Justin Wolfers on Jobs Report — Is This All We Can Hope For?

[00:00:00] Speaker 1: the latest jobs report just dropped. Let me start by telling you why it's important. This is the most timely and most accurate indicator of the state of the economy and we just learned where we were in June. Of course, like any data, it's not going to be perfect. Look, here's today's big story. It's basically that the economy is not sinking and it's not surging. We're treading water. Let me give you some numbers to help you make sense of all of that. So this jobs report tells us that employment grew by 57,000 over the month. If I told you a number like that a few years ago, you would have said 57,000. That's not very much. Most months, the economy grows much more, 150,000, 200,000, 300,000, numbers like that. Yes. And this is a different economy. Let me explain why. The most important thing that determines the pace of jobs growth is actually the rate of population growth. More people, both means more buyers and more workers. We've seen a sharp contraction in population growth under the Trump administration, mostly due to immigration crackdowns. Also, people aren't coming in even if they wanted to in a bunch of cases. So what that means is there's this concept called break-even jobs growth. It's basically how many jobs do we need to create per month in order to just keep everything nice and steady. And a few years ago, you might've said 150,000 or even 200,000. Now, the truth is we don't know what it is, but we do know it's going to be a lot lower and a reasonable estimate might be around about 60,000 jobs. And so this month we got about 60,000 jobs and the unemployment rate remained roughly constant. And so maybe we really are just treading water. We're hitting break-even jobs growth. So that's the first thing. 60,000 jobs were created. That's well below expectations. Markets were expecting around about 120,000 jobs to be created. So don't think of this as double, just think of it as though expecting a few more. So they were disappointed by this. Second thing to understand is this comes on after a month ago, the last jobs report was unbelievably strong. It wasn't just that we got very strong jobs growth. We got positive revisions for the two previous months. And it looked like, you know, someone had put the pedal to the metal. Well, we've subsequently learned that a lot of that jobs growth or some of that jobs growth was illusory. So the May jobs number was revised down by 43,000 to be growth of 129,000. And April was revised down by 31,000. And so basically you put it all together. And this is an economy that over the past three months has been creating around about 100,000 jobs a month, maybe a little less, maybe a bit more. I'm trying to do math in my head right there. I'm not very good at it. So maybe that's enough actually to meet that break-even job growth. And so that might explain why the unemployment rate, it had been slowly drifting up and then it may be at flatline, but it might be slowly drifting down right now with this recent surge in jobs growth. So what we have is positive jobs growth, not as much as we thought we had for previous months and not as much as we hoped we would have this month. So disappointing relative to expectations, but in a pretty good spot. So now the unemployment rate is 4.2%. That's just down a tick from 4.3%. But overall, the unemployment numbers have been looking, you know, reasonably good. And by the way, if I keep looking away, that's just me trying to check out all my graphs and facts and figures as we're talking right here. Another big question with all of this is, you know, how should you think about it? Today is the day in every month where you should really update your thinking about the economy. So as I said, not sinking, not surging, treading water. The other thing that I think people often think about at a time like this is what does this mean for the Fed? Okay. So a month ago, we saw two things going on at the same time. We saw inflation surging predominantly because of the Iran war, but also because of tariffs. And you saw the job market surging. Look, when the job market surging, you're worried about more overheating and more inflation. So what you had was two reasons that would have been pushing the Fed to raise rates and zero reasons, I'm sorry, President Trump, for cutting rates anytime soon. What you've seen is the job. This jobs report suggests a more sustainable rate of jobs growth, less likely to cause overheating. So, but we still have inflation, which is pushing towards a rate rise. So I think the case for a rate rise has gone from unmistakably obvious to moderately weaker, but still reasonably strong. And you should continue to expect that the Fed is going to be looking at rate rises at a time when unemployment is either flat or falling and inflation is high and possibly even rising. Hey, look, it's too easy for people to focus on what this month's number is. Every month's number is noisy. Every month gets revised. And yes, by the way, we still believe these jobs numbers are true. And we've talked more about that in past videos. But we really want to use this to take track of how the recovery or this economic expansion as a whole is working. And so there's a few longer run stories that we've really been focusing on at Platypus Economics that I want to keep focusing on here. The first is possibly the most surprising or possibly most interesting thing going on, which is since January 2025, 90% of all jobs created under the second Trump administration have gone to women. They've all non-farm payrolls jobs. That's a stunning fact. It's an interesting imbalance. And in fact, women now hold a majority of all non-farm payrolls jobs as they've done for a few months. It's an interesting fact on its own. It's a doubly interesting fact when you juxtapose it with the story of the economy that one hears from the administration. It's a story of hard hats and blokes in steel-toed boots and big, boofy fellas getting back to manufacturing. But that's not what's been happening at all. This is an economy that has grown largely through the service sector in predominantly female fields. That's a lot of what's going on here. But, you know, interesting to keep your eye on this is an increasingly feminized workforce. Now, the next important part of this analysis actually helps explain what's going on. This is also an unbalanced economic expansion. In fact, all of the economic expansion since January 2025, more than 100% of it is due to the growth of healthcare and social assistance. Once you look at healthcare and social assistance, if you took that out of the picture, the rest of the economy has actually shed jobs overall. That's really quite striking. That's not to say if healthcare hadn't have happened, the rest of the economy would have shrunk. A lot of workers would have moved across, found other ways to find jobs. But it is a strikingly unbalanced economy. You know, I've looked a little harder at this and some other data, and it's not unusual to see this sort of imbalance in an economic expansion. So I think what's more striking here is the juxtaposition of the reality of our economy, which is it's the care economy that is really growing. And over the past month, that care economy has just, it's been absolutely relentless. It grew this month, it grew the month before, it's been growing month after month. The rest of the economy basically flatlined, grew a little bit this last month, but it's still far behind where it was a year and a half ago. And so, by the way, that, this enormous growth in healthcare and social assistance while the rest of the economy has actually created less jobs gives you a sense of why, for many people, it feels like economic opportunity might be shrinking. If you're not in the healthcare sector, in fact, it is. This also explains what's going on with the gender composition of this economic expansion. These healthcare is a traditionally, predominantly female occupation. They were already employing a lot of women. Now, as it expands, they're continuing to employ a lot of men. Keep your eye on this space because it suggests that if this continues, actually, I do expect it to continue, not just for years, but for decades, then men are going to have to come to terms with the fact that the future of the economy looks very different than the past. And what were historically masculine jobs are no longer excess exclusively the domain of men. And that really brings me to the one industry the administration's focused most squarely on has been manufacturing. And they've delivered literally nothing on this. Manufacturing, the US economy has been shedding manufacturing jobs for decades and nothing has happened in the last year and a half to reverse that. In fact, manufacturing jobs have fallen over the last year and a half, despite all of the efforts of the administration to talk about factories, to create jobs, to do deals and so on. There's a cheeky fact, by the way, which is that the first few months of the Trump administration didn't see much of a fall in manufacturing employment. And then came the so-called Liberation Day tariffs. These were designed to help manufacturing. But in fact, since then, that is when the drop off in manufacturing employment really took off. And so we lost a lot of manufacturing jobs subsequent to Liberation Day. The trade war has changed a lot since then and something I'm going to continue to talk about in other videos. But when the Supreme Court struck down those Liberation Day tariffs, in fact, that's when we got a little bit of a turnaround in manufacturing. Is that cause and effect or is that coincidence or is that something else going on? Honestly, I can't tell you, but I do know that the promised manufacturing revival is not here. Continuing to talk about it isn't helping any of us. It's not getting us anywhere. One final fact before we leave. This jobs report also tells us about wage growth. The important story for people is what's going on with wages relative to prices. That determines how much your living standards are rising. Today, we've got the wages part of the equation. We've got a little bit of growth in wages. We haven't seen the prices data, but we have a pretty good guess that they continue to go up. So far over the last 18 months, wages and prices as of last month had risen in exactly equal amount. My guess when we get the price data is we're going to discover the prices got ahead, which means that people's real wages on average have fallen over the last 18 months and they've been falling fairly sharply over the past six months. So if folks around you are feeling miserable, I think those data will help you understand that. Okay. Big picture. We're not surging. We're not sinking. We're treading water. And honestly, at times like this, sometimes treading water might be all we can hope for.