forecasting
freightcast
A Sudden Chill Hits the Markets
At 11:37 AM on Friday, a single social media post from Donald Trump mentioning “China” and a “100% increase in tariffs” erased $2 trillion in market value within hours.
- S&P 500: down 2.7% — the steepest fall since April
- Dow Jones: off 879 points (-1.9%)
- Nasdaq: down 3.56%, snapping a record-setting week
The timing couldn’t have been worse. Markets had been flirting with all-time highs, and investors were settling into a comfortable optimism. The sudden policy shock reminded everyone that global trade tensions remain a live wire.
A Government Shutdown Compounds the Confusion
As if market volatility weren’t enough, Washington went dark. Congress failed to pass a funding bill, triggering a federal government shutdown that halted the release of official economic data.
This creates a unique challenge for forecasters and analysts:
- Interrupted data flow: No employment report, no new economic indicators.
- Operational slowdown: Reduced government services and delayed contracts impact Q4 activity.
- Reliance on private data: Analysts turn to sources like ADP and the Federal Reserve’s internal datasets.
While temporary, the blackout limits visibility just when clarity is most needed.
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Labor Market Weakening
- ADP shows –32,000 jobs in September
- Fed notes a “curious balance” of weak supply and demand
- Hiring momentum has clearly faded
The labor slowdown could push the Fed toward another rate cut, but with tariffs adding inflationary noise, policymakers are in a bind.
Manufacturing: Stalled and Struggling
The ISM Manufacturing Index ticked up slightly to 49.1—technically an improvement, but still below the 50 threshold signaling contraction.
The details reveal deeper problems:
- Production: +1.3 to 52.6
- New Orders: -2.5 to 48.9
- Inventories: -1.7 to 47.7
Respondent commentary tells the real story:
- “Steel tariffs are killing us.”
- “Business continues to be severely depressed.”
“We are in a stagflation environment—prices are up and customers won’t buy.”
This paints a picture of industrial stagnation driven by tariffs, weak orders, and capital investment on hold.
Services Sector Barely Positive
- Business Activity: 49.9 (first contraction since 2000)
- Prices remain elevated: 69.4%
Services have been the economy’s lifeline. But persistent inflation and slowing hiring could erode that stability by year-end.
Trade Policy Turbulence
If the government reopens soon, the next big data release will be the trade deficit — and that could provide new insights into how tariffs are reshaping global flows.
The trade deficit fell 24% in August, mostly from a sharp drop in goods imports. But that decline is less about improved competitiveness and more about companies pulling back amid uncertainty.
New tariffs on pharmaceuticals, lumber, and semiconductors — and pending legal challenges — add yet another layer of complexity heading into Q4.
Key Takeaway
The U.S. economy isn’t collapsing — but the signs of fatigue are multiplying. With tariffs back in the headlines, a government shutdown clouding visibility, and a weakening labor market, the forecast for fall looks as chilly as the weather outside.
