Can AI Hold Up? Ruan Mu-Hua Reveals Two Major Warning Signs in the US Economy: Fed Rate Cut Expectations Rise

The two main drivers of the US economy—"consumption" and "employment"—are showing simultaneous signs of weakening. Financial expert Ruan Mu-Hua posted on Facebook, pointing out that US consumer demand cooled significantly in July, with retail sales falling far below expectations. This indicates that the market is becoming increasingly cautious about the resilience of consumer spending in the second half of the year.

US retail sales in July declined 0.6% month-on-month, far below the market's expected growth of 0.1%, and marked the largest monthly drop since May 2025. The main factors dragging down the figures were "reduced automobile purchases" and "a slowdown in online retail."

In the labor market, the non-farm payroll data released earlier showed an unexpected decline of 23,000 jobs in July, a stark contrast to the market's forecast of an 83,000 increase. Meanwhile, the unemployment rate slightly dropped to 4.1%. With employment data significantly underperforming and prior figures revised downward, market expectations for the Federal Reserve (Fed) to cut interest rates or shift its monetary policy have intensified.

Further analysis of labor and household financial structures reveals the following:

- Full-time jobs declining: The number of full-time jobs in the US has decreased by 1.5 million over the past year. - Savings rate nearing a low: Household savings rates have dropped sharply. The personal savings rate in June 2025 was only 2.70%, close to a four-year low. Compared to the historical average savings rate of approximately 8.36% since 1959, the current figure is significantly below the long-term average.

Ruan Mu-Hua emphasized that the above macroeconomic data proves that while the AI industry may be supporting the economy, "consumption" and "employment" remain the primary engines driving and sustaining the overall economy. If consumption and employment continue to weaken while prices fail to decline significantly, the risk of "stagflation" must be closely monitored in the future.