Consumer sentiment sours as government shutdown threatens economic damage
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(NEW YORK) — Consumer sentiment soured in October as a government shutdown threatens to weaken a wobbly economy beset by an uptick in inflation and a sharp slowdown of hiring, fresh data on Friday showed. The reading marked a decrease from the previous month but it came in higher than economists expected.
Shopper attitudes have worsened for three consecutive months, resuming a decline that took hold after President Donald Trump took office, University of Michigan Survey data showed.
At its low point this year, consumer sentiment fell close to its worst level since an acute bout of inflation three years ago. The measure remains well below where it stood in December, before Trump took office.
Year-ahead inflation expectations ticked down from 4.7% in September to 4.6% in October, the data showed. The outcome anticipated by respondents would put inflation well above its current level of 2.9%. Long-run inflation expectations held steady from the previous month, data showed.
The data on consumer sentiment is likely to garner more attention than usual, since the government shutdown has halted closely watched releases from the federal government, including monthly jobs and inflation reports.
Consumer spending, which accounts for about two-thirds of U.S. economic activity, is a key bellwether for the outlook of the nation’s economy.
A government shutdown typically risks only modest damage for the economy but it can cause a marked decline in consumer sentiment, threatening a later drop in consumer spending, some experts previously told ABC News.
Consumer sentiment fell more than 7 points from December 2018 to January 2019, coinciding with the most recent 35-day government shutdown, according to a Committee for Responsible Federal Budget analysis of University of Michigan survey data. A souring of consumer sentiment, albeit limited, occurred over each of the three most recent shutdowns that preceded 2018.
The government shutdown, which entered its 10th day on Friday, has shown little sign of resolution. The Senate has rejected dueling funding proposals from Democrats and Republicans in seven separate votes.
The shutdown has coincided with a delicate moment for the nation’s economy, as a hiring slowdown stokes recession fears and inflation proves difficult to fully contain.
Federal Reserve Chair Jerome Powell said last month that policymakers face a “challenging situation” while they attempt to navigate the economy through a “turbulent period.”
(NEW YORK) — The Federal Reserve cut its benchmark interest rate a quarter of a percentage point on Wednesday, opting for its first interest rate cut this year in an effort to revive the flagging labor market.
The central bank delivered a policy long-sought by President Donald Trump, though the size of the rate cut all but certainly fell short of Trump’s desired outcome. The Federal Open Market Committee (FOMC), a policymaking body at the Fed, projected two additional quarter-point rate cuts over the remainder of the year.
Five meetings and nine months have elapsed since the Fed last cut interest rates. The federal funds rate stands between 4% and 4.25%, preserving much of a sharp increase imposed in response to a pandemic-era bout of inflation.
The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In a statement on Wednesday, the FOMC indicated greater concern for slowing employment growth than for rising inflation.
“The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen,” the FOMC said.
The high-stakes announcement marks a flashpoint in the monthslong pressure campaign directed at the Fed by Trump.
In recent weeks, Trump has moved to fire one member of the Fed’s board of governors and secure Senate confirmation for another. Both officials were on track to be among the 12 policymakers who cast votes on the interest-rate decision, though their status remained uncertain days before the Fed meeting.
The race to reshape the Fed comes after Trump railed for months against the central bank and its Chair Jerome Powell for declining to heed his call for lower interest rates. In July, Powell stressed the importance of political independence, saying it allows central bankers to make “very challenging decisions” based on “data.”
In a social media post on Monday, Trump reiterated his criticism of Powell, saying the Fed chair “MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND.”
In recent months, the economy has suffered a sharp hiring slowdown alongside an uptick of inflation, setting the conditions for what economists call “stagflation.”
The economic conditions have put Fed policymakers in a bind. If the Fed raises interest rates as a means of protecting against tariff-induced inflation, it risks tipping the economy into a downturn. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a hiring slowdown, it threatens to boost spending and worsen inflation.
Last month, Powell said the central bank faces a “challenging situation,” putting pressure on both sides of the Fed’s dual mission to maximize employment and control inflation.
Still, Powell said, the “balance of risks appears to be shifting” in light of a hiring slowdown made clear in a weak jobs report earlier this year that included sharp downward revisions of job gains over recent months.
Trump recently moved to fire board member Lisa Cook, who sued Trump over her attempted ouster, saying the decision violated her legal protections as an employee at the independent federal agency. Trump said he removed Cook over mortgage fraud allegations against her.
Federal law allows the president to remove a member of the Fed board “for cause,” though no president has attempted such a removal in the 112-year history of the central bank.
Last week, a federal judge issued a preliminary injunction requiring the Fed to let Cook continue serving in her role as a governor of the Federal Reserve System as her lawsuit moves through the courts.
Days later, the Trump administration filed a request with an appeals court asking to remove Cook by Monday, before the scheduled vote on interest rates. That day, an appeals court rejected Trump’s bid, clearing the path for Cook to vote at the Fed meeting. Trump may appeal the ruling to the Supreme Court.
Last month, Trump called on Cook to resign on the same day that Bill Pulte, the director of the Federal Housing Finance Agency, posted on X part of an Aug. 15 letter sent to U.S. Attorney General Pam Bondi accusing Cook of falsifying bank documents and property records to acquire more favorable loan terms, “potentially committing mortgage fraud,” the letter stated.
In a statement provided to ABC News at the time, Cook said she learned from the media about Pulte’s letter seeking a criminal referral over the mortgage application, which predated her time with the Federal Reserve.
“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” Cook said in the statement last week. “I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.”
The Senate voted 48-47 on Monday to confirm White House economic adviser Stephen Miran’s nomination to serve as a member of the Board of Governors of the Federal Reserve, paving the way for Miran to cast a vote on interest rates.
Miran has vowed to safeguard central bank independence but said earlier this month that he does not plan to resign from his position within the Trump administration. Miran is filling a vacancy created by the early retirement of Fed board member Adrianna Kugler, whose term was set to end in January.
Miran said he plans to take an unpaid leave of absence from his current role. Miran reached the decision after “advice from counsel,” since his term on the Fed board would last four months, Miran said at a Senate hearing this month.
Co-founder and chief executive officer of Nvidia Corp., Jensen Huang attends the 9th edition of the VivaTech trade show at the Parc des Expositions de la Porte de Versailles on June 11, 2025, in Paris. (Chesnot/Getty Images, FILE)
(NEW YORK) — Chip giant Nvidia delivered more revenue than expected over a recent three-month period, the company said on Wednesday, defying concern among some prominent figures about a possible bubble in the artificial intelligence industry.
The California-based company recorded $46.7 billion in sales over three months ending in July, which exceeded analyst expectations of $46.2 billion. The jump in revenue marked 56% growth compared to the same quarter a year earlier.
The fresh data offered the latest window into the health of the artificial intelligence (AI) industry, which in recent years has become a key engine for stock market gains and economic growth.
Nvidia, the $4 trillion company behind many of the chips fueling AI products, has expanded at a breakneck pace since an AI boom set off by the release of OpenAI’s ChatGPT in 2022. The California-based company saw its stock price soar nearly 700% over the ensuing two years.
Alongside continued growth, the company is weathering new challenges. President Donald Trump barred the sale of chips to China earlier this year, before revoking the ban in July. A month later, Trump struck an agreement with Nvidia allowing the company to sell chips in China if the firm hands over 15% of revenue generated by the exports to the U.S.
Speaking at the White House earlier this month, the president recounted the agreement with Nvidia.
“I said, ‘If I’m going to do that, I want you to pay us as a country something, because I’m giving you a release,'” Trump said.
In May, the company said it expected to suffer an $8 billion loss as result of restrictions imposed upon chip exports. Earnings released on Wednesday said the company did not sell any H20 chips in China over the most recent quarter, but the firm did not mention any losses related to the policy.
In recent weeks, some prominent figures have warned of an AI bubble, casting doubt on the sustainability of the sector’s gangbusters growth. Torsten Sløk, chief economist at Apollo, said last month that the AI bubble may exceed the dot-com bubble of the 1990s, suggesting that the top firms are overvalued.
In an interview earlier this month, OpenAI CEO Sam Altman also said the AI industry had become a bubble.
“Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes,” Altman told tech publication The Verge.
Still, the AI sector remains a bright spot for the U.S. economy. AI-related spending added a 0.5 percentage point boost to annualized gross domestic product growth over the first half of 2025, Pantheon Macroeconomics found.
Treasury Secretary Scott Bessent speaks alongside President Donald Trump during a press availability in the Oval Office of the White House, Sept. 5, 2025. (Kevin Dietsch/Getty Images)
(NEW YORK) — Employers in nearly every industry have cut back on hiring, according to the latest data, leaving job seekers with fewer places to turn.
A recent jobs report extended a lackluster run of labor data that stretches back to the beginning of the summer. While the unemployment rate stands at a historically low level, millions of out-of-work Americans face stiff conditions.
Nearly two million job seekers have been out of the workforce for more than 27 weeks, which amounts to about a quarter of all unemployed people, the U.S. Bureau of Labor Statistics said on Friday.
At the same time, worker confidence in their ability to find a new job has hit a record low, according to a survey released by the New York Federal Reserve on Monday.
Analysts who spoke to ABC News attributed the tepid job market in part to economic uncertainty hanging over employers as a result of President Donald Trump’s tariff and immigration policies. The recent adoption of artificial intelligence tools has also diminished prospects for jobs in some entry-level roles, some analysts added.
“New hiring has really slowed to a crawl,” Mark Hamrick, senior economic analyst at Bankrate, told ABC News.
In a note to clients Friday, Joseph Brusuelas, global economist at RSM, described the U.S. as a “slow hire, slow fire economy,” saying that a sharp increase in tariffs has burdened some importers with higher taxes and cast doubt over the nation’s economic outlook.
“The impact of tariffs on hiring is undeniable,” Brusuelas said in the note, adding that the levies had “pushed economic uncertainty to the highest level in years.”
Restrictive immigration policies, meanwhile, have reduced the supply of available workers and threatened employers with higher labor costs, deepening a sense of uncertainty, some analysts said.
The Trump administration has pursued an immigration policy that features the detention of undocumented immigrants at work sites and the revocation of Temporary Protected Status – a form of temporary legal status – for hundreds of thousands of immigrants.
“We’re deporting lots and lots of working immigrants. That just stirs the pot even further in terms of employers feeling, ‘We don’t know what’s going on here,’” Michelle Holder, a labor economist at John Jay College of Criminal Justice, told ABC News.
For its part, the Trump administration downplayed the weaker-than-expected jobs report late last week, voicing expectations of an upward revision of the data and predicting better job performance.
A tax-cut measure enacted by Trump earlier this year will boost business investment and drive up hiring, Kevin Hassett, director of the National Economic Council, told reporters on Friday.
“President Trump knows that we’re super optimistic about the future of the jobs numbers, because we’re seeing a massive blowout in capital spending,” Hassett said.
The hiring cooldown has hit nearly every industry, including leisure and hospitality and the federal government, BLS data shows.
The manufacturing sector has suffered a net loss of 78,000 jobs this year in the midst of a tariff policy that the Trump administration has said is aimed at reviving domestic production. Construction, another key sector dependent on long-term investment, has incurred a net loss of 10,000 jobs over the past three months.
“This has to do with producers’ uncertainties about the future,” Holder said.
In response to the flagging labor market, the Fed is expected to cut interest rates when policymakers meet later this month. Investors peg the chances of a quarter-point rate cut this month at about 88% and the odds of a half-point cut at nearly 12%, according to CME FedWatch Tool, a measure of market sentiment.
In theory, a reduction of interest rates could boost hiring as borrowing expenses fall and businesses encounter more favorable conditions for new investment. However, the Fed’s incremental approach is unlikely to yield major improvement for job seekers anytime soon, Hamrick said.
“It will have a marginal impact for people,” Hamrick added. “I don’t see that producing a sea change in the environment anytime soon.”
