The American consumer is spooked, says Fmr. CEA Chair Jared Bernstein

Inflation & Monetary Policy - Core inflation remains sticky above the target at 29% year-over-year [2] - Service inflation accelerated in July and has been sticky above 3% for months, compared to around 2% pre-pandemic [3] - The Fed may consider tariffs as a one-time event, leading to a potential September rate cut due to a softening job market [6] Labor Market - The job market is showing cracks, with indicators of slowing job growth generating concern [5][6] - Immigration is down, creating fog and dampening the signal-to-noise ratio in the labor supply [5] Consumer Sentiment & Spending - Consumer sentiment experienced a significant tick down, as indicated by the Michigan Sentiment Survey [7] - Real consumer spending showed a decent pop, up 03% in the recent report, but only up at a 05% annualized rate from December through July [8] - Tariffs, chaos, deportations, uncertainty, and harassment of the Federal Reserve are weighing on consumer sentiment [10] Economic Risks & Interest Rates - The US is potentially losing its status as a safe haven, with international investors likely demanding a premium to hold US assets due to moves against the Fed's independence [10] - Risk premium pressures on interest rates are evident, with the spread between the 30-year Treasury and shorter-term Treasury bills widening [12] - The term premium, which was negative a few years ago, is now closing in at a bit below 1%, indicating increasing risk premium pressures on interest rates [12][13] - The president's meddling in the Federal Reserve and private industry is contributing to the risk premium [13] - The fiscal outlook is also problematic from a longer-term interest rate perspective [14]