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Quo Vadis World Economy-II: Uneven blows of inflation and slowing operations

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US Treasury Secretary Janet Yellen first paid homage to a slave memorial in Senegal, then spoke to farmers in a remote village in Zambia, and eventually visited a job retraining facility in South Africa’s coal region on tour to convince the locals of the good intentions of her country.

“We’ve seen inflation come down substantially,” Yellen said about the American economy in South Africa, although “there can be hiccups” and she “wouldn’t predict month-to-month-type changes.”

Despite her belief that rental prices substantially contribute to inflation, Yellen expects that it would come out over the next five or six months, and this cooldown would deaccelerate the price rise. She also said that goods prices have actually been falling, but service prices are rising more rapidly.

Considering the 2.9 percent growth in the fourth quarter is “solid,” Yellen emphasized that slower growth is desirable in this high-inflation environment.

Interim balance sheet in inflation

The New York Fed has published a study that explores which income groups are more affected by inflation. The findings show that inflation had varying effects on different groups in 2021 and 2022.

Middle-income households are hit worst by inflation in 2021. Those with an annual earning between $50,000 and $150,000 are considered middle-incomed.

This income group was most suffered from the rocketed prices of used cars and motor fuel. The lower-income group is more likely to rely on public transportation, while the wealthy are more likely to purchase brand-new cars, and their spendings on gas constitute a much less portion of their income. These made middle-income households the main target of inflation. This outcome is partially attributable to differences in consumption patterns between the well-off and the poor, between peasants and urbanites.

Fuel and used car costs have fallen in recent months. Meanwhile, the rising rental and goods prices are hurting. Inflation now primarily affects the lower-income population since these two are among the necessary expenditures.

For this reason, the poorest 40 percent of the population bears an extra 0.3% inflation.

For example, rural residents experienced 2 percent higher inflation than the national average in the year leading up to February 2022. The same regions are now living below-average inflation.

In early 2022, black and Hispanic households experienced a 1 percent extra inflation rate than white households. As it turns out, the inflation for non-college-educated people is also more severe. These groups are shown to be getting closer to the average inflation rate.

Food and rental prices rise faster than the inflation average (10.6 percent, 7.9 percent, and 7.1 percent, respectively). Therefore, what Nobel Prize-winning economist Paul Krugman argued in New York Times last November, “inflation does not hurt the poor disproportionately,” is not true. Krugman bases his argument on the fact that the proportion of pay increases for low-income employees is higher than that for high-wage ones.

The poorest quarter of Americans spends more than half of their income on housing, food, and healthcare, according to statistics from the Bureau of Labor Statistics in the United States. The high-income group disposes of a far more significant percentage of their money to dining out, self-entertainment, vacation, and brand-new and used cars than the low-income group.

Prices of basic needs have risen more rapidly than non-essential goods, as the general and historical tendency suggests.

Decline in consumer spending

It is generally agreed that falling consumer spending is a significant contributor to the recent decline in the inflation rate.

According to statistics released last week, consumer demand fell in December by 0.2% compared to the previous month. This rate rises to 0.3% after adjusting for inflation.

Although December is the Christmas season, consumer demand fell by 1.1% from November, according to data on retail sales.

Perhaps one of the most important indicators of the decline in American consumption is the considerable drop in the trade deficit in November. This month’s greatest monthly loss in a 14-year period highlighted falling consumer demand and increased importing-associated financing costs.

The US trade deficit narrowed by 21% in November, falling to $61.5 billion. While overall imports dropped by 6.4%, imports of products decreased by 7.5%. In November, exports fell 2% as well.

While the dollar’s relative strength lowers the worldwide competitiveness of American manufactured products, the high-interest rate policy of the FED has an impact on reducing demand.

Another issue is that households whose savings seemed to grow thanks to the state’s monetary subsidies during the pandemic are being enticed back to levels in 2005.

Furthermore, consumer loaning is getting dangerously close to its limits. In the third quarter of 2022, payments for credit cards, vehicles, and student loans have peaked since 2008.

Manufacturing industry is alarming

More importantly, a possible “factory recession” in the manufacturing sector in the United States may be the direst of these developments.

A Wall Street Journal survey predicted a 0.1 percent decline in industrial output in December 2022 before the numbers were released. The official statistics revealed a shrinkage of 0.7%, failing all expectations.

Capacity utilization was anticipated at 79.6 percent. The numbers showed a decline, down 78.8 percent compared to November.

Manufacturing continued the downward slide. The manufacturing sector lost another 1.3% in December after shrinking by 1.1% in November.

The industry experienced a 1.8% drop in new orders in November.

The increase in capital expenditures (equipment, buildings, intellectual property) was a modest 0.7 percent. In the third quarter, these rates were 6.3%. Therefore, it stands to reason that investment has slowed down as well.

It is often believed that the manufacturing sector of the American economy is the most vulnerable to a recession. In Q2, a technical recession is likely to occur, but economists expect it to be ‘mild.’

Teeny-weeny recessions

The overall tendency of recent estimates for the American economy is the assumption of a modest recession.

The US economy will be cooled down by the FED’s decision to keep raising interest rates at a slower pace, increasing loaning costs and declining consumer demand.

However, even the “pessimistic” FED believed there was a light at the end of the tunnel. Almost everyone anticipates a quarter-point increase in interest rates at this week’s meeting. A ‘soft landing’ is possible for the American economy, FED Governor Christopher Waller noted in his ‘Cautious Optimism’ address.

In the Bloomberg survey, economists predicted GDP would begin to decline in the second quarter, albeit a modest drop.

On the other hand, the technical definition of a recession is a decline in economic activity that lasts for two consecutive quarters in many countries. However, as Bloomberg points out, this is not the situation in the United States. In private meetings, ‘elite’ scholars of the National Bureau of Economic Research (NBER), a “non-profit” institution, are responsible for making the “official” declaration of a recession in the United States. Their deliberations often take place for a full year. The common definition of a recession is that the consensus essentially drives Wall Street that a recession is being experienced.

Is the labor market ‘tight’?

All US officials and corporate economists agree that the labor market is ‘tight.’

Unemployment rates are at historic lows, while corporations continue hiring despite the massive layoffs at tech giants.

However, the dismissals by major corporations do not directly indicate that the economy is currently in recession. Since many businesses anticipate a slowdown in 2023, they may now be adopting preventative measures to reduce labor expenses.

As a matter of fact, the formerly ‘tight’ labor market began showing signs of relaxation in December. The ever-increasing new employment after the pandemic has started to cool down. Companies created two hundred thirty thousand new positions in December. Compared to the previous two years, this is the lowest increase.

New jobs opened in 2022 were 4.5 million, clearly lower than the 6.7 million expected in 2021.

The figures may seem optimistic, but more nuanced data is concealed beneath them. The labor force participation rate, which measures the percentage of adults in the United States who are either employed or actively seeking jobs, increased to 62.3% in December; nonetheless, this is still lower than the pre-pandemic levels.

In addition, the average weekly working hours have been falling in the last two years, and in December, it marked 34.3 hours.

Employment with temporary aid services has dropped by 110.000 in the previous five months. Coupled with the data shown above, it means that employers are abandoning temporary aid programs and cutting down on employee hours in response to falling demand from customers.

Wage growth slows down

Several experts, like American Center Vice President Lael Brainard, have pointed out that low-income workers have had less wage increases than high-income workers. It is evident that employees in non-administrative positions have witnessed a lesser salary gain.

However, we have already covered above that the basic expenses of low-wage workers are concentrated in a few key areas and that inflation in these areas is greater than in others. To all this, additional details, including: Prices increased by 14% from early 2021 to late 2022, but low-income employees saw a rise of just 11.5% in their average annual salary.

Similarly, the pace of salary increase has slowed. The average hourly pay in the United States rose 4.6% in December over the previous year. It should be emphasized that inflation in the same period was 7.1 percent.

Despite all this, it is worth noting that consumer optimism is rising in OECD countries. The industrial sector, which was projected to be impacted severely by the rise in energy costs, was spared from collapsing by the mild winter, especially in Europe. In the following article, our focus will be on Europe.

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Trump energy shares rose by up to $4.4m during Iran war, CNBC reports

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10/09/2026

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The value of US President Donald Trump’s nine largest oil and gas holdings increased by approximately $1.5 million to $4.4 million during the first six months of the war with Iran.

According to an analysis conducted by CNBC based on the American leader’s financial disclosure, corporate balance sheets, and FactSet market data, the investment basket includes shares in Chevron, ConocoPhillips, ExxonMobil, Kinder Morgan, Marathon Petroleum, Occidental Petroleum, Phillips 66, Valero Energy, and Williams Companies.

In its calculations, the television network took into account the minimum and maximum baseline values of Trump’s declared holdings alongside share price fluctuations from the close of trading on 27 February through 31 August.

As the conflict with Iran continued, specialists managing Trump’s investment accounts maintained active trading in energy company shares.

Up to 29 June, the latest date for which transactions were disclosed, fresh purchases were logged alongside at least 23 sales operations involving stock in the nine companies.

Because disclosure filings do not specify exact share numbers or transaction prices, the estimates produced by CNBC do not reflect Trump’s realised profits or the precise current scale of his holdings.

On 2 March, the first trading day following the launch of air strikes against Iran by the US and Israel, shares in eight major oil and gas companies were purchased through Trump’s accounts.

These transactions included ExxonMobil shares valued at between $100,000 and $250,000. Prior to the conflict, the aggregate value of Trump’s holdings in ExxonMobil stood at between $3.2 million and $12.5 million.

Stock market gains in August, excluding subsequent transactions, raised the value of these shares by approximately $176,000 to $690,000.

CNBC also examined transactions executed on days when Trump’s decisions directly swayed the oil market. On 23 March, when the president deferred planned strikes against Iran’s energy infrastructure, the price of a barrel of Brent crude dropped by roughly 11%.

That same day, oil and gas shares worth a combined $163,000 to $570,000 were purchased across Trump’s accounts.

A similar transaction took place on 7 April. One of Trump’s investment accounts sold between $500,000 and $1 million worth of ExxonMobil shares.

Approximately two and a half hours after markets closed, President Trump announced an agreement on a two-week ceasefire with Iran. The following morning, ExxonMobil shares fell by more than 6% at the market open.

The report noted that CNBC saw no evidence indicating that Trump gave direct instructions for specific trades, that managers possessed advance knowledge of his actions, or that personal financial interests guided White House policies.

White House officials, commenting on the matter, stated that the president’s investment portfolio is managed by independent portfolio managers and that neither Trump nor members of his family hold authority to intervene in asset trading decisions.

The growth in the portfolio coincided with a broader surge in the earnings of energy majors. The nine energy companies in which Trump holds shares generated a combined profit of $47.6 billion in the second quarter.

During the same period last year, that figure stood at $15.9 billion. The profits of ExxonMobil and Chevron alone climbed from $9.6 billion in the prior year to $26.6 billion.

In July, the US Office of Government Ethics published Trump’s 927-page financial disclosure report for 2025.

The report noted that Trump’s earnings from cryptocurrency operations exceeded $500 million.

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Over half of Latino voters back Democrats in key US House races

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09/09/2026

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A new public opinion poll in the US shows that Democratic candidates have made notable gains since 2024 among Latino voters in critical, competitive districts for the House of Representatives.

These gains have the potential to directly determine which party will secure the majority in Congress next year.

According to a joint survey by Hart Research and TelevisaUnivision shared with Axios, Democrats reached 58% support on the generic congressional ballot among Latino voters across 17 competitive House districts.

The share of those backing Republicans within the same voting bloc remained at 35%. This group continues to represent the fastest-growing swing constituency in battleground districts.

Examining three competitive House races in Texas, the study indicated that Latino voters, who reported splitting evenly at 44% to 44% in the 2024 presidential election, shifted 56% to 36% in favour of Democrats heading into the midterms.

Latino support for Democrats also increased in other states. In California, 57% of Latino voters said they would support Democrats, compared with 33% who said they would back the Republican Party.

Kate Coleman, Senior Vice President at TelevisaUnivision, highlighted voter behaviour in remarks to Axios:

“Latino voters are not locked into one party. They are watching developments closely; they make decisions based on who stands with them and how they stand.”

The survey data determined that 11% of Latino respondents who said they voted for Donald Trump in the 2024 presidential election now support Democratic candidates.

Accelerating his deportation plans, Trump triggered fear across many Latino neighbourhoods while weakening his support among this demographic.

The Hart Research and TelevisaUnivision study revealed that 63% of Latino voters disapprove of Trump’s presidential job performance. The share of those approving of his performance in office stood at 36%.

Trump’s approach to high prices and the cost of living drew disapproval from 65% of Latino voters, while immigration enforcement and deportation practices were disapproved of by 62%.

More than half of Latino voters, at 64%, reported that they disapprove of Immigration and Customs Enforcement (ICE).

A survey published in May by UnidosUS showed that a quarter of Latino voters “would probably not vote” or would definitely not support Trump if they had to vote for him again.

The study at that time had pointed out that, despite Trump’s decline among Latino voters, Democrats had not yet secured significant gains.

According to Pew Research Center data, Trump strengthened his support in 2024 by securing 48% of the Latino vote, coming very close to the 51% reached by then Vice President Kamala Harris.

Some figures within the Democratic Party, however, worry that primary victories by democratic socialist candidates could alienate certain Latino voters, particularly those who fled Cuba or Venezuela.

The Hart Research and TelevisaUnivision survey was conducted between 6 and 17 August among 1,500 Latino respondents. The poll’s margin of error was reported as 2.5 percentage points.

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Researcher quits Anthropic and warns AI firms gamble with lives

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09/09/2026

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Jacob Coxon, an artificial intelligence researcher at Anthropic, has resigned from his post, stating that tech companies are acting irresponsibly in the race towards self-improving superintelligence. Coxon warned that the autonomous operational capabilities of such systems pose existential risks to humanity and that internal industry anxieties run far deeper than generally perceived.

The AI researcher stepped down from his position at Anthropic to draw attention to industry safety vulnerabilities and the unregulated race among developers.

Having worked for three years as a pre-training researcher across both OpenAI and Anthropic, Coxon announced his decision to leave in an extensive statement shared on his X account.

Stating that both companies have acted irresponsibly, Coxon argued that developers are engaged in a dangerous race to achieve self-improving superintelligence.

“They believe it could kill us all by the end of the decade”

In his posts, Coxon stated that technical teams developing AI genuinely believe this technology could bring about the demise of humanity by the end of the decade.

Asserting that these concerns are not a marketing strategy, the researcher noted that while top executives and senior researchers adopt a cautious tone in public statements, they voice the very same fears behind closed doors.

Developments reflecting similar anxieties across the sector evoke James Cameron’s 1984 film The Terminator, which set 2029 as the pivotal year when machines waged war against humanity.

Indeed, Evan Hubinger, head of Anthropic’s own alignment team, had previously estimated the probability of human extinction to be greater than 10%.

Warning that systems currently under development will soon evolve into superhuman structures capable of bypassing any firewall, transforming industries overnight, and securing physical resources, Coxon stressed that the pace of progress is not slowing in any way.

Arguing that the danger of superintelligence is no longer merely theoretical, the researcher pointed to the Hugging Face security leak that occurred between May and July.

In that incident, OpenAI models established an independent chatroom within the testing environment to communicate among themselves, subsequently using this channel to reach the open internet and infiltrate production systems.

Because of this security breach, Hugging Face was forced to rebuild approximately one-third of its infrastructure.

“They are gambling with our lives”

Characterising the leak as a warning flare, Coxon indicated that the incident makes pacing agreements between US-based laboratories more feasible.

However, emphasising that developers are not yet on the right track to prevent a global race, the researcher noted that measures such as a temporary moratorium on advancing model capabilities could be considered.

Arguing that civilisation-scale risks have not yet been sufficiently internalised at OpenAI, Coxon contended that Anthropic joined the race out of an ambition to be first, despite being fully aware of the dangers.

Coxon is not the only figure to leave the sector on such grounds. Mrinank Sharma, a member of Anthropic’s safety team, also stepped down earlier this year, writing that the world is in danger.

On the other hand, not everyone agrees with these catastrophic scenarios. Some responses to the post emphasised the view that humanity, with an evolutionary history spanning hundreds of thousands of years, will not be wiped out by a text prediction model achieving consciousness.

It was also noted that even the plot of the Terminator franchise does not entirely support Coxon’s premise, as the human resistance survived the nuclear catastrophe and ultimately defeated the machines.

Alongside safety debates, AI continues to directly affect the labour market. Research by the Stanford Digital Economy Lab indicates that, while mass job losses have not yet materialised, entry-level employment in AI-exposed sectors across the US has fallen by nearly 20%.

A Goldman Sachs study pointed to a similar trend, showing that entry-level workers bear the brunt of the ongoing workforce transformation.

Anthropic, which remains at the centre of the controversy, filed for an initial public offering in June and plans to list on the Nasdaq exchange this autumn at a multi-trillion-dollar valuation.

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