Consumer confidence falters, signaling worry about economy under Trump
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(NEW YORK) — Consumer confidence plummeted in February, indicating worry about the direction of the U.S. economy under President Donald Trump.
A gauge of consumer confidence registered its largest monthly drop since August 2021, the nonpartisan Conference Board said on Tuesday.
Meanwhile, the share of consumers who expect a recession within the next year surged to a nine-month high, the data showed. A growing portion of consumers believe the job market will worsen, the stock market will fall and interest rates will rise, the report added.
Trump has issued a flurry of economy-related directives since he took office last month, including tariff proposals, spending cuts and an assault on diversity, equity and inclusion initiatives.
Earlier this month, Trump announced 25% tariffs on goods from Mexico and Canada as well as 10% tariffs on products from China.
Trump paused the tariffs on Mexico and Canada for one month after striking a deal with each of the two countries on drug trafficking and border security. On Monday, Trump said he plans to go forward with the tariffs when that pause lifts next week.
Seven of every 10 American adults believe tariffs will raise prices, an Ipsos survey found last week.
Concern about rising prices coincides with a bout of resurgent inflation that stretches back to the final months of the Biden administration. Consumer prices rose 3% in January compared to a year ago, registering a percentage point higher than the Federal Reserve’s target of 2%.
Egg prices, a closely watched symbol of rising costs, soared 53% in January compared to a year ago. An avian flu has decimated the egg supply, lifting prices higher.
“Consumers who fear the impact of higher tariffs, spending cuts, and deportations are getting worried and are likely to be more cautious,” Bill Adams, chief economist at Comerica Bank in Dallas, told ABC News.
Meanwhile, U.S. hiring slowed at the outset of the year. The nation added 143,000 jobs in January, far fewer than the 265,000 jobs gained a month prior, government data showed.
Still, some measures of consumer sentiment improved this month. Consumers’ assessment of current business conditions moved higher, while an uptick in purchasing plans for a home extended a monthslong recovery.
The fresh data follows a report last month from the University of Michigan showing that its gauge of consumer sentiment had declined for the first time in six months.
The results showed a sharp disparity between Democrats and Republicans, however. Attitudes among Democrats worsened while sentiment among Republicans improved.
(WASHINGTON) — Fresh inflation data set for release on Wednesday will provide an update on prices ahead of the holidays and help determine the outcome of an interest rate decision at the Federal Reserve slated for next week.
A monthslong slowdown of inflation came to an end when price increases accelerated in October, the most recent month for which data is available. The hot reading reversed some previous progress in lowering inflation and left price increases above the Fed’s target rate.
Economists expect consumer prices to have climbed 2.7% in November, which would amount to a slight uptick in price increases and mark two consecutive months of rising inflation.
The inflation gauge makes up the last piece of significant economic data before the Fed announces its next interest rate decision on Dec. 18. A finding of accelerated price hikes may give the Fed pause as it weighs interest rate cuts.
Inflation has slowed dramatically from a peak of more than 9% in June 2022, but price increases remain slightly above the target rate of 2%.
In recent months, the Fed has cut its benchmark rate three quarters of a percentage point, dialing back its yearslong fight against inflation and delivering relief for borrowers saddled with high costs.
The Fed is expected to cut interest rates by another quarter of a percentage point at its meeting next week, according to the CME FedWatch Tool, a measure of market sentiment.
Over time, rate cuts ease the burden on borrowers for everything from home mortgages to credit cards to cars, making it cheaper to get a loan or refinance one. The cuts also boost company valuations, potentially helping fuel returns for stockholders.
In theory, the policy eases access to funds, stimulates economic activity and boosts demand. But the promise of bolstered consumer strength risks increased prices.
Speaking at a press conference in Washington, D.C., on Thursday, Fed Chair Jerome Powell voiced optimism about the prospects for achieving a “soft landing,” in which the U.S. averts a recession while inflation returns to normal.
“We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and labor market can be maintained with inflation moving sustainably down to 2%,” Powell said.
The trajectory of inflation could shift in the coming months. Some economists expect President-elect Donald Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants to raise consumer prices.
When asked about the Fed’s potential response to Trump’s policies, Powell said the central bank would make its rate decisions based on how any policy changes impact the economy.
“In the near term, the election will have no effects on our policy decisions,” Powell said. “We don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy will be.”
“We don’t guess, we don’t speculate and we don’t assume,” Powell added.
(LOS ANGELES) — Multiple fires raging across the Los Angeles area will cost insurers as much as $30 billion, Wells Fargo and Goldman Sachs estimated in a report released this week.
After accounting for non-insured damages, the total costs will balloon to $40 billion, the report said.
The ongoing fires, according to analysts, “appear to already be the costliest wildfire event in California history.”
The forecast would make the fires one of the 20 costliest natural disasters in U.S. history, when calculated as a share of the nation’s gross domestic product, analysts added.
The wildfires have left a path of wreckage in their wake. More than 12,000 homes and other structures have burned down in the fire, the California Department of Forestry and Fire Protection said.
At least 24 people have died and more than a dozen others remain unaccounted for as multiple wildfires, fueled by severe drought conditions and strong winds, continue to burn.
Thousands of firefighters are battling wildfires across 45 square miles of Los Angeles County. About 92,000 people remain under mandatory evacuation orders and another 89,000 are under evacuation warnings.
A rise in high-cost natural disasters has strained insurers and helped send home insurance premiums nationwide soaring, experts previously told ABC News. Plus, a recent bout of acute inflation has made homebuilding and repairs more expensive, they noted, exacerbating the cost crunch for insurers.
Industry unrest roiling the insurance market in California demonstrates the role climate change has played in skyrocketing premiums and struggling insurers, some experts said.
The average home insurance price jumped a staggering 43% in California from January 2018 to December 2023, S&P Global found last year.
Over recent years, many insurers have reduced coverage or stopped offering it altogether in California as wildfire risks have grown. With more frequent and intense wildfires, insurers face the prospect of more claims and higher costs.
While wildfires are a natural and necessary part of Earth’s cycle, climate change and other more direct human influences have increased their likelihood. Climate change is making naturally occurring events more intense and more frequent, research shows.
Los Angeles residents and homes remain under threat from the wildfires.
A “particularly dangerous situation” with a red flag warning will go into effect in western Los Angeles County and most of Ventura County on Tuesday, weather officials said, with winds threatening to further fuel historic Southern California wildfires.
ABC News’ Kevin Shalvey, David Brennan, Emily Shapiro, Meredith Deliso, Max Golembo, Matthew Glasser and Julia Jacobo contributed to this report.
(NEW YORK) — An Elon Musk ally hired to overhaul the U.S. Department of Treasury has a lengthy record of undertaking hardline reforms in the private sector that demoralized staff and made them fear for their jobs, according to interviews with several former employees at his tech firm.
Tom Krause, the CEO of Silicon Valley-based Cloud Software Group, oversaw layoffs at his company in each of the last three years while instituting a return-to-office mandate, rigid performance ratings, and a request that weekly updates be sent from workers directly to Krause, the former employees told ABC News — echoing the sort of reforms that Musk’s new Department of Government Efficiency has begun undertaking within government agencies.
One former Cloud Software Group employee said she hid her pregnancy for fear it could make her a target of layoffs. An ex-manager said they dreaded filing performance reviews of subordinates, knowing some workers may fall victim to the next cycle of cuts. Another former employee said they avoided expressing unease in company emails or in the messaging app Slack out of concern that it could jeopardize their job.
“They’re taking business practices popular in boardrooms and on golf clubs, and they’re taking them into government,” Kathleen Roan, a former senior content designer at Cloud Software Group who retired in 2024, told ABC News.
Krause in recent days has vaulted into a key position at the Treasury Department, overseeing its $5 trillion payment system, which sends funds to tens of millions of Americans for programs like Medicare and Social Security, the agency’s website says.
In a press release, the agency said Krause brings decades of experience “managing balance sheets” to the agency’s effort to “maximize payment integrity.”
Neither Krause nor Cloud Software Group responded to a request for comment from ABC News.
A ‘hatchet man’
Several former employees ABC spoke with praised Krause as a savvy business leader, and one said they enjoyed their tenure at the company. But most of them requested that they not be identified due to concerns about reprisals.
“There was a whittling away of the things that made you feel like you were a valued employee and then finally ‘Oh, now we’re going to start eliminating jobs,'” Roan said of her time at the company under Krause. “They saw people as expendable.”
Cloud Software Group company was established in 2022 through the acquisition of enterprise software firm Citrix in a private equity-backed $16.5 billion deal, followed by a merger with TIBCO Software.
Krause, who had previously served as president of software at Palo Alto-based Broadcom, was named CEO of the new firm.
Within months, in January 2023, the company cut 15% of its workforce.
“The feeling was that he was there to cut expenses down and be a hatchet man, similar to what’s happening now in the government,” a former human resources employee said. “Everyone was on edge.”
Some of the cost-cutting measures at Cloud Software Group under Krause were first reported by The American Prospect.
Within months of Krause’s arrival, the company also requested that employees return to the office, multiple former employees said.
At the same time, the company closed some offices in an effort to reduce overhead costs, multiple former employees told ABC News. The closures left some workers without an office nearby, making them exempt from the return-to-office requirement, a former employee said.
On Inauguration Day, Trump signed an executive order calling on federal agency heads to mandate in-office work. Musk backed that policy in an op-ed he co-authored in the Wall Street Journal, predicting that mandatory return to work “would result in a wave of voluntary terminations that we welcome.”
‘A much higher level of business discipline’
Employees at Cloud Software Group lost some perks, too.
David Morgan, a former client support provider at Cloud Software Group, said the firm ended his quarterly bonuses, which amounted to $16,000 each year. Workers also stopped receiving “thank you” days, an extra allotment of paid time off, Morgan said.
“Everything we were told would be benefits at the time of hiring was slowly removed,” Morgan said. An Air Force veteran with a disability, Morgan said he received one day of notice before he lost his job as part of a round of layoffs in January 2024, after having been assured that his position had been safe over the months prior.
In a post on LinkedIn that month, Krause said the company had improved but still required personnel changes.
“Our focus on adding value for our long-standing customers while driving a much higher level of business discipline and accountability is bearing fruit — with customer retention and financial results for our first fiscal year as Cloud Software Group coming in ahead of plan,” Krause said.
“But change often means difficult decisions,” he wrote. “While we have a number of areas of the business where our plans involve additional hiring to support our goals, they also mean a pragmatic look at those places where we simply need fewer or different resources.”
In a direct message to Krause over LinkedIn days later, Morgan wrote, “It’s challenging to reconcile my dedication and commitment to the company with the feeling of being let go in a way that seemed to lack empathy.” It does not appear that Krause responded, according to a screenshot of the conversation reviewed by ABC News.
Another policy shift under Krause brought the implementation of employee-performance ratings on a scale of one to three, multiple former employees said.
The ratings took a toll on one former manager, who said the company required them to label at least one subordinate as a low performer. “I had to give one person a low score, even if I thought they didn’t really deserve a low score,” they said. “It was miserable.”
Rating systems have reportedly been deployed as part of the Trump administration’s recent push to cut staff. Senior staff across the Department of Health and Human Services were told to rank thousands of employees in probationary periods, with as much as 40% to be deemed non-mission critical, the Washington Post reported.
‘It’s very alarming’
Daniel Keum, a professor of management at Columbia University Business School, said the apparent overlap between cost-cutting initiatives at Cloud Software Group and some federal agencies exemplifies the Trump administration’s use of tactics borrowed from the private sector.
“In tech, there’s a mentality that you have to break things to make them a lot better,” Keum told ABC News. “When transposed into federal agencies, that mentality becomes very dicey.”
Nearly all former employees who spoke to ABC News expressed shock or concern about the role at the Treasury taken up by Krause, though one expressed indifference and another voiced support.
“It’s very alarming,” said Roan, the former Cloud Software Group design architect.
“He should absolutely not have anything to do with the U.S. Treasury Department,” said Morgan.
In contrast, a former account executive at the company applauded the choice of Krause for the Treasury role, citing his financial acumen.
“I don’t think you can find a better person to swim in the weeds [and] sit in the edifice of the Treasury Department,” the person said.
In January, Cloud Software Group conducted another round of layoffs. That same month, Krause sent an email to all employees asking them to voluntarily send him a message at the end of each week “telling me what you accomplished,” according to a copy of the email reviewed by ABC News.
The approach draws on best practices from “two great entrepreneurs and CEOs that lead the most valuable companies in the world,” Krause wrote, naming Musk and Nvidia CEO Jensen Huang.
In a separate email in recent days, Krause told employees that he plans to continue in his role at the company during his time at the Treasury, according to a copy of the email reviewed by ABC News that was first reported by CRN.
“I am honored to serve our country,” Krause wrote. “Let me be clear — as CEO of Cloud Software Group, I am committed to our company and to you, our employees.”
