Weekly Economic Report 6.6.25

Last week we discussed our growing concerns about inflation. This week’s employment data – especially the 0.4% rise in wages – leaves us worried that real economic growth is cooling, but money growth is not. More money is fueling strong equity markets, bitcoin, and other asset markets – and threatens to show up in the prices of goods and services in coming months. Whether those price increases are dictated by tariffs, or pushed through under the umbrella of their expectation, is a matter of timing that is still unclear. As noted last week, part of the excess money was from the Social Security Fairness Act. More government stimulus is coming on October 1st, as it is clear the FY2026 deficit will be larger than in FY2025. We expect new tax cuts for tips, overtime pay, and a larger standard deduction for the elderly (as a replacement for tax cuts on social security) will all be in the new budget. Meanwhile, fewer border crossings have brought labor force growth to a standstill, reducing the potential growth rate – not to the level of stagflation, just higher inflation.

EU06-06-2025.pdf

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