There are two ways we Americans are looking at the world as you read this: near-term and longer-term. Investors are focused on the Federal Reserve board’s monetary policy committee decision ten days hence, when they will learn whether it will lower its benchmark interest rate as expected.

Investors’ edginess is increased because, historically, markets are at their weakest in September and we might face a government shutdown on October 1.

Serious policymakers take a longer view. They want to determine whether he who sowed the wind with claims of untrammelled power has forced us to inherit the whirlwind, and just how much of the America we have known was caught up in that.

First, the next ten days. Data tells a tale of a growing economy, at an annual rate of 3.3 per cent in the second quarter and projected to grow at 4 per cent by Kevin Hassett, the chief White House economist.

Americans, comforted by the “wealth effect” stemming from rising share and house prices, continue to spend. Hassett reckons that business investment, driven in part by billions spent on AI-related projects, is up by 8 per cent. Factory activity continues to contract and the housing sector is in the doldrums. Still, little in the data cry out for a Fed rate cut to stimulate activity.

But Jerome Powell, the Fed chairman, believes the labour market requires attention. The economy created a piddling 22,000 jobs in August and the unemployment rate ticked up from 4.2 to 4.3 per cent. That would not ordinarily be a worrying level, but it might be artificially low because we have avoided massive lay-offs due to “labour hoarding” — temporary retention of under-employed workers by employers who found it difficult to fill openings after the Covid-19 pandemic.

More people are spending more time looking for more jobs. For the first time in four years there are more jobseekers than job openings. Job-hopping in pursuit of greener pastures has been replaced by “job hugging”, even by dissatisfied workers.

Overhanging the market is AI, unpredictable but surely likely to destroy more jobs than it creates. Employers surveyed by The Wall Street Journal variously describe their plans as “holding down hiring”, “less head count”, “human-light” and those talking to the Axios news website say “budget conversations are heavy on jobs that won’t exist in 18 months”.

President Trump, who is predicting the largest boom in job creation the nation has ever seen, said in advance of Friday’s release that we will not have “real numbers” for a year.

Powell has indicated he is more worried about the soft jobs market than about an inflation rate that remains a full percentage point above the Fed’s 2 per cent target. The Bank’s policymakers are assuming the tariff-induced price increases that many businesses are planning will be one-shot affairs, after which the rate of inflation will resume its decline.

So it’s to be a cut in the Fed’s benchmark interest rate at the Fed policy meeting on September 16-17. Whether the rate cut will be 0.25 or 0.50 percentage points is not certain, but it will surely not be the three full points Trump is demanding.

Second, to the longer term, and the whirlwind. The Supreme Court will rule in October whether Trump has the constitutional authority to levy tariffs without congressional approval. Were it to decide that a 50-year emergency is an oxymoron, “it would be a total disaster for the country …. our country would be completely destroyed, and our military power would be instantly obliterated … we could be a third-world country”, warns Trump.

If the Supremes decide against Trump, he will find “other authorities”, as Howard Lutnick, the commerce secretary, describes them, that convey the power to levy tariffs and the economy will display its vaunted resilience. But the whirlwind will sweep up both the domestic economy and America’s standing in the world. Americans will be poorer, living behind a tariff wall that “protects” them and domestic companies from more efficient suppliers of goods. Traditional business critics of administrations past will be cowed into silence by a powerful and vindictive government.

A new Fed, in which Trump says he will “very shortly” have a majority, will elevate “fiscal dominance” to be its lodestone in the hope of minimising the cost of servicing the national debt, prompting investors to demand higher rates to fund mounting deficits.

In China, President Xi will have cemented his country’s position as the leader of a hostile coalition now broader than America ever faced, at a time when Trump is antagonising America’s allies. Xi’s Shanghai Cooperation Organisation is sweeping up trade lost by America as Trump counts the proceeds from his tariffs.

The 25 heads of state who attended China’s display of military might, overseen by Xi, Putin and Kim, will add heft to the Brics’ efforts to dethrone King Dollar as the world’s trading and reserve currency, while investors hunt for alternatives to dollar-denominated assets, no longer as safe a haven as they once were.

That’s the same dollar Trump is so keen to devalue to discourage imports.

irwin@irwinstelzer.com

Irwin Stelzer is a business adviser