The Weekly Wrap: The Buck Doesn’t Stop with Jerome Powell
Welcome to Friday!
Happy Jobs Day to everyone celebrating. This week, we found out that the GDP is stronger than anticipated, more people are eager to enter the workforce, Powell’s supporters feel he was exonerated after an inspector general didn’t label him a criminal, and there are still concerns among some liberals about the surge of women in the job market.
Let’s jump in!
Powell’s Fed Faces Sharp Criticism
Remember when Jerome Powell claimed that the Justice Department’s probe into the Fed’s office renovations was just a ploy to meddle in monetary policy? The mainstream financial media largely accepted this viewpoint, though nobody could quite explain the logic. Why would Donald Trump or anyone else believe that going after the Fed for construction issues would somehow change interest rate decisions?
This week, the Fed’s inspector general released a report on the renovations. It revealed that the Fed had made numerous mistakes. Most notably, the project lacked proper oversight, allowing top officials, including Powell, to evade responsibility.
Strangely enough, the financial media viewed this as a win for Powell. No criminal activity was found! Powell wasn’t pocketing funds! He was merely overseeing an organization, poorly managing a multibillion-dollar construction project for its headquarters. The notion that one can’t hold top brass accountable because they didn’t actively supervise isn’t quite the exoneration some journalists might think.
Fortunately, the Fed’s new leadership interpreted the report differently. Warsh didn’t celebrate or ridicule Trump for pointing out issues with the project. Instead, he introduced significant reforms to ensure that future accountability gaps don’t happen again. This was essentially a strong rebuke of Powell’s oversight practices—echoing the inspector general’s findings.
Unemployment Rises, But So Does Participation
The thriving Trump economy is drawing more individuals into the workforce.
The Bureau of Labor Statistics announced on Friday that the unemployment rate crept up to 4.2 percent from 4.1 percent. The unemployed count increased by 78,000, totaling 7.1 million. Meanwhile, the labor force expanded by 485,000, and employment climbed by 406,000. The participation rate rose to 61.8 percent from 61.6 percent, and the employment-population ratio increased to 59.2 percent from 59.1 percent.
Notably, those who lost a job or ended a temporary work position dropped by 45,000, down to 3.2 million. Permanent job losses decreased to 1.75 million, while temporary layoffs were relatively stable at 845,000.
In simpler terms, it’s not job losses driving the increase in the unemployment rate. The counts of job losers have actually fallen. Instead, what we’re seeing is an uptick in labor force participation.
Liberal Concerns Over Female Employment Growth
It seems that liberals often prefer to battle imaginary foes rather than debate actual conservatives.
For the second month in a row, liberals are pretending to worry about the fact that women secured more jobs than men since Trump took office. If a Democrat were in power, this would be hailed as a major achievement. With men generally being more employed than women, the increase in women’s jobs is a step toward greater equality.
Liberals seem convinced, without basis, that conservatives harbor a secret disdain for female employment and wish to promote a “male breadwinner economy.” They interpret the latest job statistics as evidence that conservatives are failing in a goal they’ve imagined for them—one that the liberals personally deem undesirable.
Perhaps there’s a darker motive at play. They may suspect that these numbers could alienate sexist voters from the Republican side, potentially harming GOP prospects in the midterms. Maybe it’s just a strategy to manipulate perceptions.
Regardless, those figures don’t prove what liberals assume they do. The smaller net gains for men may largely stem from a significant reduction in the number of foreign-born men in the workforce. As we pointed out last month, this demographic has declined considerably, and that, all else being equal, would affect male employment numbers.
GDP Growth Surprises on the Upside
This week, the government revealed that the economy expanded at a much quicker pace in the first half of the year than earlier estimates suggested. What initially appeared to be a lackluster start to the year is now seen as quite robust. The latest report for second-quarter GDP growth was revised to 2.2 percent from 1.5 percent, with first-quarter growth also adjusted up to 2.5 percent from 2.1 percent.
The revisions stem from several positive indicators: increased household spending, stronger nonresidential investment, and less negative impact from inventories. Even though corporate profit growth was slightly revised down, it still marked the strongest quarterly increase since the economy reopened in the second quarter of 2021.
The political media seems to have successfully discouraged Republicans from promoting the economy out of fear of appearing “out of touch” or “overlooking suffering.” This tactic essentially disarms Republican candidates, stripping them of one of their most compelling reasons to seek voters’ support. If anyone were to ask our opinion, we’d argue this should be ignored. It’s a solid economy, and it deserves to be acknowledged!
Reflecting on Income Tax History
Not every glance into economic history is a cause for celebration. This week marks the 113th anniversary of Woodrow Wilson signing the Underwood–Simmons tariff legislation, which included the modern federal income tax. This law reduced tariffs while introducing income taxation as outlined in the newly ratified Sixteenth Amendment.
This legislation represented the shift from a system that focused on taxing imports to one that imposed taxes on American incomes. It initiated the transition of federal revenue agents from ports and borders to our domestic economy.
The initial tax rate was set at one percent, applying to individuals earning above exemptions of $3,000 and married couples above $4,000. In today’s terms, that would be approximately $102,000 for individuals and $135,000 for couples.
