The Fed has cut rates, but it’s still battling hard to fulfill its famous dual mandate: Keep inflation low and employment high. To understand the recent furore over job numbers and its relation to interest rates, editor Peter Green spoke with Tim Mahedy, chief economist at economic consulting firm Access Macro.

BBTW: Is a recession now inevitable?

Tim Mahedy: I don’t think it’s inevitable. I do think we’ve inched closer over the last year, and the data we keep getting, particularly in the labor market, shows us that we were closer than we thought last year. There are structural things happening with labor demand and supply that allow you to have fewer job gains every month and not have it be as worrying as it would have been 10 years ago. That said, the pace of job gains over the summer is below the break-even rate. I think we’re at a spot where we’ll start seeing the unemployment rate rise. We are tiptoeing towards that recession. It would require either a change in federal immigration and trade policy, or looser monetary policy to help us stave off a recession.

What got us here?

It’s a bunch of things together: We had a big boom in immigration that lifted potential GDP and lifted the equilibrium interest rate, and also some productivity gains from AI. The underlying fundamentals of the economy were stronger in ‘23 and ‘24 than some of us initially thought, and that helped us absorb higher interest rates. Immigration has now gone the exact opposite direction. That’s going to have the opposite impact on potential growth and interest rates. Trade policy, very clearly, is going to be inflationary. It’s going to hurt consumption and investment, especially if it continues to roll out as it does in little announcements over time, in a sequence of one-time shocks. Restrictive monetary policy is also forming this cloud that is both changing the underlying fundamentals of the economy and creating cyclical risk.

What about jobs?

Two things are happening. There’s both structural shifts happening in the labor market reducing the demand for labor and the supply — an aging population. College graduates are also not doing great in terms of long term unemployment. That’s really getting hollowed out because of AI. The other thing is that there was a surge in hiring post-pandemic that may have shifted demand from the future. So now we’re in a spot where people are over-hired.

The Fed cut rates by 25 basis points. Will that fix things?

This is a really hard time to be making monetary policy. We don’t get these instances often where the dual mandate is truly in conflict.The core Personal Consumption Expenditures (PCE) price index inflation rates have been increasing for five months. So we’re getting more and more inflation. At the same time, obviously, the labor market is weakening, so the Fed is stuck in a really tough spot where they’re going to have to pick between these things. What they’ve done is to try to split the difference.

Will that work? The New York Fed says we won’t see inflation down to the 2% target until the end of 2027.

We’ve now had inflation above the target rate for 53 months. So, you’re talking about six and a half, seven years of inflation above 2% every single month. And you have to either acknowledge that risk and say we’re going to risk that and have inflation go even higher, to cut faster to avoid a labor market decline, or we’re going to have to really get inflation under control and we’re going to raise the risk of a recession. Going down the middle of the road is the most risky strategy.

Going forward, what should we be paying attention to in the job numbers?

Look at the monthly pace of your core inflation, look at the concentration of job gains. At this moment, we’re adding jobs, but they’re concentrated in one sector. More than 80% of job gains this year have been in health care and social assistance. That’s a huge concentration. If we’re going to stay at this level of job gains, I’d like to see it spread out a bit. The economy is fragile, and just like your portfolio needs to be diversified, you want to see the economy adding jobs in lots of different places, even if it’s not a lot of jobs.

This interview has been edited and condensed for brevity and clarity.

—Peter S. Green

The usual suspects

• You’ve got sale? First, an end to dial-up service. Now, AOL $AOL may have a new owner. Private equity firm Apollo Global Management $APO has an interested buyer, the Wall Street Journal reports, for $1.5 billion. AOL earns about $400 million a year. Apollo paid $5 billion in 2021 to buy AOL and Yahoo $YHOO from Verizon $VZ.
• TikTok deal? The fate of Chinese-owned video app TikTok is about to be decided by the U.S.and Chinese governments. This time, President Trump’s envoys say they’ve lined up a consortium of software and hosting giant Oracle, private equity firm Silver Lake and venture capital firm Andreesen Hororowitz to take over 80% of TikTok, and run the U.S. version of the platform on an adaptation of TikTok’s Chinese-built algorithm. China’s ByteDance, a government-linked firm that now owns the app, would keep 20%. It’s not clear that a U.S.-tweaked version of China’s TikTok app will satisfy the law’s requirements, but those niceties may fade in the rush to secure a deal before Trump visits China. “We’ve got a deal on TikTok. I’ve reached a deal with China,” Trump said Tuesday, adding, “I’m going to speak to President Xi [Jinping] on Friday to confirm everything.”
• China nixes Nvidia invasion: China has banned companies there from buying special Nvidia $NVDA chips made for the Chinese market, the Financial Times reported, sending Nvidia shares down. Then Nvidia said it will buy a 4% stake in U.S. chipmaker Intel $INTC for $5 billion, a slight discount to its closing price on Wednesday, just weeks after the Trump Administration promised to convert some Biden era loans and grants into a 10% stake in Intel. On Thursday, Intel’s shares soared more than 25 percent to $31.79. Nvidia’s stock rose about 3 percent. The two will work on making chips for data centers.
• I scream at ice cream: Multinational food giants like Unilever $UL don’t like political controversy. And that’s the red line for Jerry Greenfield, the Jerry in Ben & Jerry’s ice cream, whose partner posted a note he wrote on X saying he’s quit the brand after founding it 47 years ago. Unilever now won’t let the socially active ice cream brand it bought 25 years ago speak out on hot-button issues such as the war in Gaza, Jerry says. “Ben & Jerry’s has been silenced, sidelined for fear of upsetting those in power,” Greenfield wrote on co-founder Ben Cohen’s X account.
• Fly-by: Delta’s $DAL cross-border joint-venture with AeroMexico is keeping ticket prices artificially high and must be dissolved by Jan. 1, The Department of Transportation ruled this week. The DOT also blames Mexico, which is restricting competition at Mexico City’s main airport. The effort to end the nine-year old collaboration was begun under the Biden Administration. Delta says fares could rise if their venture is undone, and two dozen routes could be cancelled.
• Car Talk: GM $GM recalled 23,000 corvettes after it figured out why the $100,000 speedsters were awkwardly bursting into flames at gas pumps. Turns out an engine-cooling fan can, in rare instances, blow gasoline onto the engine when a gas pump’s automatic shutoff fails. GM says it’s fixed the problem. Meanwhile Rivian $RIVN, the mini-Tesla wannabe that’s been losing billions of dollars a year, is opening a large factory in Georgia to build a crossover expected to sell for $37,000. And even after ICE agents hauled away several hundred of LG Energy Solutions employees who had overstayed or violated short-term work visas, the Korean-owned EV battery maker said it hadn’t stopped work on its Georgia factory, one of four under construction in the U.S.

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The media mirror

• On bended (Dis)knee: ABC parent Disney $DIS bowed to threats from the Trump Administration’s top media regulator, and yanked comedian Jimmy Kimmel’s show for remarking that rightwing personality Charlie Kirk’s killer was probably “one of the MAGA gang.” Immediately before Kimmel’s show was “suspended indefinitely” by Disney, FCC chair Brendan Carr told a podcast that his apolitical, bipartisan commission has “remedies we can look at,” adding, “we can do this the easy way or the hard way.” The “hard way” may have been a reference to a pending offer by Nexstar $NXST which owns 32 of the 200 ABC affiliate stations, to buy Gannett’s $GCI former TV holdings, now called Tegna $TGNA, for $6.2 billion. That sale needs FCC approval. “Companies are now pre-emptively censoring — or “canceling” — people who they fear will upset the president,” the New York Times wrote in its influential Dealbook newsletter.
• Grey lady sued: Donald Trump has filed a $15 billion defamation lawsuit against the New York Times $NYT. Trump says the paper and four of its top reporters interfered in the 2024 election and spread “false and defamatory” content about him. “The “Times” has engaged in a decades-long method of lying about your Favorite President (ME!)” Trump posted on his Truth Social network. Libel suits face a high bar in the U.S., and have to prove a statement was published with “reckless disregard” for the truth, and caused quantifiable damage to a person’s reputation. Fox News media commentator Howard Kurtz tweeted on X, “Trump craves NYT’s approval, as a Queens guy who wanted to conquer Manhattan. He got it till the 2016 run. Times has led the negative barrage against the president, but without showing malice or specific errors, the suit will languish.”
• David’s new Goliath: Nepo-mogul and new Paramount Skydance $PSKY CEO David Ellison is plotting a bid for troubled rival studio and media company Warner Bros. Discovery $WBD , the Wall Street Journal reported, just weeks after he secured a deal for CBS-owned Paramount. Ellison says he’ll pay cash for WBD, which had a market cap of $33 billion when the announcement came (it’s now near $44 billion). Maybe that’s because Ellison’s dad, Oracle $ORCL founder and Trump’s ally Larry, saw his personal fortune shoot up by $70 billion after closing a huge deal with OpenAI last week. WBD boss David Zaslav, who combined Warner Brothers with Discovery in a value subtractive merger in 2022, had planned to split the company in two, expecting rich offers for the studio and streaming unit from tech companies like Amazon $AMZN and Apple $AAPL.

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The short stack

• Fyre away: The Fyre Festival has a buyer: The shut-down-for-enabling-piracy file-sharing platform LimeWire, which has since become a crypto marketplace, said it paid $245,000 on eBay for the Caribbean Island luxury music fest. “We’re not bringing the festival back — we’re bringing the brand and the meme back to life,” said LimeWire CEO Julian Zehetmayr. The press release was titled “What could possibly go wrong?”
• Name not-so-cheap? Domain name seller and web hosting platform namecheap, the low-priced higher-service competitor to Go Daddy, is selling itself for $1.5 billion to PE firm CVC Capital partners. Closely held NameCheap says revenue grew 18% in 2024, to $398 million.
• Keep on Truckin’? Tariff impacts and a downturn in U.S. manufacturing are challenging the U.S. trucking industry, despite massive gains in efficiency. Adding to the woes of the logistics industry: An Oct. 14 deadline for the U.S. to start charging duties on Chinese-made, owned and operated ships of $100 to $250 a container. The Trump Administration says the move is meant to push more business to U.S. shipbuilders, but trade groups note America no longer makes a lot of ships, so shipping will just get more expensive. Meanwhile, the Wall Street Journal reports on shoppers getting whacked with massive tariff bills weeks after packages they ordered from abroad were delivered. It’s ever since President Trump ended the de minimis exemption for small packages worth up to $800.

Elon’s world

• The gospel truth, but which gospel? Tesla $TSLA shareholders seem to believe that the only future for their already highly valued stock — it was trading Wednesday at 246 times earnings — is to pay CEO Elon Musk even more money. As Tesla’s board of directors promises a $900 billion pay package if Musk can supercharge the company’s already highly valued stock, Musk himself is talking up the company’s share price, spending $1 billion (of his then $345 billion fortune) to buy Tesla shares. A shrewd move: the resulting share bump added more than $95 billion to his own net worth, pegging it at $440 billion. None of that saved Elon from the wrath of Pope Leo XIV, who said society is in “big trouble” with widening CEO and employee pay gaps, this week. Musk snapped at the Vatican on X: “Why do you see the speck in your neighbor’s eye, but do not notice the log in your own eye?” he wrote, quoting the gospel of Matthew, noting the Vatican’s assets are worth about $2 trillion.
• Blast zone: Musk is also facing the wrath of a singular group of politically potent Floridians who don’t want him launching mega rockets from Kennedy Space Center at Cape Canaveral.The blast zone is so big, it’s closing down their nudist beach. Not that Musk has to care. He said in a recent video podcast that he expects humans to settle on Mars by 2055. How many rockets does the Pope have?