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 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’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.