Today’s jobs report was a strong one, and encouraging in its broad-based gains. Manufacturing is now up by more than 50,000 jobs since February. Combine that with the increase in job openings and total manufacturing labor demand over the period is up by more than 200,000 jobs. Not bad.
The Federal Reserve’s latest Beige Book reports: “Healthy labor demand was seen most frequently in manufacturing, construction, and some service sectors... Significant wage increases were most often connected to demand for skilled workers in construction and manufacturing.” Also encouraging.
And the Purchasing Managers’ Indices continue to report strong growth this month.
From S&P: “The headline seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI®) was unchanged at 53.9 in August, signaling a solid expansion in the manufacturing economy. Output volumes rose for the fifteenth consecutive month…”
From ISM: “New Orders Growing; Production Growing; Employment Growing… Economic activity in the manufacturing sector expanded in August for the eighth consecutive month…”
And from the Dallas Federal Reserve, Texas Manufacturing Activity Accelerates as Outlooks Improve Further.
Caveat: There may be something wrong with these numbers. The true experts in the free trade gang were so reliable about posting data from these sources in the months after Liberation Day, when it didn’t immediately turn positive. But now they’ve gone quiet. They may know something we don’t. We are monitoring the situation.
YOUR ONE WEEKEND READ is Why the World Needs to Force China’s Yuan to Revalue: A currency accord, enforced with tariffs, might be the only way to get China to act, from Greg Ip in the Wall Street Journal:
China’s massive and growing trade surplus threatens to hollow out its trading partners’ industrial bases. For years, the rest of the world has pleaded with China to change its economic model to rely more on domestic demand, and less on exports, to no avail.
A currency accord, enforced with tariffs, might be the only way to get China to act. The time may be ripe. Frustration with China is boiling over, especially in Europe. “This Chinese surge now threatens…the very core of Europe’s productive system,” a French government report said in February. In June, German Chancellor Friedrich Merz called for a new Plaza Accord aimed at China.
A meeting by central bank governors and finance ministers from the top 20 economies starting this weekend in Asheville, N.C., would be a good place to start the conversation.
Read the whole thing and, while you do, imagine former Trump CEA Chair Steven Miran bursting through the wall like the Kool-Aid Man. Did someone say a currency accord backed by tariffs?
Seriously, though, it’s good to see the international economic framework that has guided the Trump administration get the credit it deserves in the Journal…
…and with our trading partners! On Sunday, reported Reuters, G20 countries should consider more trade barriers on China to cut imbalances, Bessent says. “U.S. Treasury Secretary Scott Bessent said on Sunday he will encourage G20 members to re-examine terms of trade with China to shrink global imbalances and press Beijing to rebalance its economy away from exports and toward domestic consumption.”
On Tuesday, the U.S. released a “chair statement” from the summit with support from 19 of 20 countries. Any guess on who the one is? (The Financial Times provides a hint: China derails consensus after US-hosted G20.) As Bloomberg’s chief U.S. economist Anna Wong notes, “The 19-1 vote is really telling. Now that Europe is experiencing what the U.S. had experienced in the 2000s, there is finally something approaching moving toward a global consensus on global imbalances.”
Strange, that. We were warned by the very best experts that aggressive U.S. action on trade was going to alienate allies and drive them toward China. But it seems to have had the opposite effect, and now everyone is coming together to confront and isolate China.
From the Wall Street Journal: U.S. Says It’s Fed Up With China’s Overcapacity—and More Countries Agree. For instance, “When it comes to China, ‘everyone’s feelings have crossed a threshold,” said Japanese Finance Minister Satsuki Katayama.’” And, “a February report by the French government titled ‘The Chinese Steamroller’ said China’s export surge threatened the ‘very core of Europe’s productive system.’ In Indonesia, one of the poorest G-20 members, government officials have said that a flood of Chinese imports is hurting domestic industry.”
Indeed, it appears that by refusing to continue absorbing the brunt of the global imbalances itself, the U.S. has forced its partners to acknowledge and address the problem alongside it.
In his latest at Foreign Affairs, A Great Rebalancing Is Coming: Who Will Bear the Costs of a Global Trade Adjustment?, Michael Pettis looks at how all this might play out:
Beijing seems set on trying to preserve its surpluses for as long as possible. Washington is just as intent on reducing its deficits. If Europe can develop the political capacity to do the same, the burden of adjustment will increasingly fall onto the surplus economies, which would have to rely more on domestic demand and less on exports. If it cannot, Europe will absorb more and more of the global surpluses, and what appears today to be a trade conflict mainly between China and the United States may become a conflict between China and Europe—and a struggle between the two of them to avoid bearing steeper costs down the road.
If I were Canada, I’d work on teaming up with the United States against China on this one, rather than cozying up to China or thinking about joining the EU. I would not recommend the current strategy. As Secretary Bessent suggests, “I don’t think you can be in a tit-for-tat with someone who’s 13 times larger than you are.”
MORE GOOD READS FROM THE WEEK
I still don’t have the greenlight to emulate Matt Walsh’s “What Is a Woman?” documentary, sporting a man-bun wig while wandering around conferences to ask pretentious and underachieving economists “what is an economist?” So you’ll have to make do with this not-a-parody column from Soumaya Keynes in the Financial Times: When Is an Economist Not an Economist?
Think of economists as a guild whose members police who is allowed to join and what counts as true economics. By guarding the definition of economic expertise, they preserve their influence over the public and public policy.
This seems mostly right, with the caveat that their definition of “true economics” has fallen so flat on its face that defining their profession by its terms is at this point reducing their influence rather than preserving it. (Also, fun fact: Yes, Ms. Keynes is related to that Keynes! She is his great-great-niece.)
Forthcoming in the American Economic Review, from Daron Acemoglu et al: Eclipse of Rent-Sharing: The Effects of Managers’ Business Education on Wages and the Labor Share in the US and Denmark. Apparently, CEOs with business degrees don’t just wear snazzier quarter-zip fleeces, they also reduce wages by placing higher priority on shareholder value. They do not, on the other hand, increase output, investment, or employment growth.
And, from the New York Times, Wispr Flow is supposed to make writing effortless and magical. So I “wrote” this column with it. Amy X. Wang observes:
To tell you the truth, I hate this. I hate Wispr Flow so much. I hate that so many people in the world are lauding this like it’s the greatest invention, when actually I think it’s making everyone sound a little like an idiot, and now everybody has to read everyone else’s idiot words. I wish I could describe elegantly how much I hate it with some kind of handy, clever metaphor, but that kind of creativity comes to me through writing with my hands.
Speaking of things AI is ruining…
EDUCATION
NYC school system to ban AI for elementary, middle school students (Politico). Good for them. EPPC’s Patrick Brown makes the salient political point: “One political side has its leaders pushing robots as tutors and ‘A1 in every classroom.’ The other side has a major city administration keeping generative AI out of elementary and middle school classrooms. One of those paths is more family- and human-friendly than the other.”
This misstep by at least one faction of the right-of-center parallels the one I wrote about in Vice President Donald Trump: “If Trump brands Republicans as the party of liberty-means-license and ‘kids want to spend their time gambling with borrowed money because that’s their welfare-maximizing revealed preference,’ while Democrats become the party that speaks in moral terms and works to ensure young men build decent lives, the electoral consequences will be steep.”
In better news, from the State Department, “Vice President J.D. Vance and Secretary Marco Rubio announced today the launch of Foundry School, a training program for entrepreneurs, engineers, technicians, and industrial leaders to rebuild American manufacturing.” Cutting the enormous and counterproductive subsidies to traditional higher education is important, having new models like this toward which funding can be directed is equally important.
And back to worse news, from the Department of Justice, Ohio State University Agrees to $2.1M Settlement to Resolve Allegations that it Failed to Disclose Employees’ Ties to the People’s Republic of China in Applications for Federal Research Funding. Well the fine is good news, but as FDD’s Craig Singleton goes deeper on the problem in Higher Ed’s Secret Foreign Funding:
Washington has a list of names. What’s delaying disclosure? (Wall Street Journal).
China, China, China. It’s enough to make you think entangling our economy and society with a communist, authoritarian one might not be a good idea! Which brings us too…
CHINA
A few decoupling items to keep an eye on, all from Bloomberg:
Top Automakers Urge Congress to Permanently Ban Chinese Cars: “The call by the US auto industry’s biggest trade association — echoing a similar plea made by the alliance and other auto groups in March — underscores mounting concerns in the domestic industry about the threat posed by China’s automobile makers. The alliance represents domestic carmakers including General Motors Co. as well as overseas giants Toyota Motor Corp. and Volkswagen AG.”
A wild, related statistic from BYD’s latest financial report: “First-half sales from overseas rose 34% to 181.3 billion yuan ($27 billion), accounting for 53% of the total, while they shrank 31% in Greater China.” That’s, um, not normal. “The results show how the vast Chinese market, where annual vehicle sales outnumber those of the US by nearly two-to-one, has become so brutal that not even its national champion can count on making money there. That’s why Chinese carmakers have increasingly turned abroad…”
Why the FCC Is Becoming America’s China Uber-Hawk: “Perhaps less-well recognized is that the regulator is emerging as a key instrument in Washington’s efforts to ‘de-risk,’ or in some cases outright decouple, US supply chains from China. This shouldn’t come as a surprise: Since before the FCC’s creation, the US national security apparatus (and especially the Navy) was paying close attention to devices that transmit and receive signals over the air.”
LABOR x IMMIGRATION
Don’t look now, but: Record-High 47% Want Unions to Have More Influence (Gallup). Of particular note, “partisans differ on whether unions should gain influence, but majorities in all three groups approve of unions overall: 89% of Democrats, 70% of independents and 52% of Republicans. Broad Democratic approval is typical, but this is only the second time in the past quarter century — the first being in 2022 — that a majority of Republicans have approved of unions.”
Perhaps not unrelatedly, the quiet withdrawal of the case for mass immigration continues apace, even on the Wall Street Journal opinion page. In Immigration Becomes a Global Powder Keg, Walter Russell Mead makes the obvious yet not so frequently made point: “In recent years, American immigration advocates have argued that falling birthrates create a need for more immigrant labor. Those arguments are less convincing in the face of the accelerated automation that artificial intelligence appears ready to unleash.”
Example? Watch this “AgTech moon landing moment.” The first robotically harvested head of lettuce!
Perhaps not unrelatedly, the Center for Immigration Studies has released its latest analysis on the foreign-born population in the United States, finding that since January 2025, “The total foreign-born population declined 2.9m; Illegal immigrant population may have declined 2.3m.”
Either “root causes” like climate change suddenly reversed their effect, or enforcing the law works. You be the judge.
One place that enforcing the law seems to work is trucking. The U.S. Department of Transportation announced that it has shut down more than 100 commercial driver’s license (CDL) schools that were granting licenses to drivers who failed English proficiency tests, among a variety of actions. Vice President JD Vance on the problem: “We know that trucking is one of the best sources of employment for non-college-educated men. It was bad for people’s jobs, but it also made our streets and our highways a lot less safe.”
OPT, Yeah You Know Me (you’re welcome, Gen X). Here’s a problem that deserves more attention and seems easy enough to solve: alongside the H-1B mess, people are catching on to the absurdities of Optional Practical Training program (OPT), which was intended to allow foreign college students to work temporarily, but has been expanded by corporations and allied regulators into yet another boondoggle. Bloomberg actually had one of the best rundowns on this a number of years ago in The STEM Graduate System Is Broken. Here’s How to Fix It:
OPT has also opened a side door into the U.S. job market with minimal labor protections and oversight. It is increasingly funneling cheaper and more pliable, visa-dependent foreign candidates into fields such as software engineering and development, depressing wages and making a once-attractive career path less desirable. Moreover, even as OPT benefits U.S. schools eager to attract foreign students, it can undercut American students looking for work. And there have been too many instances of exploitation and outright fraud.
Fair warning, though, from the Cato Institute, which is proudly promoting testimony from its director of immigration studies, David Bier: “If you make legal immigration impossible, don’t complain about illegal immigration. You created it. You made it illegal.” That’s one way of looking at it! Fortunately, not one that conservatives have to put up with any longer.
And finally, speaking of things conservatives don’t have to put up with any longer…
YOUR BAD TWEET OF THE WEEK
Likely a regular feature, given the volume of foolishness out there (nominations welcome). Our inaugural edition comes to us from Grover Norquist’s former tax policy director, Ryan Ellis:
Enjoy the weekend!
The shambolic way that “Liberation Day “ was done (read “Regime Change” to see how the sausage was made) and still the tariffs had some positive effect indicates that they were needed. It is quite astounding that Europe still cozies up to China who is keeping Russia and Iran alive.
Europe (and Canada) is completely useless whether we are talking about the economic struggle with China or defending the Arctic.