Labor Market Jitters Are Shaking Consumer Confidence

(…) The 84.5 reading plumbs a depth even lower than the 85.7 reading in April 2020.

A deterioration in the labor market is largely behind the drop, though persistent high cost of living combined with tariffs and foreign interventions are not doing anything to shore up confidence among consumers.

Some households took the extra effort to write in responses and the official release noted “write-in responses on factors affecting the economy continued to skew towards pessimism. References to prices and inflation, oil and gas prices, and food and grocery prices remained elevated. Mentions of tariffs and trade, politics, and the labor market also rose in January, and references to health/insurance and war edged higher.”

The moderating jobs market is leaving households particularly downbeat. As shown by the nearby chart, the ratio of the share of consumers viewing jobs as “plentiful” versus “hard to get” fell sharply last month, reaching a fresh post-pandemic low. Said differently, an increasing share of consumers think there are fewer jobs available today. (…)

The rising share of households viewing jobs as “hard to get” has moved up with the unemployment rate and speaks to the Fed’s focus on labor today. But this measure is still relatively low due to the majority of households defining jobs as “not so plentiful” today, which speaks to the uniqueness of this jobs market.

 

ING has longer term charts:

Source: Macrobond, ING

Unemployment and consumer perceptions of the jobs market

Source: Macrobond, ING

Indeed Job Postings have improved a little lately (through Jan. 9)

• Amazon to Lay Off Around 16,000 Corporate Employees Job cuts affecting corporate employees are the tech giant’s latest round
• UPS to Cut Another 30,000 Jobs in Sweeping Cost-Savings Push

EU and India Reach Free-Trade Deal as World Responds to Trump Tariffs ‘Mother of all deals’ will link almost two billion consumers across the two economies

India and the European Union have reached a free-trade agreement that will open a new market for European cars and other products, showing how the world’s middle powers are expanding alliances in response to President Trump’s tariffs.

The deal, announced Tuesday, is set to link almost two billion consumers across the two economies, making it the biggest free-trade agreement by population that the EU has concluded. It is “the mother of all deals,” European Commission President Ursula von der Leyen said at a meeting in New Delhi.

It is the latest example of U.S. trading partners seeking to curb their reliance on America by expanding ties with other markets. The EU earlier this month signed a free-trade agreement with the four South American countries that founded the Mercosur customs union.

The U.K. has over the past year announced its own trade deal with India, updated an existing agreement with South Korea and reached a trade-and-security pact with the EU. Canada and China agreed earlier this month to lower tariffs on Chinese-made electric vehicles and Canadian canola oil.

In a speech at the World Economic Forum in Davos last week, Canadian Prime Minister Mark Carney called on the world’s middle powers to create what he called a dense web of connections in trade, investment and culture.

Von der Leyen echoed that idea. “In this increasingly volatile world, Europe chooses cooperation and strategic partnerships,” she said.

The agreement still needs to be completed and ratified by both sides. In the EU, that process typically takes a year or more and will require approval from the European Parliament and the bloc’s member countries, an EU official said.

The EU-India deal is set to eliminate or reduce tariffs for the vast majority of goods that are traded between the two economies, according to the EU. The bloc said that should lead to EU savings equivalent to about $4.8 billion each year.

India’s tariffs on machinery, chemicals and pharmaceuticals are set to be mostly eliminated, and tariffs on key agricultural goods will be reduced or eliminated, the EU said.

Tariffs on European cars should gradually drop to 10% from their current level of 110%, with the lower tariffs applying to a maximum of 250,000 vehicles each year. The EU currently exports about 3,000 cars to India because of India’s high tariffs, the EU official said.

The reduction in car tariffs will be phased in over a period of 10 years for combustion engine vehicles and 14 years for electric vehicles, the EU official said.

Some elements of the deal didn’t go as far as EU officials had hoped. It doesn’t include chapters on government procurement, energy or raw materials, and it doesn’t cover liberalizing investment in manufacturing, the EU said.

The agreement is also important for India, which the U.S. hit with 50% tariffs in 2025, among the highest levels applied to U.S. trading partners.

Indian Prime Minister Narendra Modi said the deal would “strengthen the confidence of every business and every investor in India.”

The deal encompasses a quarter of the global economy and will complement the free-trade agreement India has with the U.K., Modi said.

India’s trade ministry said labor-intensive goods, whose exports to Europe total more than $30 billion, would see tariffs drop from between 4% and 26% to zero when the deal goes into effect. Industries including apparel, footwear, marine products, plastics and jewelry will benefit, it said.

India, which is forecast to become the world’s fourth-largest economy this year, has held firm against U.S. demands to open up its markets to dairy products and ethanol.

The EU is India’s largest trading partner for goods, with two-way trade reaching $136 billion in the last fiscal year, according to Indian trade data.

India accounted for about 2% of the EU’s total trade in goods in 2024, according to the bloc. European officials said EU exports to India could double from their current level as a result of the trade agreement.

This is not just another trade deal. It is a major deal for both the EU and India but also a big deal for the US, increasingly a high cost island.

The same day that Trump threatened to hike duties on South Korean goods to 25% (stocks largely shrugged off the threat), India and the EU capped nearly two decades of negotiations and signed a trade agreement that the European Commission called “the mother of all deals,” as the rest of the world presses on.

The two-decade-long EU–India trade talks gained momentum after Washington imposed a 50% tariff on some Indian goods, and as U.S. allies pushed back against President Donald Trump’s tariff threats and his bid to take over Greenland.

It also comes a few days after Trump threatened 100% tariffs if Canada signed a trade deal with China. Prime Minister Mark Carney, in a speech that got a standing ovation in Davos last week, urged middle powers to come together to avoid becoming victimized. He is planning to visit India to sign deals on uranium, energy and minerals, after striking a limited tariffs deal with China which he qualified as a “new strategic partnership”.

Before signing the deal with New Delhi, the EU agreed a pact with the South American bloc Mercosur, following deals last year with Indonesia, Mexico and Switzerland. During the same period, New Delhi finalized pacts with Britain, New Zealand and Oman.

The deal is expected to double EU exports to India by 2032 by eliminating or reducing tariffs in 96.6% of traded goods by value, and will lead to savings of 4 billion euros ($4.75 billion) in duties for European companies, the EU said.

The EU will cut tariffs on 99.5% of goods imported from India over seven years, with tariffs to be cut to zero on Indian marine goods, leather and textile products, chemicals, rubber, base metals and gems and jewelry.

Trade between India and the EU stood at $136.5 billion in the fiscal year through March 2025, compared to $132 billion of trade between India and U.S., and $128 billion between India and China.

EU companies will now enjoy “first-mover advantage” in India’s rapidly growing market. While U.S. exporters face high tariffs, EU manufacturers of automobiles, chemicals, and spirits will benefit from preferential access.

The EU will eliminate its current 12% tariff on Indian apparel and textiles immediately or in short phases. This allows Indian garments
to enter the EU market duty-free, while they enter the US with 50% tariffs (up to 62.3%–63.9% specifically on woven and knitted apparel).

Indian apparel will thus be considerably cheaper on European shelves, while the same goods in the US are
among the most expensive due to one of the highest tariff rates globally. Indian manufacturers will quickly redirect their production toward the EU to capitalize on the new price advantage.

By opening a duty-free market of nearly 500 million European consumers, India is successfully “de-risking” its economy from its previous heavy reliance on the U.S. market.

The EU-India agreement, the world’s second and fourth-largest economies, covers approximately 25% of global GDP and one-third of all global trade.

In an April 2025 interview with Time magazine, Trump said America is a “department store, and we set the price for companies wanting to do business in the country.” In Oval Office remarks on May 6, 2025, Trump stated, “I’m the shopkeeper and I keep the store”.

It looks like many other store managers across the world are also minding their stores, critically more focused on accessibility and affordability.

At Davos last week, a real store owner spoke the reality:

• Amazon CEO Jassy says Trump’s tariffs have started to ‘creep’ into prices

Amazon CEO Andy Jassy said President Donald Trump’s sweeping tariffs are starting to be reflected in the price of some items, as sellers weigh how to absorb the shock of the added costs.

Amazon and many of its third-party merchants pre-purchased inventory to try to get ahead of the tariffs and keep prices low for customers, but most of that supply ran out last fall, Jassy said in a Tuesday interview with CNBC’s Becky Quick at the World Economic Forum in Davos, Switzerland.

“So you start to see some of the tariffs creep into some of the prices, some of the items, and you see some sellers are deciding that they’re passing on those higher costs to consumers in the form of higher prices, some are deciding that they’ll absorb it to drive demand and some are doing something in between,” Jassy said. “I think you’re starting to see more of that impact.”

The comments are a notable shift from last year, when Jassy said Amazon hadn’t seen “prices appreciably go up” a few months after Trump announced wide-ranging tariffs.

Last April, Jassy also predicted that some sellers may be forced to pass the added cost of the tariffs on to consumers because some businesses “don’t have 50% extra margin that you can play with.” (…)

Amazon is trying to “keep prices as low as possible” for consumers, but in some cases, price hikes may be unavoidable, Jassy said Tuesday.

“At a certain point, because retail is, as you know, a mid-single digit operating margin business, if people’s costs go up by 10%, there aren’t a lot of places to absorb it,” Jassy said.

“You don’t have endless options,” he added. (…)

• India and Canada to Anchor Trade in Energy, Critical Minerals

(…) India’s expected growth in energy demand is a “great opportunity” for the North American nation, which holds large supplies of oil, gas and critical minerals, Energy and Natural Resources Minister Tim Hodgson told Bloomberg Television at the India Energy Week in Goa on Wednesday.

“We produce 6% of the world’s oil today and India gets less than 1% of its oil from Canada,” he said. Increasing that share to a more reasonable level would make both countries stronger, more resilient and secure, he added. (…)

Canadian officials are liaising with international partners to create new frameworks for critical minerals trade, including to facilitate off-take agreements and strategic stockpiling. That could include providing its “highest quality” uranium to help India achieve its goal of building 100 gigawatts of nuclear capacity by 2047.

India could also benefit from the ample LNG supplies that Canada can now provide through its 12 million-ton-a-year plant that started production in June, and which is expected to grow to a capacity of 50 million tons. Companies like Shell PLC, Petronas, Korea Gas Corp. and China’s CNOOC Ltd. “find our LNG to be competitively priced.” (…)

AI CORNER

PJM, the largest Regional Transmission Organization (RTO) in the United States, responsible for coordinating the movement of wholesale electricity across all or parts of 13 Northeastern states and the District of Columbia, serving 65 million people, recently upgraded its 10-year peak summer annual average demand growth forecast from 3.1% to 3.6%. Goldman Sachs’ take:

In the short term, tightening US power markets could slow data center expansions. The critical tightness of the PJM market (already reached in 2025), coupled with transmission bottlenecks, makes it challenging for the market operator to approve large load growth at the previously projected pace for the next few years.

In the long term, incremental power demand from data centers, as well as electrification including EVs and increased industrial activity, will continue to contribute to US power demand growth.

The upgraded long-term forecast suggests that the market operator expects these constraints to be resolved later this decade to enable even higher power demand growth into the 2030s.

On Jan 16, in response to the market tightness and resulting affordability pressure, President Trump and the governors of several US Northeastern states proposed an emergency plan of wholesale electricity auctions in PJM to require technology companies to fund long-term contracts for new power generation capacity.

While we believe this plan, if executed, could lead to increased costs for building and using data centers in PJM (and potentially in other regional power markets in the US with similar plans), we expect limited impact on current and future data center additions and associated power demand growth because (1) power costs are not a primary driver for data center additions and (2) the market of data centers will remain tight in the next few years to incentivize faster data center additions as opposed to slower, as our equity research colleagues expect the growth in demand for data centers will continue to outpace that in supply.

Power costs may not be a “primary driver for data center additions”, it is nonetheless a cash cost that looks to be higher than originally planned.

My son David last week reminded me that Theodore Roosevelt’s presidency (1901–1909) marked a decisive pivot in American statecraft, moving the nation from relative isolationism toward active imperial engagement, often justifying this expansion through a lens of “civilization” and national vigor that marginalized the “weak idealists” of his time.

• Reinterpretation of the Monroe Doctrine: While the original 1823 doctrine was passive—warning Europe to stay out of the Americas—Roosevelt (often called “The Big Stick”) inverted it with his 1904 Roosevelt Corollary. He asserted that the United States had the right to intervene in the internal affairs of Latin American nations to correct “chronic wrongdoing” or “impotence”. This effectively established the U.S. as an international police power in the Western Hemisphere, legitimizing interventions in Venezuela, the Dominican Republic, and Panama.

• Contempt for “Weak Idealists”: Roosevelt harbored deep disdain for anti-imperialists like Mark Twain, whom he privately called “insane” and a “formidable disaster”. He viewed their principled opposition to expansion as a sign of national weakness, famously stating he would “like to skin Mark Twain alive” for his critiques.

Mark Twain became a prominent anti-imperialist, undergoing a dramatic political transformation around 1899. He initially supported American imperial expansion and called the Spanish-American War “the worthiest” war ever fought, but completely reversed his position after witnessing U.S. actions in the Philippines.(wikipedia+1)

Twain’s awakening came when he realized American intentions in the Philippines were conquest rather than liberation. In October 1900, he explained: “I have read carefully the treaty of Paris, and I have seen that we do not intend to free, but to subjugate the people of the Philippines. We have gone there to conquer, not to redeem”. He formally joined the American Anti-Imperialist League in January 1901 as vice-president, lending his considerable literary fame to the movement. (peoplesworld+3)

Then, Sunday Jan. 26, Cumberland Advisors CEO David Kotok posted

US-Venezuela Policy: Follow the Money To understand some of the US-Venezuela policy, we must follow the money. Here’s the story as we see it today.

The United States’ handling of Venezuelan oil revenue has evolved into one of the most unusual financial and diplomatic arrangements in modern American foreign policy. The core of the story is straightforward: The US government seized Venezuelan oil under long-standing sanctions authority, sold that oil on the global market, and placed a portion of the proceeds into a US-controlled bank account located in Qatar. (…)

The amount of money involved will quickly grow into the billions and may eventually reach very large sums using this monetary transfer technique.

Currently this revenue is off the congressional budget radar screen and does not fall under congressional scrutiny. Debate about it is assured in the coming days, weeks, and months. Every politician wants to try to do something with a large and growing pool of money.

But scrutiny isn’t a change in law. Trump 2.0 will defend this novel mechanism against all legal attacks. We can assume that legal actions are coming from multiple sources, as all those with claims on Venezuela will try to assert them. Lawyers in this arena are in for a field day in a new business.

The monetary implications are also substantial. This is a US government-owned fund placed in a bank. It will assuredly start out invested in US T-bills. So, we now have a new buyer of US government debt, and that development has implications for a positive monetary force that will enable the financing of some of the additional deficits that Trump 2.0 seems to be delivering if deficit forecasts come close to their marks.

Other countries besides Venezuela become targets for this innovative financial approach. It’s simple: Seize sanctioned oil or other stuff; sell it; put the money where you control it and lawyers cannot get to it.

And maybe other jurisdictions besides the United States have similar possibilities. Where this ends is anybody’s guess. But, for now, this horse has left the barn.

Global finances and indeed the international order of the global financial system have been changed with a single novel innovation. My expectation is that the changes will be huge. Here’s a single instance to consider: “US control of Venezuela oil risks debt r goews estructuring showdown with China” | Reuters,https://www.reuters.com/business/energy/us-control-venezuela-oil-risks-debt-restructuring-showdown-with-china-2026-01-23/.

In succinct form, with citations, the report that follows explains how this happened, why it happened, and why the Qatar transfer stands out as historically unprecedented. The implications of this novel approach are massive.

David goes on documenting his findings. Well worth reading his complete posts linked above.

You should also read Reuters’ account dated Jan 23, linked within Kotok’s post above. Some excerpts:

U.S. control of Venezuela’s oil exports has ensnared barrels that had been servicing debt to China, lining up another potential showdown between the two superpowers that could further complicate the South American country’s path out of default.

Around a tenth ​of Venezuela’s $150 billion foreign debt pile is estimated to be loans from China that the OPEC member was paying in oil cargoes – until the U.S. seized Venezuelan President Nicolas Maduro earlier this ‌month.

Debt experts said the ramifications of China’s claim on the cargoes and any clash with the United States could make it tougher for Venezuela to restructure its debt after a 2017 default and put at risk Beijing’s cooperation in restructuring deals for other developing nations.

“Even under the best circumstances, this was going to be very messy – trying to disentangle where all these creditors stand in the credit hierarchy,” said Christopher Hodge, chief economist with Natixis and a former U.S. Treasury official.

“The fact that now America is controlling all the finances into and out of the country…this seems to be unprecedented to me, that we’re going to have such entanglements, such opacity about the finances of a government,” Hodge said. (…)

The Trump administration has now said that proceeds from the sale of Venezuela’s oil will go into a Qatar-based account controlled by Washington, potentially giving the U.S. President himself substantial leverage over which creditors get paid, and when.

Beijing condemned the redirection of Venezuelan oil exports during a January 7 news conference, adding “legitimate rights and interests of China and other ⁠countries in Venezuela must be protected”. (…)

The Trump administration is allowing China to purchase Venezuelan oil but ‍not at the “unfair, undercut” prices at which Caracas sold the crude previously, a U.S. official said on Thursday. (…)

“All of these things will have the practical effect of subordinating the claims of legacy debtholders,” said global sovereign debt expert Lee Buchheit, adding it was unclear if Trump had the legal right to determine who gets paid first.

Some $60 billion of Venezuela’s bonds tipped into default in 2017, and a restructuring agreement is ⁠essential to enable it to borrow again and attract ⁠new investment.

In a typical restructuring, bilateral lenders come ​together and agree what losses they will accept, usually via the Paris Club of creditor nations. This sets the bar for the “comparable” losses private lenders – bond investors, banks and others – must take.

“Comparability of treatment will be a real challenge, particularly if the U.S. controls the use of oil revenues,” said Mark Walker, a longtime sovereign debt advisor who previously worked on potential Venezuelan restructurings. (…)

China has little immediate leverage. Countries typically do not take other nations to court or arbitration over lending claims, Walker said, and would need to settle the situation “on a government-to-government basis”.

But ramifications are possible: China ​is the largest bilateral lender to the developing world and its cooperation with the Paris Club has been crucial over the past ‍decade. Beijing agreed restructuring terms via a platform called the Common Framework during Ghana, Zambia and Ethiopia’s debt restructuring talks.

“China’s obvious leverage is to refuse to cooperate in future Common Framework sovereign debt workouts until it feels that it has been treated fairly in Venezuela,” Buchheit said. “And ​that threat would have some force.”

Many issues from this, mostly problematic to say the least. A non-exhaustive list:

• The US has seized Venezuela’s critical source of revenues and is keeping the money in a “safe” place owned by the USA.
• How good this proves to be for Venezuelans remains to be demonstrated.
• Congress is kept on the sideline.
• Trump is the sole banker and decision maker. More leverage.
• China is importantly impacted:
• Trump controls the spigot for the servicing of its Venezuelan debt.
• The US says China must pay Brent prices, even though Venezuela’s heavy crude, like Canada’s, always sells at a $5-10 discount to light crude because of high transportation and processing costs.
• China was buying around 50% of Venezuelan oil production. Where else could this heavy crude go?

It seems to me that just about everything is getting messy, and messier.

The Roosevelt Corollary and “Big Stick” interventions set precedents for repeated U.S. involvement in Latin America, leading to cycles of occupation, backlash, and long‑term instability that later required further interventions.

Roosevelt’s “Big Stick” Foreign Policy

(…) Roosevelt believed that in light of the country’s recent military successes, it was unnecessary to use force to achieve foreign policy goals, so long as the military could threaten force. This rationale also rested on the young president’s philosophy, which he termed the “strenuous life,” and that prized challenges overseas as opportunities to instill American men with the resolve and vigor they allegedly had once acquired in the Trans-Mississippi West.

Roosevelt was often depicted in cartoons wielding his “big stick” and pushing the U.S. foreign agenda, often through the power of the U.S. Navy.

Roosevelt believed that while the coercive power wielded by the United States could be harmful in the wrong hands, the Western Hemisphere’s best interests were also the best interests of the United States. He felt, in short, that the United States had the right and the obligation to be the policeman of the hemisphere. This belief, and his strategy of “speaking softly and carrying a big stick,” shaped much of Roosevelt’s foreign policy. (…)

Roosevelt wanted to send a clear message to the rest of the world—and in particular to his European counterparts—that the colonization of the Western Hemisphere had now ended, and their interference in the countries there would no longer be tolerated. At the same time, he sent a message to his counterparts in Central and South America, should the United States see problems erupt in the region, that it would intervene in order to maintain peace and stability throughout the hemisphere. (…)

Roosevelt states that the United States would use military force “as an international police power” to correct any “chronic wrongdoing” by any Latin American nation that might threaten stability in the region. Unlike the Monroe Doctrine, which proclaimed an American policy of noninterference with its neighbors’ affairs, the Roosevelt Corollary loudly proclaimed the right and obligation of the United States to involve itself whenever necessary.

Roosevelt immediately began to put the new corollary to work. He used it to establish protectorates over Cuba and Panama, as well as to direct the United States to manage the Dominican Republic’s custom service revenues. Despite growing resentment from neighboring countries over American intervention in their internal affairs, as well as European concerns from afar, knowledge of Roosevelt’s previous actions in Colombia concerning acquisition of land upon which to build the Panama Canal left many fearful of American reprisals should they resist.

Eventually, Presidents Herbert Hoover and Franklin Roosevelt softened American rhetoric regarding U.S. domination of the Western Hemisphere, with the latter proclaiming a new “Good Neighbor Policy” that renounced American intervention in other nations’ affairs.

However, subsequent presidents would continue to reference aspects of the Roosevelt Corollary to justify American involvement in Haiti, Nicaragua, and other nations throughout the twentieth century. (…)

History rhymes, Twain said. Not necessarily in a poetic way.