went up 4.1%. And our PCE core minus food and energy is up 3.4%. All of these are above what the target would be for the Fed. Basically, the Fed has a couple of mandates. One is stable prices. Keep it around 2%. And the second one is keep maximum employment so you don't want to see unemployment go up. And three, you want to have moderate long-term interest rates. So like think of mortgages on homes for 30 years or if you think about the national debt that's been growing. So if you take care of the first two, the third thing should work itself out. But if they're out of balance, then the third one starts to have problems. This week, we got data on jobs. On July 1st, we have our independent source from the ADP. We're up 98,000 jobs in June. Basically, these were in finance, education, health services, trade, transportation, utilities for the most part. There are other areas that did gain jobs, but not as significantly. On July 2nd, we have our Bureau of Labor and Statistics. This is the government data. We've added 57,000 jobs in June. We've had revisions to both May and April. May is now at 129,000 jobs. This was just revised down by 43,000 jobs. And then April is now at 148,000 jobs. This was also revised down by 31,000 jobs. So this is 74,000 jobs that don't exist that we thought existed. That's not good news. We also saw that the labor force participation rate went down. It's now at 61.5%. It went down by about 0.3%. This is where I really like to look because when you talk about unemployment, it's kind of like a little bit of a funny number. So unemployment has been going up over the last couple of years. It was down at a low of 3.4%, and then it's been climbing. It got up to about 4.3%, 4.4%. It's down at 4.2%. So that's why I have it in blue. Over the last couple of months, it came down just slightly. However, over the last several years, it's gone up. When we talk about unemployment, what are we talking about? There's 7.1 million people considered unemployed. That means they've actively looked for a job in the last four weeks. If you haven't looked for a job in the last four weeks and you don't have a job, but you want a job, that's not considered unemployed. That would be considered not in the labor force. So there's 6 million people not in the labor force because they haven't looked for a job in the last four weeks. And if you have a job, it's a part-time job, but you want full-time work, you're also not counted. So that's another 4.7 million people that want that full-time work, but are currently part-time. So if you look at the 7.1 and the 6 million people, add those two together, you're at 13.1 million people that do want a job, but unemployed is only counting 7.1 million people. So in reality, there's about 7.7% of people that are not employed, but want a job. And either have looked or not looked for work in the last four weeks. And then if you add all these numbers up, people that want full-time jobs that don't currently have a full-time job, so that's whether they have no job or they have part-time work, but they haven't been able to get to a full-time job, is closer to about 10.5%. So if you look at the 27-week unemployment number, people that don't have a job but want a job and they're on unemployment, it's about one in four people have been unemployed for at least six months or more. On June 30th, we had our JOLTS report. There were 7.6 million jobs reported as being open and available. 5.2 million people were hired and 5.1 million people separated from their employment. Typically what I see is most people don't quit a job right now without having another job lined up. Now if we look at the 7.6 million open jobs, and we look at only 5.2 million people were hired effectively, there's a difference between that. That's about 2.4 million jobs are left unfilled. It's approximately about a third of jobs are left open each month. So I'm saying, "Are those fake jobs? Are they just postings that go nowhere, or ghost jobs?" Have you had any experience where you've been filling out application after application and it just doesn't seem to get anywhere? It could be this. If you see a job posting that's been open for more than a month, the likelihood that it's a ghost or a fake job goes up infinitely higher than something that just opened up a week or two weeks ago. Let's talk about the Fed. On June 17th, the Federal Open Market Committee meeting took place. They decided to hold interest rates steady at 3.5% to 3.75%. I know a lot of people were hoping with the new Fed chair, effectively, that he would drop interest rates, but with inflation running as hot as it is, and we're adding jobs monthly. That starts to cause an issue with the stable prices mandate. And he also kind of alluded to, he's twisting this a little, so 2.0% is not his inflation target, that was the prior Fed chief's inflation target. He said, "Really, it's the first number that matters." So whether it's 2 or 2.5 or 2.9, you know, that first number matters more than the second digit, effectively. He's given himself a little bit more leeway, but you can't argue 6.5%, 4.2, and 4.1%, it doesn't really matter. 3.4, you're getting close to the 2.9, but 5.1, all of these numbers, except for that one, are above that 2.9%. It doesn't look like we're actually going to drop interest rates. In fact, there's a risk that we're going to raise interest rates this year. I'll get to that in a moment. They said that they want to maintain ample reserves. Basically, they're buying up that zero to three-year T-bills, treasury bills, whatever you want to call it, bonds. And then inflation is elevated, capital investment and productivity are strong. However, unemployment is steady. It's not going down, it's not going up, it's pretty stable for the moment. Economic activity has expanded. However, there's still uncertainty with the Middle East conflict, effectively US and Iran and other countries being involved. And that's driving up the energy prices with the Strait of Hormuz being blocked. Countries are building pipelines around that. They're like, I can't wait for this to be fixed. So they're just going to start building pipelines to other waterways to get out of this. Do you recognize that this one came with a dot plot every three months they go through this? So they look at the interest rates and they're saying that basically they're likely to hold or to rise in 2026. And 17 out of the 18 people that are looking at this, providing the data, have said they expect it to stay the same or go up. Do not expect interest rates to go down, at least short-term interest rates. What's our gross domestic product look like? Well, on June 25th, first quarter 2026 was revised to 2.1%, still positive, so that's good. July 1st, second quarter 2026, GDP now has dropped their estimate fairly significantly. We're only at plus 1.2%. How's the consumer doing? By the way, we're all consumers. How are you doing? Are you spending more? Are you spending less? Are you spending more in a certain area? Do you find yourself spending more on necessities, like electricity, gas, diesel, that sort of thing? Or are you spending it more on vacations and fun things? Leave a comment below. Tell us what you're doing. So on June 25th, personal income is up 0.7%, up $181 billion, so that's good. Personal consumption expenditures are also up 0.7%. That's fairly high, so that's not really the best. And it went up by $156 billion, which ate away at most of the gains. So where is this money being spent? Really, it's in finance, insurance, healthcare, housing, utilities, gas, energy. So the negative of this is, if you notice, most of these things are not fun, they're necessities. People when they're concerned about money will pull back everywhere else, but they'll continue spending on whatever they need to spend such as, you know, those things right there. And the personal savings rate is going up slightly. It's at 3%. 3% is very small. It's really hard to get ahead if you're saving such a small portion of an income. So I would prefer that to be closer to like 15%, for example. June 26th, we have our index of consumer sentiment. Month over month, we're up 10.5%, year over year, we're down 18.5%. Current economic conditions, we're up 4.1%, down 26.4% year over year. Index of consumer expectations, we're up 15% month over month, down 12.7% year over year. If we look on June 30th, current financial situation, there's more people thinking it's bad rather than good. This is the first time I've seen this crossover since 2022. And remember, back in 2022, this is when the Fed raised interest rates, inflation was high, and then the conflict between Russia and Ukraine occurred. Overall confidence is slightly up, so that's good. However, labor is down, business expectations slightly up, financial expectations slightly up. How's construction going? On July 1st, construction spending increased by 0.1%, but realize there's an error here. So it could be as much as plus or minus 0.7%, so this could be negative or positive. It doesn't really tell you much, and that's month over month. However, if you look at year over year, it's down 1.5%, with an error of plus or minus 1.3%, so it's still negative. Regardless, if you look at the error, it just could be worse effectively. We have our manufacturing numbers. So on July 1st, the ISM overall economy is expanding, manufacturing is expanding, but they're growing at a slower pace. Employment and new orders are contracting. Employment's been contracting for a while, new orders, this is the first month it's actually contracted in some time. So a couple of concerns that I want to raise, there's the yen carry trade, effectively people borrow money in yen and then convert it to U.S. dollars and put it into the U.S. stock market. If the exchange rate changes or the Bank of Japan increases interest rates on those loans or the stock market goes down, people start pulling billions and billions of dollars out of the U.S. stock market. That can lead to additional volatility in the stock market. There's the conflict between U.S. and Iran. This is leading Iran to blockade the Strait of Hormuz, which is about 20% of the world's oil goes through this area. And with that being closed, that's basically why a lot of the fuel prices are so high, the energy prices are high, which is then basically raising the prices of everything. This is on again, off again, on again, off again. It's hard to keep up with. Now, a lot of those countries in the Middle East, they are building pipelines to try to circumvent this whole issue so they don't have to go through the Strait of Hormuz. That brings us up to the U.S. Strategic Petroleum Reserve. This is now dropping below 320 million barrels and dropping each day now. It's the lowest it's been in about 40 years. They have to maintain a certain amount of oil in these caverns or else they collapse. So I think they need to keep a roughly 100, 100 something million barrels so they can probably withdraw down another couple hundred million barrels. But this is the lowest it's been since the 1980s. Another red flag that's popping up is private credit. Morgan Stanley has started to limit some of their withdrawals. So if investors wanted to pull out of the private credit funds, they can't pull their money out. They have to leave it there. They can only withdraw a smaller portion of that. Do recognize there's IPOs that are coming out this summer. We had SpaceX come out and there's going to be some AI IPOs as well. IPOs are just initial public offerings. A lot of them currently don't have profit. Things that are not profitable, I kind of hold back a little bit. The price just goes up when there's a lot of hype because there's a lot of demand, not a lot of supply. However, IPOs tend to have a lockup period where the people that have all these shares privately, that once it becomes public, they can start trading. But they have a lockup period so they can't sell any of their shares for some period of time. That might be a couple of weeks, couple of months. It's usually like, you know, half a year, up to a year, something like that. After the lockup period ends, what typically happens is price tends to go down for a period of time. Reason being is the hype is gone, so there's less demand. You have added supply because people are dropping shares on the market for the first time. They didn't have the ability to do so previously. So then what happens is you have a lot of supply, not a lot of demand. Supply and demand have some equilibrium with price, and then price drops. It's basic economics. So currently, gold is trading at $4,193 per ounce. And all of the U.S. gold that the U.S. holds is at $42 an ounce. So with the strike of a pen, effectively, you could go from, I think it's $11 something billion worth of gold at the current legal valuation, where you can convert that to the current value of gold, which would put you at gaining a little bit more than $1.1 trillion in gains, which is $1.2 trillion effectively. They may offer bonds or something like that. But we'll wait and see. The negative of this is, if you were to do that, it's like dumping a trillion dollars of money into the market. You have more supply of money, same amount of goods and services. So then inflation usually would follow something like this. So if you have an extra trillion dollars just floating around, I would expect our inflation numbers to go up even faster. So with all this said, what am I doing with my money? Well, first and foremost, get out of debt, first thing to do. However, I would say it's okay to have a primary mortgage that's a fixed rate, low interest mortgage on a home that you live in. You have to live somewhere. So after I make sure I'm out of debt, one of the things I'm doing is I have a six plus month emergency fund. And this is in CDs and high yield savings. These are FDIC. So they're insured up to the limit. Why do I say six months? Well, it's really because people when they're unemployed, about a fourth of them are unemployed for more than six months. So that's why I want that any money I need in less than five years. I'm going to keep that into like high yield CDs, high yield savings. These are currently at like three and a half, 4% is what I've been getting. And they're FDIC so that they're insured up to their limit of about $250,000 last time I checked. Three, any money I don't need for at least five years. This is where I'm using dollar cost averaging. I'm putting 70 to 80% to the S&P 500, about 10 to 20% total international fund and about 0 to 10% bonds. Now, do you realize that bond value is inversely proportional to the interest rate, meaning that if interest rates go up, bond value goes down. And if interest rates go down, bond value goes up. So right now I'm not buying any more bonds because I'm concerned with the rising inflation. And if they start to raise interest rates, then my bond value goes down. I am holding a good percentage of bonds, like 8% at the moment, but I'm not looking to buy any more bonds because of the inflation concern and that leading to raise interest rates. I also hold a lot of metal, so like I have gold and silver and aluminum and I make body armor, copper and steel. And I also reinvest in businesses I have or new ideas for businesses or a farm or YouTube or Amazon or Google or whatever it might be. Thank you for watching. Please subscribe. I cover a lot of financial topics such as how to make more money, how to save, how to invest, how to be an entrepreneur and limit your risk. If any of these interest you, please subscribe and have a great day.