Moody's Talks - Inside Economics - A Jobs Recession

Episode Date: September 5, 2025

Dante joins the Inside Economics team to talk about the August employment report. After another set of weak numbers, Mark declares that the economy has entered a jobs recession. Cris and Marisa agree, but Dante would like to see more evidence. They also discuss how the lack of hiring is disproportionately impacting young workers. They wrap up by considering what it all means for the Fed, in light of a big jump in market expectations for more drastic rate cuts by the end of the year. Guest: Dante DeAntonio, Senior Director of Economic Research, Moody's AnalyticsHosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by a few of my colleagues, my two trusted co-hosts, Mrs. DeNatley, Chris DeRides. Hi, guys. Hey, Mark. And Dante, Dr. Dante Di Antonio. Doctor, how are you? Doing well, Mark. How are you? Good, good. This is Jobs Friday. This is Friday, September 5th. And obviously we always have you on for Jobs Friday. And this is an action-packed one. We're going to keep this one short, too, because we've had nothing. nothing but technical, well, not we, me, I've had nothing but technical difficulties. That's why you can't see me because I have no idea what's going on. I blame it on Moody's. It's definitely Moody's fault. What do you guys think? Yeah. No comment. We'll go with that. No comment.

Yeah. Okay. All right. Well, we're going to get down to brass tax here really, no chit-chat, nothing. We're just going to get down to work here. What a report, huh? What, Dante? What do you think? Yeah, I mean, I think obviously it was kind of what we were expecting. I just jumped right in. Did I tell you this is job? Yes, I did say it's Jobs Friday, didn't I? It's Jobs Friday. You did, yeah.

So we got the jobs report for the month of August and it was, well, you tell me, what was it, Dante? I mean, it was weak, right? I mean, we were expecting week. We were, you know, we were expecting job growth would be pretty slow in August and it did not disappoint in that respect. We got, you know, 22,000 jobs added. unemployment rate creeped up a little bit as the headline figures there. There wasn't a whole lot of positives underneath the surface that you can find. I don't think, you know, average job growth over the last three months is just 29,000.

So we've seen weak job growth now and it's continuing to be weak. Revisions to the last two months weren't as big as they were in the prior report, but still significant in the sense that the small gain in June actually flipped to a loss. So that's the first headline payroll loss since late 2020, I believe. You know, industry composition, not particularly favorable either. You know, growth remains concentrated in mostly healthcare, a little bit of support from leisure and hospitality. Outside of that, there's just a lot of weakness, right? You added almost 47,000 jobs in healthcare, but the headline gain was only 22,000.

So the sort of net of all other industries was negative for August. So, yeah, not a whole lot to like, I don't think, other than health care continuing to add jobs at a pretty good pace. So before you go there, so for me, the headline is with the revision, the June employment number has now, now has a negative sign attached to it. Small, but negative. Agreed. I mean, I think it's a big deal. I think also, I think we talked about last month that the reality is, if you're, averaging job growth that, you know, something like 25 or 30,000, you're almost certainly going

to get some negatives in there, right, just given the volatility in the numbers month to month. So I don't think we should be that surprised that there's a negative number, but I think it is obviously a big deal that there is a negative number just from a psychological perspective. Yeah, and the July gain, that was revised up a teeny bit, but it's still a weak gain in August, obviously very, very week. And this feels like we're going to get more revisions here, not only the monthly revisions that go back a couple months, but the so-called benchmark revisions coming. I guess we're going to get a read on that in a few days, right? The BLS is going to come out with the estimate of its so-called benchmark revision. That's the revision related to benching these

survey-based estimates to employment as measured by unemployment insurance counsel, full census. And that feels like we know that's going to be week, too, I think. That's right. That comes out next Tuesday morning. And yeah, that's almost certainly will be negative. It's really just a question of how negative it will be, you know, science point to it being pretty weak. You're likely at least 400,000 jobs down over the, you know, for March 2024 or March 25, excuse me. Right. And as you point out, the, if you look across industries, what, I mean, from my quick read, there's only a couple, three, four industries that are adding of any, jobs of any consequence, right? Healthcare was one, hospitality was another, local government might be a third. But other than that, it's a lot of negative signs, right? There's a lot of negative signs. Even if you look over the last three months, I mean, there's been a lot of negative

signs in a lot of industries here over the last three months, which is obviously not a positive sign for job growth moving forward. Yeah, great. Okay. So before we move on to the household survey, Chris, what do you think about the payroll numbers? the numbers we were just talking about. Extremely weak. Extremely weak.

And the negative, right, that certainly stuck out to me as a story, right? Even though it's maybe statistically insignificant, but still, first negative print since 2020, that's a big deal. Right, right. Marissa, the same deal? Yeah, I'm not surprised at all by these numbers. This is kind of right in line with what I was expecting. I was thinking one of these numbers would flip negative that we've seen in the past couple months. So, yeah, I was looking at the composition.

If you look back to the beginning of the year, at net job growth, 88% of all the job gains have come from education and health care. I mean, there's like nothing very little going on outside of that industry, which is a large industry. It's just, you know, it's comprising all. almost all of the job growth in the economy right now. Hey, do you know what the three-month diffusion index, that's, you know, totes up across all the industries, what percent of the industries are actually adding to payrolls? Do we, did anyone look at that, Dante? At the expense of giving up one of my stats, yeah, the diffusion index, it's been below 50

now for the fifth straight month, and that's unprecedented outside of a recession, right? You don't get the diffusion index below 50 for any length of time. you get a month or two every once in a while where it drops below 50. But there hasn't been a point going back to 1990 where the diffusion index has been below 50 for five months in a row without it being a recession, right? It happened in 1991. It happened in 2001. It happened during the Great Recession.

It didn't even happen during the pandemic. There was only a couple months there where it was below 50. So it's really a sort of unprecedented level of lack of diffusion of job gains right now. Right. What was the actual number, do you know? I'm just curious. It was 49 something this month. I averaged 48-2 over the last five months.

Okay. Okay. Well, I ask you just every month, what do you think underlying job growth is, monthly job growth, abstracting from the vagaries of the data, the monthly vagaries of the data, what is underlying job growth at this point? I would probably say somewhere between, you know, the 30 we're at now and maybe 50 at best. that's sort of the absolute upper bound, I think, at this point, but probably weaker than that. Okay, so it's 25 to 50K.

Does that sound right to you, Marissa? I think it's even lower. I think it's somewhere between zero and 25. Right. Okay. And Chris, what about you? Yeah, on the lower end. So 30 sounds about right to me, but.

Okay. Okay. All right, let me ask you this question. Well, maybe what we should do. just talk about the household survey, because this has been, we've been focused on the payroll survey, the survey of businesses, which is what we tend to focus on because it's a big survey of lots of establishments and includes a lot of workers across the country. But we also have the household survey. And what did the household survey say, Dante? So it's a little bit of mixed

news coming out of the household survey. The headline is that the unemployment rate did tick a little bit higher to 4.3%. So that's the highest that it's been since fall of 2021. So, you know, it hasn't jumped up in any big way in any one month, but it's incrementally been moving higher and, you know, is now the highest it's been in almost four years. But a lot of that increase this month, at least, was driven by a sort of surprising jump in the labor force. Again, some of that is just month to month noise, right? If you look relative to January, the labor force is still basically unchanged between January and August at this point, but you did get an increase of over 400,000 in the labor force this month, pushed the labor force participation rate back up a little bit.

Again, it's still down relative to a year or two ago, but it did rebound a little bit. Household survey employment was also stronger, but again, there's a lot of volatility. It was up almost 300,000 in August, but again, that averages out to a much lower number if you look over three, five, seven months. Participation prime age participation did jump quite a bit. So maybe a little bit of good news there for prime age workers, but not a lot that I would write home about in terms of positive news coming out of the household survey. Okay. So we have a very weak job growth.

The payroll numbers, you know, barely positive, if positive at all. And yet unemployment, it's moving higher. It's edging higher, but it's still low and edging very, very slowly higher. And that goes to labor force growth. that the labor force hasn't grown this year. And that goes to, I think, restrictive immigration policy. And we were seeing, I didn't look this month. Maybe you can, maybe you guys looked, but the foreign-born labor force has been declining. I don't know if it fell again in the month of August. So the question is, you know, which is telling the true story here? I mean,

in terms of the strength of the labor market and the economy, is it the job numbers or is it the unemployment rate, which is it? How do you view it? Mercer? I think they're both telling a true story. I just think it's a very muddled, weird story that we don't typically see, right? So you have this contract, very massive contraction in labor supply, which is kind of masking a lot of the weakness in the labor market, I think. I mean, we know that demand has weakened. We see that in the payroll numbers. We see that in other measures of the labor market, like the job opening and labor turnover survey. But we're just having a lot of people leaving the labor force. So that's keeping, you know, a cap on how high the unemployment rate is going.

Now, back to what Dante said, the unemployment rate, if you take out the pandemic, which I always do, you take out the pandemic, the unemployment rate is as high as it's been since like late 2018. and all these other measures, you know, if I was looking at like the U6 unemployment rate, right, which adds in people working part-time for economic reasons, people who are discouraged, people who are marginally attached to the labor force, that also is as high as it's been since like 2017. So it's all moving kind of in the wrong direction. It's just that the household survey looks a lot stronger, I think, right now than the payroll survey, but I don't really think it is.

I think there's that labor supply issue going on that's making it look better. Okay. So the other kind of benchmark statistic is that I think about when thinking about the labor market is the so-called break-even job growth. So what monthly job increase is consistent with stable unemployment? And given that labor supply is under a lot of pressure, given the immigration policy, that break-even gain is now also very low. What do you think that is?

So if the underlying job growth, payroll job growth is, say, 25K, or maybe it's high 50K, what do you think the break-even job growth is? Somewhere between 25, maybe a little, a little. It's got to be higher, right? Because the unemployment rate. Right. So somewhere between 25 and 50 because we saw the unemployment rate move up this month. Right.

And we got a gain of 17, right? So I don't know, maybe it's 30 or 40. Okay. So you're saying underlying job growth is zero and then the break-eavian job growth is 25K. Yeah. And Dante, you would say break-even is 25 to 50-k. excuse me, that underlying growth is somewhere around 25K to 50K. What do you think break-even is?

Yeah, I think it's probably about 50, right? I mean, I think if we were averaging 50 over the last three months instead of 30, the unemployment rate probably doesn't move. And Chris, what do you think? You're with Dante on the underlying job growth of about 25K. What do you think the break-even is? Yeah, I agree with him on the break-even. 40-50 sounds about right.

Yeah, right. Okay. Well, I'm right there with you. I think the underlying rate of job growth is about 25K and that the break-even is about 50K, you know, something like that, barely positive. Okay, try this on for size. I'm just curious what you think. I think we are in a jobs recession.

In my mind, if there's a negative sign attached to a number, it's declining. That's a recession. We are in a jobs recession. And I think that will become more evident in coming months as we get more of the revised data coming in. And, you know, this plays out a little bit more. But we're not in a full-blown recession, an outright economic downturn. Because other economic indicators that one looks at when judging that, when the National Bureau of Economic Research, the NBER, the dating committee there, the arbiters of recessions, look at the and trying to

determine when recessions begin and end and are we in one, look at a plethora of data. And so if they look at other things like income and profits, you look at, of course, GDP, industrial, even industrial production to some degree, you know, they're not signaling. I don't see the negative signs yet. It may be coming, but we haven't seen this negative signs yet. So the MBER looking at this data on jobs will say, no, this isn't, we're not quite there yet. not a full-blown recession, but in my mind, we are now in a jobs recession. Does that, does that resonate Merissa to you with you at all? Definitely. It does. I think it's, yeah. Okay. So I'm going to use, the title of this podcast is going to be a jobs recession, right?

Chris, Chris, would you push back on that? No, I guess, I mean, we're making a statement that there will be some more downward revision, right? You're not basing that solely on one month of negative job. You're assuming that there will be additional weakness and that we will confirm the recession has already begun for jobs. Yeah. One-time fluke. Yeah. Yeah. That's what I'm saying. Yeah. But also remember, none of these past months is a statistically significant increase in jobs. I mean, you need like, I don't know what it is. I'd have to look. But it's over, I think you need over 100,000 for that to be statistically significant. So you could argue that August and July and June are basically all zeros.

Right. Right. I think the statistical significance is even bigger than that. Yeah, I think, yeah, it's over 100, I know. It's over 100. Yeah, it's over 100. Dante, would you push back on the description of this as a jobs recession? I think I might push back a little bit, mainly just because I'm not convinced that we will

get down on revisions to July and August here moving forward, right? So even with the benchmarks, even with the benchmarks? Well, I mean, the benchmarks will mostly affect data pre-March 2025, right? Most of the impact there is April 24 through March 25, which, you know, I think the downward revision there will align that period of job growth more closely with what we've seen lately, but it won't have a significant impact on these recent numbers. You know, July, you know, the sum of state from the, you know, state employment data has done a pretty good job of, you know, sort of leading what's going to happen to the national

numbers and the July, some of state employment game was pretty strong. It was actually, I think, 140 or 150,000. So I'm not convinced that July will ultimately be revised lower from where it is right now. August historically gets revised up a lot more often than it gets revised down. So again, we're in a different world now than in previous years. So that's not a set in stone either. But I just think if we're sitting here next month and June is locked in, it's down a little bit. But if July stays where it is at 80K, if August gets revised up to, say, 50 instead of 22, and September comes in at, you know, 50 again, to me, I'm not, again, on a statistical significance basis, they're all basically zero, but is that, that doesn't scream to me jobs recession if you're getting sort of

mostly small positive numbers. Right, right, right. Okay, all good points. Oh, sorry. No, go ahead. Yeah, that's a great point. The diffusion are adaptation and diffusion, right? So I mean, certainly, I'd love to see some more industries get involved here.

You know, I'd love not to see it all be health care. I'd love to see that diffusion index come back above 50. I'm not as convinced that that will happen. You know, I think we can obviously, we can sort of sit there at low, stable job growth if it's just mostly coming from health care and you sort of get a, you know, smattering of other industries that are up and down month to month. I don't, it doesn't signal a great strength in the labor market to me if it's all coming from health care.

But yeah, I'm not sure that. ready to declare recession, right? I'm not ready to call it a jobs recession. Maybe Mark will convince me, I'm sure. Well, I guess, I mean, you're right. I mean, to some degree I'm forecasting a bit, and who knows how that will play out. I guess the other thing I'd point out is hours worked are way down. And I think this month overall didn't decline, but manufacturing hours declined again.

So that's another sign tell that we're in what I'd consider to be a recessionary kind of environment in the jobs market. Now, you know, there is the point that all the weakness seems to be with hiring, not layoffs, right? We haven't seen. Layoffs are up a little bit, but they're only up a little bit. So maybe you can make the case that you need to start seeing some layoffs before you call an actual recession. But do you know me? I want to be first. I'm going to call this the jobs recession.

You know, I do think the one other thing that's maybe more positive in the report, and this is also in the payroll survey, is hourly earnings, right? They seem to be hanging in there. Now, how do you view that, though? Is that a double-edged sword in the sense that obviously higher wages are a positive for the workers receiving those wage increases? and that's income gains and that's important to consumer spending and keeping the economy moving forward in an aggregate sense.

But it also may be reflective of the fact that we're losing that the labor force is weak and in certain sectors because of the immigration policy, we're seeing a tight labor market and wage growth is pushing up and that's adding to inflationary pressure. So I don't know. How do you view that, Marissa? Yeah, it could well be. Now, I haven't really dug into the industry detail of the earnings data. I don't know, maybe Dante has to see where the strength in earnings is coming from. I mean, the other data point that we've looked at is that we see that just inflation overall in services has been picking up, right? And it's pretty strong. Core services is pretty strong. So that also could indicate some upward wage pressure in some of these industries. So, yeah, I mean, it's not a great combination, right? Not what you would typically see if you have a weak job market and typically have downward pressure on earnings, but it seems like the opposite is happening here.

And that could be an industry composition story. Right, right. Okay. Dante, any views on the hourly earnings? Yeah, I was just going to say, I think, you know, in part, it's likely due, you know, you have that concentration in health care. And I think, you know, you are seeing health care provider. While job growth is still strong, I think there are some labor supply issues. in healthcare. And so you're probably seeing some of that effect of having to boost wages in health care to keep drawing workers in because the demand is still there on the health care side of things. I think you're probably getting a disproportionate effect from what's going on in

healthcare. Yeah, I'll have to say it's a very atypical, unusual kind of environment we're in, right? I mean, just really kind of just, I guess it's been bizarre since the pandemic hit. It just feels like we're still kind of adjusting. It's just very, very difficult to get your mind around all the things, all the moving parts here. Okay, anything else on the jobs report want to call out before we move on? I thought we'd play the stats game and then I want to come back and talk about the market reaction and the Fed and all that stuff in the context of today's numbers. But before we do that, any other, do we miss anything? Anybody wants to call out in the job numbers?

Chris, anything else you want to call out? No, I think we characterize it. Okay. I guess the only other thing I'd point out is I think this is true. Dante, correct me if it's not. I think when the, and I keep going back to the NBR, because now it's becoming a question of how you define a recession, you know, because we're getting, you know, perilously close to a downturn,

that when the NBR actually dates the recession, you know, what months did the recession begin and what month did it end, it correlates very highly with payroll employment. So when that payroll employment number goes negative as it does in June, if it stays negative in a persistent, consistent way, that's the month that the recession began, right? Is that, is that, am I right about that, Chris, do you know? Does that, does that sound right to you? That's typically the case. I'm trying to, actually, I can't recall an instance where that's not the case. Right, right.

So it is, it's conceivable that once we get all the data in and we're a few months down the road and more times elapses and if the economy continues to founder, that we could already be in recession, right? I mean, it could date it all the way back to June, that recession has already started. Yeah, or earlier. I mean, these numbers aren't going to stand. They're going to get revised. So we could even get a negative prior to June. Right, right. Dante, you were going to say something?

Yeah, I mean, I think that, yeah, it's almost always the case that whenever a recession has started, right? By the time the sort of start of the recession is declared, you've already had several months of negative job growth, right? So they go back and date it sort of that closely aligns with when that job decline started. So I think that's a fair assessment. Yeah. Okay. All right. Okay.

Very good. Let's play the game. The stats game. We each put forward a stat. The rest of the group tries to figure it out with clues, questions, deductive reasoning. We want a question that isn't so easy we get it, or stat that it's so easy we get it right away or stat that's so hard we never get it. And one that's apropos to the topic at hand jobs and the labor market, all the better. And we always begin with Marissa. Marissa, what's your stat? My stat is 54.3%. that feels like a ISM is it it's not in the employment data is it it isn't the employment data yeah it is in the employment data 54.3 percent is you thinking it was the services ISM I was going to say something in the ISM survey or something I thought like I thought what's that Dante I was just asking if it's a participation rate it is a participation rate oh 54 point That feels low, right? So that would be like the blind young workers?

Yep. Okay. Can you be more specific? 20 to 24-year-olds? No. 16-to-24-year-olds. Ah, 16-24-year-olds. Yeah.

Very good. Yeah. So this is the, yeah, the participation rate of the youngest bucket of workers that BLS tracks, which is 16 to 24. So this is the lowest it's been since August. of 2018 and the decline in the participation rate for this group so far this year is the biggest decline we've seen since early 2010. So still coming out of the Great Recession. It's down 2.1 percentage points since the start of the year. So bigger than any other age demographic group and bigger than we've seen in 15 years. That's my point.

Yeah, exactly. So we've talked a lot about the lack of hiring and in particular how young people starting their careers are finding it very difficult to find a job, a first job in particular. So yeah, it's pretty weak when you look at it in a historical context and certainly weaker than participation rates you see for other age groups. Even retirees, right? The participation rate has held up better for older people. than it has at this point for younger people. Do you know, is the participation rate risen for any age group or demographic of a consequence? Yeah, it has. So the participation rate for, I think, maybe, I think the prime age participation rate, 25 to 54, I think their participation rate is up since the start of the year. Was that right? I think it's down a little bit, like a couple tenths of a percentage point

for older workers, but this is the biggest decline, for sure. Do you look across other demographics, like educational attainment or ethnicity? Have you noticed anything there in terms of participation? No, I looked this morning for men and women. So participation for women has weakened much more than it has for men. and that could go to things like the federal workforce contraction. It could partially go to the immigration story. But I didn't look at other, I didn't look at like ethnicity or race.

Okay. Okay. And fundamentally, the weak hiring, what do you think is going on there? What's the fundamental causes of that? I mean, I think businesses are just being very, very cautious. I think just given the uncertainty around policy, I think with tariffs, I think the cost of doing business has risen quite a bit. So they're pulling back on hiring instead of laying people off so far. And they're probably pulling back on new job openings and recruiting. Those things are very expensive.

So I think that's the first reason. I know a lot of people like to talk about the AI story and there was just a paper that came out last week. by some researchers who looked at hiring using the ADP data, and they surmised that hiring is down for young people because of the increased usage of AI. I think that may be part of the story, but I still think that's a minor part of the story. I think it's more just the economic uncertainty out there. Got it.

Dante, do you agree with that assessment on the fundamental causes of the lack of hiring? Yeah, I think so. I mean, I think it's mainly an uncertainty story and just a desire to cut costs without laying workers off for the most part. And then certainly I think AI and other technological advancements are playing a role, but I think that role is small right now. Okay.

We have Jared Franz, the chief economist of the Capital Group, that large investment house coming on next Friday, and he's done a lot of work in this area. I think he's got a bit of a different view about the impacts, but that'll be an interesting conversation. Okay. Dante, what's your stat? 9.2% in the jobs numbers.

In the jobs numbers? In the payroll survey. Not in the payroll survey. Is it an unemployment rate for a demographic group? It is an unemployment rate. It's very closely related to Marissa's stat. Is it an unemployment rate for young people? It is, but it's 20 to 24-year-olds.

Okay. Ah, geez. So it's basically the same story, but I think, you know, it's up, it was up over a full percentage point from last month. So it was 7.9% jumped to 9.2%. That's the highest for that age group since 2015. If you ignore the pandemic, so you're going back a decade to see unemployment that high. I mean, it's the same story that you just covered with Marissa, right? I think that weak hiring is disproportionately affecting young workers, right? You know, they don't get the benefits of the no layoff story because they don't have jobs yet. And they get hit the hardest by no,

hiring because, you know, they're trying to find a job for the first time in a lot of cases. And so I think we're going to continue to see, you know, a disproportionate impact in that youngest group. You know, if you look at unemployment rates for prime age workers or for workers, you know, 55 and older, they've creeped up a little bit over the last couple of years. But for that young group of workers, you know, that unemployment rate bottomed out around 6 percent and now it's up to 9.2 percent, right? You've seen a huge increase in unemployment in that group. And there's just not a lot of, I think, help coming if hiring stays as weak as it. You know, I wonder if one of the explanations for why consumers have impacted in despite the, you know, if you saw a negative job, if I told you negative job numbers, what's the rest of the economy doing, what are consumers doing? I suspect you'd say, oh, they're in big trouble, they're pulling back, you know, this is a real problem. We're in recession. Maybe one reason why that isn't the case is this is the fact that the weakness in the labor market, the

negative numbers are related to hiring and that's impacting younger workers and they are you know they're less wealthy they have lower incomes they do less of the spending most of the spending is done by the prime age and older or wealthier households and they're not being affected or they're they're not being affected to the same degree that hiring isn't for them it's about the layoffs and the layoffs are low so no big deal what do you think of that theory that's a zanby theory by the way i came up i'm listening to you guys No? No, I think that makes a lot of sense. I mean, like you said, the sort of higher income consumers that contribute the most to spending,

you know, they're either, you know, could already be retired or they're, you know, well in their careers. And if layoffs stay low, they're less likely to be impacted in this situation. And so, you know, the 20 to 24 age group while they're suffering, they're also not huge contributors to consumer spending in aggregate. So it's just the impact is going to be much smaller. Yeah. Chris, what do you think of that theory? Yeah, certainly. I think it makes a lot of sense.

You also have the stock markets. Yeah. Wealth is holding up. So as long as that's the case, then those more affluent households are going to continue to spend. There is this demographic wave in terms of retirements going on that we probably should talk more about at some point. But, you know, you have that large number of baby boomers retiring.

They're not going to be particularly affected by what's going to the labor market. So it makes sense. I wonder if there's a way. we can look at this in a more quantitative way. I got to think about that. We need some data. We can look at spending by age group. From the consumer expenditure service?

Yeah, it's really lagged. It's really lagged, yeah. I mean, the other thing about that young age group is there's a lot of them. So they don't contribute, you know, they're not big spenders typically, but there are a lot of people in that younger age group. So at some point, it might matter on the margin, but it might matter, depending on how weak the job market gets. Yeah, we should give that some thought, you know, how to measure, see if we can measure that more, more accurately. Anyway, okay, let's do one more. Chris, what's your stat?

All right, 0.99. Oh, in the employment data? It is employment related. But not an employer It's a round rounded increase in the It's a ratio I'll throw it out there So I know what it is

It's uncharled positions unemployed Unfilled positions unemployed The ratio of unfilled positions unemployed Yes yes Correct Dante you knew that too didn't you Yeah I think it just felt below one For the first time in like forever right

I mean that was the headline Yeah Oh Dante beat me to it I missed that If I had a cowbell, I'd be ringing it right now. I'd be. Oh, okay. Oh, damn.

Oh, okay. Oh, yeah, that's a really good one. Go ahead and explain it, Chris. Yeah, so as Dante mentioned, it's below one now. Dante mentioned. Outside of the pandemic, the last time it was this low was in 2018 again, right? To Mercer's point, a lot of our statistics are now going back to that period. Right?

So another indication. of the job market just being extremely weak, right? Fewer vacancies relative to the unemployed. Yeah. Yeah, I thought that was a good stat. Very good stat. Okay. Well, let's come back.

As I said earlier, we're going to keep this one short just because I was so rattled by all the technical issues. I need to go get a drink or something. I don't know. Dan, computer. Chris, how's the market react? When I looked, I saw the employment numbers. I go, this is pretty ugly.

And then I see the futures are up for the stock market. I saw bond yields were down long term bond. That made more sense to me. But I haven't looked recently. What's going on? Do you know? And can you describe the reaction? Yeah.

So the initial reaction was the market went up. Right? Because I think we're in that bad news is good news phase. Right. Right. This kind of cements a rate cut by the Fed in a couple weeks, maybe even a 50 basis point cut is on the table. But then the market has turned around. The stock market is down about half a percent as of money.

Okay. Okay. Okay. So it is now in the red. It is now in the red kind of across all the indices. And you're right. Okay. The bond market, that's where we'd expect to see it, is down 11, 12 basis points on the 10-year.

Oh. Oh, okay. That's a huge move then. Yeah. Okay. Zeroing in on the 4%. 4% on the 10-year treasury yield. Yeah.

Okay. Because that's kind of the bottom of the range it's been in for a few years, sort of give or take, like it's been between 4 and 4-5. And you're saying now we're back towards the bottom of that range. That's right. We're at 4.08 or 4.07, something in there. But, yeah, I think there's a psychological 4%. If we breach that, then I think investors will perk up. Do you know what investors are saying about future rate cuts now by the Fed?

Yeah, so I looked at that as well from the Fed Watch tool from the CME. So a cut in September is a slam dunk. There is across the board. But now all of a sudden, we have a lot. about 15% probability that there will be two cut, a 50 basis point cut. What? Say that again? There's a 15% probability in September, meaning this month in a couple of weeks,

we're going to get a 50 basis by half a point cut in the funds rate? That's right. Wow. 85%, you know, vast majority think it's one cut, but there's a growing, all of a sudden, this kind of shot up today based on the labor market report that the Fed is actually going to be more aggressive. Right. What about an October cut?

Can you tell me what the probability of an October cut is? Because the Fed meets this month, October and December this year. Let me see here. So that's, yeah, a 75% chance. Ah. That rates will be in the 375 to 400 range. Okay. And what about December?

December. In the year. In the year. And that's, it looks like three cuts then, right? majority are 70% that the rate's going to be 350 to 375. Okay, so the markets, the investors are now discounting. It sounds like about three rate cuts, 25 basis point each, one September, one, October, one December.

Yeah, that's the, that's the media. Right. Right. But there is more probability now being put to the further cuts, right? There's a 10% chance that the rates cut, the rates will be 325 to 350. Right. By December. Right.

Right. Of course, in our baseline forecast, we have two quarter point cuts. And where we've been for a long time, one in September, one in December, and we were consistent with markets last month, but now we're conservative. What do you think? Do you think we're overly conservative? should we add another rate cut here? You know, I think you want to be careful looking at these predictions.

They react very violently immediately following a job support like this, but then in a few days, they may settle back down. So nonetheless, I think the probability of three cuts is certainly higher now than it was just a couple weeks ago. So I'm not quite ready to put a third cut into our baseline, but if I get another employment report like this, if the inflation report doesn't show things skyrocketing, then certainly I think that's going to be the strategy. Yeah, I mean, it feels like to me, we talked about this last podcast about the Fed and Fed independence

and as a result, the Fed is more focused on avoiding a recession than they otherwise would be, given what's going on with inflation, which is high and going in the wrong direction. But they desperately, they, the Fed, Fed members desperately want to avoid going into a recession, a full-blown economic recession, because that could be existential for their independence. So they put more weight on growth and therefore will cut rates more. significantly more aggressively. So I'm increasingly of the mind that we might want to add another rate cut here. Well, we don't have to make a decision right away. I mean, we've got the inflation numbers coming and we've got next month's job numbers that will inform. But I don't know.

It feels like they're going to be cutting rates here more quickly because they desperately don't want to, they don't want this job recession to turn into a full-blown recession. Does that sound right? That's for my... Unless we do see him. really taking off, then I'm not so sure. I think. Especially if it's on the service side of the economy, right? Because if it's on the good side of the economy, you say, oh, that's tariffs, that's one off.

But it's on the service side of the economy, that's immigration. And you go, okay, that's, that feels more persistent. And that goes to wages back to our conversation around wages. So maybe it depends on where the inflation is coming from. Yeah. Yeah. Yeah. Yeah.

Okay. Okay. I guess, you know, we've talked about it a lot, but, you know, just the fact that the equity market, the stock market keeps hanging in there, you know, even it's having, it's having, there's red on the screen today, but it's still within, well, very, very close to record highs. It's just not, it's just not responding to the, to the weakening economy. But, yeah. Yeah, it kind of shrugs everything off, right? I don't know what to make of that. Yeah.

Okay. All right. Anything else, guys? Dante, Marissa, anything else? Marissa, you want to add, say, before we call it a podcast? No, I don't think so. I think we covered a lot. Yeah.

Dante? Were there any other stats you were going to mention that you didn't mention that you thought were pretty good, or you exhausted them? I think we got it with the diffusion index was the big one. We covered that, you know, high youth unemployment. And then, yeah, just the fact that the state employment data has done a pretty good job with sort of signaling direction here. And so that signals that June and July are sort of where they should be at this point.

Let me ask one more question. And then we'll call it a podcast. I can't resist because I have you. So, you know, given all the kerfuffle around President Trump's firing of the BLS commissioner and concerns about timeliness and quality of the data, you know, we've been focused increasingly on alternative sources of data. you know, what else is out there that can inform? And that came to mind when you talked about the sum of states, looking at employment based on adding up employment in each state, in which

we've not really focused on a lot until now. What other sources, data sources, are you starting to look at more intensively in an effort to get another perspective on what's going on in the labor market? Yeah, I mean, so certainly there, you know, the two I mean, the one sort of traditional other source of actual job growth has always been the ADP employment report. They provide a measure of private sector job growth every month. And that one has done an okay job historically of giving a sense of where the BLS payroll data might land. But it's not great on a month-to-month basis. It's better thinking about trends over three or six months or longer.

And then the other sort of newcomer to the scene is this data from Ravellio Labs, who just sort of in response to the firing of the BLS commissioner and can sort of heightened concerns around government data, they just put out some, I'll call it experimental, I guess at this point, because it's pretty new. But they're publishing data on job growth and on job openings and on salaries and wages. So from there, we can also get a measure. They actually publish a total non-farm job number, but we can also get a private sector number from there. as a sort of, again, leading indicator comes out a day or two before the jobs report. If you look for August, they were a little high, right?

So ADP's prediction for private sector payrolls was right around 50K, Ravellio Labs, private sector payroll number was just over 100K. So obviously, we came in a bit below both of those. But I think they're reasonable measures to sort of keep a pulse on what's happening. I think I hesitate to put too much attention because they're always going to diverge month to month, right? They're never going to be exactly right, or all three sources are never going to exactly align. But I do think over sort of longer time periods, it makes sense to keep an eye on those and make sure they're still tracking together.

Yeah, the other one, I think you mentioned was home-based. Do you watch the look at home-based at all? I have not recently. Do they have an actual employment? I think they do. Or some measure of labor market activity. We want to take a look at that as well. Did Dante miss anything?

I'd be surprised if he did, but I'm just asking. No, I mean, there's that I think Indeed puts out data on job openings, but I'm not sure how well that tracks. I mean, it's kind of a different measure. It's a count of job openings, right, not employed people. So it's different from what ADP and Revelli are trying to do. But it's another data point. If we get to a point where we're starting to question the BLS data, then we're going to have to look at all this private sector stuff. Yeah.

Right. Okay. Okay, guys. Anything else? Chris? Anything else? No? Just a little surprised, Dante, didn't mention the productivity number from this week. Oh, yeah. That upward revision to productivity is that what you're referring to?

Yeah. Yeah. It was there. It happened. I saw it. It feels like productivity, well, this is the topic for maybe next month, but it does feel like productivity has got a little bounce to it. doesn't it?

Does. No, Don't Dante? It feels that way. Yeah, I mean, obviously, the GDP measures are a little volatile right now, so I'm a little more skeptical

of, you know, obviously the productivity measure derive from there. All right. Well, let's table it. Let's talk about it next month. We'll talk about product to week. Or maybe even next week

when we have Jared on, you know, from Capital Group. Talk about it in the context of AI. Okay, guys, we're going to call this a podcast. Dear listener, I hope you enjoyed the conversation and we will talk to you next week. Take care now.