Beige or red flags?

Daily update

The Federal Reserve has to decide policy based on how far it believes labor markets will weaken, how high inflation will go, and whether higher inflation will persist. (There is also the question of whether rate changes will change any of those issues). On balance, yesterday’s information points to rate cuts.
The poor quality of the job openings data reduces its importance. Nonetheless, the persistence of weak hiring was evident. Smaller businesses, with less supply chain flexibility, reduced externally advertised job vacancies. The Federal Reserve’s Beige Book highlighted uncertainty (mentioned 47 times) as something hindering hiring. The summary section noted “nearly all Districts reported tariff-related price increases” (generally for input prices). There was some suggestion of profit-led inflation, but that does not appear to be widespread.
Bank of England Governor Bailey dampened expectations for a November rate cut. The UK does have higher inflation than its peers, although that should start to move lower. The remarks were not a particular surprise, and the UK government bond market is still generally outperforming European bonds.
US trade data is distorted, and has more political than economic significance. The initial and continuing jobless claims data has no bearing on tomorrow’s employment report, but does keep the focus on US labor market direction.