A Flood of Economic Data Is Coming. Pay Attention to the Unemployment Rate.

President Donald Trump toured the Federal Reserve’s headquarters on July 24 and spoke about the building’s renovation with Fed Chair Jerome Powell. (ANDREW CABALLERO-REYNOLDS / AFP / Getty Images)

Holy macro! The coming week sets up to be among the busiest in memory for economic news, with such key events as the Federal Open Market Committee meeting, release of the monthly jobs data, and the Aug. 1 tariff deadlines. Plus, there will be estimates for gross domestic product and employment costs for the second quarter, the release of June’s measure of the personal consumption expenditures price index, the Federal Reserve’s favored inflation gauge, and the Treasury’s latest borrowing plans.

Center stage will be the FOMC’s policy decision, due Wednesday afternoon, July 30. Forgive the repetition, but what will matter is what the panel says, since it is certain to do nothing to its federal-funds target range of 4.25%-4.50%.

That’s despite President Donald Trump’s barrage of calls for rate cuts, which culminated in his trip to the Fed on Thursday, ostensibly to inspect the renovation of the central bank’s headquarters. Trump admitted the much-ballyhooed cost overruns didn’t provide cause to fire Fed Chair Jerome Powell and reiterated that his main focus was to get rates down.

While the FOMC won’t lower rates this time, it is almost equally certain two committee members will register dissents in favor of an immediate reduction. The reduction is more likely to happen in September, with fed-funds futures putting a 65.9% probability on Friday of at least a one-quarter percentage-point cut then. Futures were pricing in a 64.3% chance of at least a second quarter-point drop by December, which is consistent with the most recent Summary of Economic Projections from the June FOMC confab. (There won’t be an update on the SEP this week.)

One topic not likely to be discussed by the FOMC is money. Four-plus decades ago, money supply was the big number the markets followed, but it fell out of fashion.

Yet a massive surge in the M2 measure in 2020 and 2021 from the Fed’s stimulus was followed by the worst inflation since the 1980s, Jim Reid, Deutsche Bank’s head of macro and thematic research, pointed out in his ever-useful Chart of the Day missive. A subsequent, sharp contraction in M2 didn’t cause a recession, however, just the failure of Silicon Valley Bank in 2023, as money growth merely returned to its long-term trend.

“Fast forward to 2025 and U.S. M2 is growing notably again—at +4.5% [year-over-year], the highest rate since July 2022,” Reid writes. “The three-month annualized rate is even stronger at +6.9%, the highest since February 2022. So there’s a clear hint that we may be turning up again**,** especially when looking at short-term momentum in the three- and six-month annualized numbers.”

That doesn’t suggest overly tight monetary policy.

The FOMC won’t have the July employment data when it meets, which the Bureau of Labor Statistics releases publicly on Friday. The consensus guess among economists calls for a 106,000 rise in nonfarm payrolls, with nearly all the increase coming in the private sector. That would contrast with the June report, which showed a larger-than-expected 147,000 rise, inflated by a jump in public-sector jobs reflecting errant seasonal adjustments for the end of the school year.

The July report could show a drop in the unemployment rate, from the most recent reading of 4.1%, not because of increased hiring but fewer job seekers, according to a client note from 22V Research, headed by Dennis DeBusschere. “The shrinking labor supply issue is underappreciated,” it said.

A jobless rate of 4% or less could provoke a negative reaction in the Treasury and stock markets.

That ironically could further complicate Fed policymaking. A low unemployment rate could obscure signs of weakness in payrolls growth, but nonetheless make it harder to cut rates. J.P. Morgan Chief Economist Bruce Kasman observes that the political blowback on the central bank could get even worse if it is seen to be reluctant to respond to a slowing economy.

Here’s hoping for a dull August.

Write to Randall W. Forsyth at randall.forsyth@barrons.com