Jared Bernstein, Former Council of Economic Advisors chair, joins 'Money Movers' to discuss July's core PCE report and what it means for the Fed and economy.

Jared Bernstein, former Chair of the Council of Economic Advisers, analyzed recent US economic data, noting that core inflation remains 'sticky' and above target, particularly in the services sector. He pointed out that while inflation figures met expectations, service inflation has accelerated and remains well above pre-pandemic levels, raising concerns about ongoing price pressures.

Bernstein also addressed signs of a weakening labor market and a notable decline in consumer sentiment, as indicated by the Michigan Sentiment Survey. He suggested that factors such as tariffs, policy uncertainty, and actions against the Federal Reserve are weighing on consumer confidence and could lead to higher risk premiums for US assets. Bernstein warned that these issues, combined with fiscal challenges, may continue to impact the US economy.

American consumer spooked, says Fmr. CEA Chair Jared Bernstein

Joining us with his takeaways this morning from the data, Jared Bernstein, chair of the Council of Economic Advisers under the Biden administration. Jared, happy Friday. It's good to see you again. You as well. Great to be here. I guess, what, is sticky the word of the day, given the data on inflation? Well, that's certainly a word I use to describe especially core inflation, 2.9 percent year over year. In fact, inflation, whether it's month over month or year over year, came in exactly as we expected. And it's always good to see the numbers tracking expectations. You don't like to be surprised. But the fact is that the core rate in particular has been stuck above its target for years now. And it's been, to coin perhaps an overused word today, awfully sticky. Another thing I saw getting a bit under the hood is that service inflation accelerated in July. And that, too, has been quite sticky, well above 3 percent, tracking that way for months now. Pre-pandemic, that was coming in around, too. Now, services aren't directly tied to tariffs. So that's a pressure that's also a source of concern right now, Carl. Yeah, that was certainly a worry coming out of the CPI print, and I'm sure we'll talk more about it in weeks to come. Of course, markets really more interested maybe in the labor data that's headed our way next week. And I think you probably see some vulnerabilities in the labor market. Yeah, I've written that the job market is showing cracks. Now, that's hard to see, harder than we'd like to see right now, because kind of the signal-to-noise ratio is dampened by a lot of fog, particularly on the labor supply side. We know that immigration is way down, but it's hard to track that in real time. That said, there are enough indicators, Chair Powell himself mentioned this in his Jackson Hole speech, enough indicators of a slowing job market to generate concern. And I think given today's inflation report, the fact that we're coming in at expectations, the fact that the Fed has repeatedly said that they could look through the tariffs as more of a one-time kind of event, the softening of the job market gets the extra weight here, and that leads to a September rate cut. And then that, you know, eventually takes a toll on consumer sentiment. When people don't have jobs, then they don't spend, and they don't think that they should be spending. And there's pullback there. How healthy do you think the U.S. consumer is? Well, you ask a timely question, because we also got information this morning from the Michigan Sentiment Survey, which showed a pretty significant tickdown in consumer sentiment. Those numbers jump around from month to month. But I'd say you're very much correct to suggest that we look at the actual spending data, because that's not so much, you know, how do you feel? That's what you're doing. And, in fact, we got a decent pop in real consumer spending. I think it was up 0.3 in this morning's report. That's real. But if you look for the course of the year, consumer spending is up at a 0.5 percent rate annualized. That's December through July, 0.5 percent. That's not a great number for real consumer spending. So, yeah, I think the American consumer is a bit spooked. I think tariffs, chaos, deportations, all the uncertainty, the harassment of the Federal Reserve, the Lisa Cook firing, all of that weighs on consumer sentiment. Jared, I had mentioned a couple of weeks ago a report came out from Swiss Re Institute that warned that the U.S. was losing its status as a safe haven and that international investors would likely start demanding a premium to hold U.S. assets. Do you think that the additional moves that we've seen against the Fed, against the Fed independence could heighten that risk? I very much do. And I think what you're mentioning, the Fed problems here, is very much a piling on to a set of problems that already existed in the very space you're mentioning. And it's not just that risk premium and interest rates might be coming around the corner. They're here. If you look at the spread between the 30-year Treasury and the 10-year or a shorter-term Treasury bill, you'll see that spread has really opened up quite a bit. If you look at the term premium, the term premium was negative a few years ago. Now it's closing in at a bit below 1 percent. So we're already seeing the kinds of risk premium pressures on interest rates where creditors are suggesting that they need a bit more if they're going to invest in an economy where you have the president such a meddler, not just in the Federal Reserve, but in private industry itself, if you look at that equity share take on Intel. So I think you're on to something important. And to me, it looks like it's going to get worse before it gets better. We haven't even talked about the fiscal outlook, which is also problematic from a longer-term interest rate perspective.

The Trump administration is planning expanded immigration operations in Chicago next week, two Department of Homeland Security sources tell CBS News. Camilo Montoya-Galvez reports.

Chicago

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Sana'a

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Beijing

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Kyiv

Ukraine Invasion

Russian attack on Kyiv kills more than a dozen people

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Minneapolis

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Washington

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Tehran

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FBI investigating Minneapolis Catholic school shooting as hate crime

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New York

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Nuuk

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Starbase

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Tel Aviv-Yafo

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Council of the City of Sydney

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Breakdown