Jobs report shock: U.S. economy unexpectedly loses thousands of jobs

[00:00:00] Speaker 1: Next up, we want to talk about the jobs numbers that came out for July today. And the U.S. lost 23,000 jobs in July, an unexpected fall. The unemployment rate dropped to 4.1%. For more on this, I want to bring in my next guest from The Wall Street Journal, David Uberti. Great to have you on, David, once again. And what stuck out to you in this report, David? [00:00:24] Speaker 2: I mean, it wasn't just this unexpected drop in July payrolls, 23,000 jobs lost for the U.S. economy. That's not a good number by any stretch of the imagination. But also in the previous two months, the Labor Department actually cut its previous estimates for job growth, erasing something like 100,000 jobs. They previously thought that were in the economy that weren't actually there. And what this goes to show is that the labor market in the United States is much weaker than previously thought. And if we think about what this might mean for the Federal Reserve, what this might mean for the interest rates that go into viewers' mortgages and credit cards and whatnot, it means that Fed might be less likely to hike those interest rates going forward. If the economy is weaker, if job gains are moving more slowly, then the Fed might stay put or even be more likely to lower those rates in the months ahead. [00:01:14] Speaker 1: And, David, I mean, it comes at a time here where we see these numbers, but it still seems like the markets is not seeing that right now. Why do you think we're seeing that on Wall Street right now where there's still this enthusiasm that is pumping despite, you know, like you just mentioned there, the mortgage rates are really high right now. The jobs numbers are out. Why isn't it translating to Wall Street right now? [00:01:42] Speaker 2: Well, the stock market is very important for people's personal wealth and what the upper income echelon of Americans spend on a day-to-day basis. It is not the economy. And there's this cliche on Wall Street at times like this when bad news is actually good news for markets. And so if we look at the things that are actually driving financial markets, this is particularly the big tech giants that are building out this gigantic number of data centers and AI infrastructure around the country and the world. They are looking more toward borrowing costs in order to finance all of that. And if the economy is actually running slower than many economists forecast coming into today, then the borrowing costs next year might be lower than they might have been otherwise if the economy was running hotter. So if we look at those tech giants in particular, those companies that are driving up stock markets so high to records, those companies want lower borrowing costs. They want at least some of this bad news. That is bad news. Now, of course, the rub is when the bad news becomes worse. And we haven't seen that quite yet, but that's what people on Wall Street and people in Washington will be looking out for in the days ahead. [00:02:49] Speaker 1: And what are you going to be looking at as we get into the fall months for these jobs numbers when they come out month by month? We'll be getting into seasonal jobs. Well, obviously, we're looking closely at the labor market, but at the same time, we want to keep a close eye on inflation. [00:03:12] Speaker 2: We have new data for July that's coming out next week. And the sort of push and pull between inflation data and jobs data, that will give us a fuller picture of what's happening in the economy. And the fear is if that inflation data next week and in the subsequent months to the end of the year, if that inflation data continues to run hotter than people in Washington or people in Wall Street or people at home might actually like, we might enter this sort of stagflationary period where we have slower growth, higher inflation. That's not really good for anybody either on Wall Street or on Main Street. [00:03:45] Speaker 1: And when do you think there will be a moment when the Fed needs to jump in and do something? Because the last couple of go arounds, we have just seen it remain steady. But what would need to happen for them to say, OK, enough's enough. We got to do something here. [00:04:02] Speaker 2: Well, they're between a rock and a hard place right now. The Fed under new chair, Kevin Warsh, has taken sort of a hands off approach in the way both it approaches markets and the way that it communicates with markets as well. A lot of people on Wall Street actually expected the Fed to be hiking at some point this year to actually boost the costs. of borrowing across the economy. Now, there might be a little less impetus for that to happen in the months ahead. So they're going to be closely watching some of this data to see whether inflation continues to be running hot. If it does run hotter than many in Wall Street and Washington want, if it gets from 3.5% to, say, 4%, that could be a danger sign at which the Fed might actually need to cut, which would theoretically send all of these ripple effects throughout the economy, whether through the mortgage market, whether through your credit card bills, and ultimately through the decisions that have to be made in businesses in terms of their hiring too. All right, David, great insight as always. [00:04:57] Speaker 1: All right, David, great insight as always. Thanks so much for joining us. We always appreciate the info and analysis. And you take care. Have a great weekend. Thank you. [00:05:06] Speaker 2: You too.