In today’s newsletter, we’re doing things a bit differently. Instead of walking you through the story behind a headline, we wanted to take a moment to help you get into the mind of a decision-maker. How? By going through updates on the Australian labour market and the effects of tariffs on the U.S. economy, duh.

Let’s put our stats hats on and get moving!

Let’s play a game that you’ve definitely never played before. Here are the rules:

Keep in mind that one of the RBA’s goals is to keep unemployment low, and they can achieve this using the cash rate. 

Here’s what the RBA said about their intentions for the cash rate and their expectations for the labour market:

So that’s our goal post. Let’s see what’s happening in the labour market:

Before moving on, let’s unpack a bit of this. How can the number of employed people fall, but the unemployment rate remains unchanged? If you’re no longer employed, doesn’t that mean you’re unemployed? Not necessarily. See how the labour force participation rate also declined? What is likely happening here is that these people who used to be employed have now left the labour market altogether.

So, what do we think? Take a moment to try and interpret the data and how it might change or reinforce the RBA’s expectations. 

Here’s how I reacted:

The upshot: The data confirms the RBA’s expectations, and we can still expect a few more rate cuts over the next 18 months. 

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A few weeks ago, we took you through what tariffs were, how they work, and whether they would affect you. Here’s a refresher if you need it. 

The key point was this: We expect U.S. tariffs to increase inflation in the U.S. because they increase the cost of imported goods. 

Here are my follow-up questions:

Well, let’s have a look at the evidence.

This chart shows us how much money the U.S. federal government makes from taxes on imports. That number jumped from just under $100 billion in Q1 of 2025 to just under $300 billion in Q2 of 2025. That’s all the additional tax revenue from the new tariffs. 

Ok, we know the tariffs are working (generating revenue for the govt). So what?

Well, one of the earliest changes we saw around the time when tariffs were first announced and implemented was consumer sentiment (i.e. how people felt about the economy). Earlier this year, consumer confidence in the U.S. dropped sharply, and it has stayed low ever since. 

Ok, but what about hard economic data? Are tariffs affecting U.S. inflation, or jobs?

Here is inflation in the U.S. for the last 18 months. We see that from March 2024 to around April 2025 it was on a steady downward trend (despite a short blip towards the end of 2024). However, inflation has been on the rise for the last 4 months. 

Is this increase due to the tariffs? Well, we can check the price trends for the individual items that are most affected by the tariffs. 

The TL;DR? There is a whiff of higher tariff-related inflation, but not enough so far to say definitively that the tariffs have caused higher inflation. 

What about jobs? Are tariffs affecting jobs? Generally speaking, it can be hard to draw direct causal links between some policies (e.g. tariffs) and outcomes. But, we have seen a slight upward trend in the number of unemployment insurance claims in the U.S, suggesting that more people may be out of work.

It puts the U.S. Federal Reserve (the U.S. version of the RBA) potentially in a tricky spot. If inflation continues to rise, and unemployment starts to rise, then they’re in a hard position. Their job is to manage both inflation and unemployment. If inflation is high, you want to increase rates, but that could also further increase unemployment, which you don’t want. When the economy has both high inflation and high unemployment, economists call this stagflation. And it’s no bueno. 

For you, it does not mean much right now. Hopefully, it gives you a better understanding of how we track the economy and understand the effects of tariffs. 

One key thing I want you to take away from this: in economics, the effects of policy changes can happen with a long lag. Tariffs were introduced nearly 6 months ago, and we are only starting to see the effects, maybe. The economy can move slowly.

The price of gold surged again, hitting another all-time high. Why? The same reasons we discussed a few weeks ago: uncertainty is still a big problem, so people are still buying and hoarding gold. 

I apologise if this was a boring titbit. As far as I could tell, nothing was happening in the labubu, lipstick, or Sydney Sweeny-verse this week. Bro is becoming unc. (For those more offline than me, bro is unc = this person is acting like a generic uncle = this person is acting older than their age).