Economic Worries, Latest from Beirut, 9/11 Plea Deal Revoked

Stocks are down, unemployment is up.

Is the head of the Federal Reserve certain he's steering the economy in the right direction?

Certainty is not a word that we have in our business.

Well, okay, then, I'm Scott Simon.

I'm Aisha Roscoe, and this is Up First from NPR News.

A blast in Tehran kills a Hamas leader, then protests in Beirut, the president and vice president on the phone to Israel's prime minister, and I have all the latest from the Middle East.

And a plea agreement with 9-11 defendants is now off the table, why the defense secretary says no deal. Stay with us, we have the news you need to start your weekend.

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The inflation news has all been very positive, and we have a job market. that is about the.

strongest that we've seen in 50 years.

That's what Treasury Secretary Janet Yellen told us on Weekend Edition just a week ago today.

So what's changed? For one, an employment report that came in weaker than expected yesterday, sending the Dow down more than 600 points. Investors wonder if the economy is headed for a recession, and if the Federal Reserve, which Janet Yellen chaired before she became Treasury Secretary, isn't acting quickly enough to avert it.

Add to that a slip by the tech-heavy Nasdaq index into what's called correction territory, meaning it's fallen 10 percent from its recent high. It all means we need to talk with NPR Chief Economics Correspondent Scott Horsley. Scott, thanks for being with us.

Good morning, Scott.

What got to the market about the jobs report?

You know, even before the jobs report yesterday, there were signs of some cracks in the labor market. On Thursday, we learned that new applications for unemployment benefits had jumped to the highest level in a year. That sparked its own mini-sell-off in the market, and then the route really accelerated. Friday after the Labor Department said employers added just 114,000 jobs last month, far fewer than forecasters had expected. What's more, the unemployment rate jumped to 4.3 percent in July. That's almost a full point higher than it was a year ago. And the worry is, when unemployment rises that much, it generally doesn't level off right away. It tends to keep climbing. There's kind of a negative feedback loop where people lose jobs so they have less money to spend and businesses don't sell as much, so they lay off even more people. That's what markets are spooked about, and there's a concern the Federal Reserve may have missed an opportunity to interrupt that downward spiral.

Well, and as you note, of course, they met just recently, and more remarkable than what they did do for some people was what they didn't do.

Yeah, what they didn't do was cut interest rates. Instead, they left their benchmark rate at the highest level in more than two decades, where it's been for the full year now. Those high interest rates have helped in bringing down inflation, but they've also been a drag on some important parts of the economy, especially manufacturing and the housing market. Now, Fed Chairman Jerome Powell signaled Wednesday that the Fed might be ready to cut interest rates at their next meeting in September. Bloomberg's Mike McKee asked Powell if he's worried about waiting too long. Are you certain that you won't fall behind the curve and lead to unnecessary unemployment if you wait until September? Certainty is not a word that we have in our business. Now, investors were already expecting the Fed to cut rates by a quarter percentage point in September. After this week's jobs report on Friday, they're betting a more aggressive half-point rate cut could be in the works. Quincy Crosby, who's chief global strategist at LPL Financial, says even that might not be enough.

The market is concerned that it may be too little, too late.

If the job market weakens further, there's going to be a lot of second-guessing about the Fed's timing. Just as the central bank was slow to raise interest rates three years ago when prices started climbing, critics will say it was too slow to cut rates when it had a chance to prevent a broader economic downturn.

And Scott, does this explain the NASDAQ? Because tech stocks took a particular beating this week, didn't they?

Yeah. Intel, the big chipmaker, had a terrible week. It reported disappointing earnings and said it's laying off about 15% of its workforce. Its stock lost more than a quarter of its value. That also dragged down some other semiconductor companies. And there's also been some newfound skepticism about artificial intelligence. In recent months, excitement over AI has been pushing stocks to record highs. Crosby says some investors are starting to wonder if all the money that's been pumped into those stocks will, in fact, pay off.

The question is now, are they just spending too much and not able to integrate the features quickly enough in order to monetize it?

Even the mighty Amazon saw its stock drop nearly 9% Friday. The e-commerce giant is spending tens of billions of dollars this year to build up its cloud computing and AI businesses. That is expected to cut into Amazon's profits, though, and on a day when many people were in a foul mood anyway, it didn't take much for them to dump the stock.

I'm Peter Scott Horsley. Thanks so much.

You're welcome.

Next up today, the Middle East. The U.S. is sending more warships to respond to an expected attack on Israel by Iran and its allies.

That's following Israel's killing of several top militant Palestinian and Lebanese leaders. And Piers Jane Araf joins us now from Beirut. Jane, thanks for being with us.

Thank you, Scott.

What is the latest?

Well, Israel's continuing those attacks on militant commanders. The Palestinian news agency says an Israeli airstrike this morning actually killed a Hamas commander in the Israeli-occupied West Bank. And, as you know, Scott, in the past week, Israel has said it killed several top commanders of Hamas, Lebanese, Hezbollah, and Islamic jihad, including in an airstrike here in the Lebanese capital. Israel hasn't taken responsibility, but it's believed to be behind the killing of a top Hamas political official while he was visiting Iran. Iran and its allies are expected to retaliate, and it has dramatically increased fears of a wider conflict breaking out. As evidence of that, the U.S. Defense Department is sending more warships and more planes to the region, and Israel and Lebanon are bracing for the expected retaliation. Here's U.S. Defense Secretary Lloyd Austin regarding the U.S. military response.

If Israel is attacked, we certainly will help defend Israel. You saw us do that in April, and you can expect to see us do that again.

But we don't want to see any of that happen. The reference to April is when Iran fired hundreds of missiles and attack drones at Israel in retaliation for an airstrike that killed a top Iranian commander in Syria.

The Hamas leader killed in Iran was buried in Qatar yesterday, and I gather mourning in several cities. Could you tell us about that, please?

It was an elaborate funeral for Ismail Haniyeh, whose body was brought back from Iran.

He was the one who was negotiating the exchange deal. So how on earth is a country that wants to conclude a deal kills the main interlocutor in those negotiations?

Let's keep in mind that Jordan is one of only two Arab countries with a peace agreement with Israel. El-Safadi said the killing was an attempt by Israeli Prime Minister Benjamin Netanyahu to torpedo the ceasefire talks. There are lots of diplomatic efforts still going on. The U.S. doesn't speak to Iran directly, but El-Safadi, for instance, this week, spoke with both the U.S. Secretary of State and the Iranian foreign minister to try to de-escalate tensions.

What's the scene been like in Iran?

Well, Iran held a huge memorial for him before transferring his body to Qatar. And here in Beirut, Palestinians factions held a symbolic funeral.

And I gather Israel detained the preacher of an important mosque in Jerusalem for incitement. What do we know about that?

Yeah, it was al-Aqsa Mosque, one of the holiest places in Islam. Israeli security forces took Sheikh Ikram Sabri away for questioning after he delivered a eulogy for Haniyeh. He was detained for several hours and then temporarily banned from the mosque.

And where are we at the moment?

Well, under high alert, certainly regarding Israel, most airlines have stopped flights in and out. And Lebanon, a bit of a bubble here in Beirut, but the country is clearly bracing for attacks and U.S. and other embassies are worried.

And here's Jayna Raff in Beirut. Thanks so much.

Thank you, Scott.

And we'll end today on the head-spinning week at the U.S. military court in Guantanamo Bay, Cuba. Three days ago, the Pentagon announced it had reached a plea agreement with three 9-11 defendants, including the alleged mastermind of the attacks, Khalid Sheikh Mohammed.

It would have mostly resolved the prosecution after two decades of legal quagmire. But last night, Defense Secretary Lloyd Austin took the deal off the table. And Vera Sasha Pfeiffer has been covering Guantanamo and joins us now. Sasha, thanks so much for being with us.

You're welcome. Good morning, Scott.

A little more detail, please, on events of the week.

Yes. And first, I want to note many people are always shocked to hear that Guantanamo is still open. It was set up after the so-called war on terror, after the September 11th attacks. There are still prisoners. there, still active cases. One of them is the September 11th 9-11 case. Twenty years later, still ongoing. This week was an earthquake at Guantanamo for those who cover it, because on Wednesday it was announced that three of the 9-11 defendants, including the big guy, Khalid Sheikh Mohammed, were going to plead guilty in exchange for, in KSM's case, a life sentence. It's presumed the other two would also get a life sentence. In return, the death penalty would come off the table. And they would no longer go to trial, which, by the way, it's looked increasingly unlikely that there will ever be a trial. And this was, you know, this was great news to people who felt that it had been really bogged down for years and was finally ending.

There were some strong feelings about it, though, weren't there?

Very much. Now, again, some people who realize how intractable the case has become felt like finally it's resolved. But people were very upset. Some 9-11 family members felt like they wanted to see these men put to death. They feel like a trial might bring out some secrets about 9-11.. We don't already know. Some congressional members pushed back. And then, all of a sudden, last night, shocking thing happened. Secretary of Defense Lloyd Austin puts out a short memo saying, I am withdrawing from the plea agreements. I'm also removing the person in charge of the military court who oversees 9-11 in the case, just in the 9-11 case, and basically undid the deal.

Isn't the military court part of the Defense Department that Lloyd Austin heads?

Yes. And this is what's so puzzling. The court is this complicated thing that's overseen by someone called the convening authority, who, in theory, statutorily, has independence, does not need the Secretary of Defense's approval to make plea deals. Yet Austin reversed it. He basically said, it's so significant a decision that I alone should make it. So I'm going to step in and reverse it. We also were told that the Biden White House had not known about this till Wednesday. So this huge, huge pushback coming from all quarters seems to have pressured Austin into reversing the deal.

And what kind of reaction has there been?

Huge. I want to play for you. Brett Eagleson, who was 15 years old when his father died in the World Trade Center, collapse. Brett opposes the deals. And here's what he said about the plea agreements.

We all deserve our day in court. And to do a plea deal feels like we've been betrayed. We want a trial. We want to put these individuals on a stand. We want the public to see it, and we want the media to see everything these individuals.

have to say.

And Scott, at the other end of the spectrum is Elizabeth Miller. She was six when her Staten Island firefighter dad died in the 9-11 attacks. She's been a supporter of the agreements, and here's what she said to me last night.

I'm really just feeling numb.

I'm disappointed in the U.S. government. We're no closer to a death penalty conviction now than we were 13 years ago. Most families just want this to end, and this was the best way, and, in my opinion, the only way that it was going to end.

But, Scott, this reversal of the plea deal makes the end look even farther away. Basically, what happens now is the 9-11 case goes back to this legal slog of endless so-called pre-trial hearings, and it's unclear how they might get to trial, if ever.

And Paris Sastry-Pfeiffer, thank you so much.

You're welcome.

And that's Up First for Saturday, August 3rd. I'm Aisha Roscoe.

And I'm Scott, Simon. Michael Radcliffe, Gabe O'Connor, and Gabriel Donatoff produced today's podcast. Andrew Craig directed.

Our editors were Ed McNulty, Raphael Nam, James Heider, and Nick Spicer.

Ana Glovna is our technical director, with engineering support from Nisha Hines, Arthur Laurent, and Andy Huther.

Evie Stoerner is our technical director. David Stone is our senior supervising editor. Sarah Oliver is our executive producer. And Jim Kane is our deputy managing editor.

Tomorrow on the podcast, Aisha flexes the reporting muscles she built up on the energy beat.

That's right. We'll take you to Louisiana's Gulf Coast for a look at liquefied natural gas. The U.S. is the world's largest exporter, and a lot of it gets piped down there before it gets shipped out. So there's a lot to learn about American energy policy, the local economy, and ecology, and global climate change.

I'm breathless just hearing about it. And for more insights like that into your community, your country, and the world, you can listen to your local NPR station. Find it, please, by going to stations.npr.org.

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