Odd Lots - Lots More on the Worsening State of the US Labor Market

Episode Date: November 7, 2025

If the government were open, we'd be getting a jobs report today. But as it is, we're in this blackout of official economic data. That's unfortunate, because the economy is already in a very confusing spot, and so any additional data right now would be very helpful in figuring out where things are heading. In the absence of Non-Farm Payrolls, we talked with Bloomberg Opinion columnist Conor Sen about the worsening state of the labor market, and why he thinks the Federal Reserve needs to step in before the unemployment rate deteriorates further. We also talk about the role AI is (or isn't) playing in the labor market.Read more: US Companies Announce Most October Job Cuts in Over 20 YearsFed’s Hammack Says Inflation a Bigger Concern Than Labor MarketSee omnystudio.com/listener for privacy information.

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Do you guys know what today is? It's our 10-year anniversary because everyone keeps sending us messages. I know we only knew, I didn't realize that today was the actual 10-year anniversary until I started getting emails from random people this morning. It's like, oh, happy 10-year. It's like, what? Random Bloomberg people, too. I thought I would be the first three months. Oh, yeah.

Sorry, Dad. In our hearts, you were the first. Yes, 10 years ago today, the first episode of Oblis. I do have, I forget who sent this to me. I have a mug. Yeah, so happy anniversary to us. Happy birthday, fair. What did you get me?

I guess this is a little weird. Happy anniversary to us. Happy birthday to Oddlots. And you know what? I didn't get you anything. I know you didn't. I wait. I wait with bated breath for a gift from Joe one of these days.

You know what? No, that's not true. I've gotten a gift. Name one. I always bring back sweets when I travel. Everyone does that. I know. I guess that doesn't count.

You know what would be a really wonderful gift? What? Fresh of jobs data. Oh, yes. I did a deadlist. I am both the most popular trader and most successful trader at Citadel. Fed is going viral. Barges.

This is an after-school special except... I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the U.S. Black gold! These are the important questions. Is it robots taking over the world? No, I think that like in a couple of years, the AI will do a really good job of making the Outlaws podcast. day that person will have the mandate of heaven.

How do I get more popular and successful? We do have the perfect guest. You're listening to Lots More, where we catch up with friends about what's going on right now. Because even when the Odd Lots is over, there's always lots more. And we really do have the perfect guest. I don't know about you guys, but I did not expect to miss the NFP as much as I am at the moment. I just thought, you know, we have all the alt data. Things will be fine.

hit the same, doesn't, Connor? It doesn't not. ADP, like having to care about ADP is just the worst. You're like all these estimates or whatever. It's like it just doesn't, even if you know it's coming out, it doesn't hit the same. There's nothing like job. The Chicago Fed estimate of unemployment. Like, all right, Austin Goolsby.

I like you, but come on, that's not the same. Well, wait. We got to get him on here. Okay. So the one upside of not having the official data, the official jobs data, because of the government shut down is everyone gets to be really mean. about the alt data, right? And say, like, really harsh things about why they don't like ADP.

But could someone just remind me why we hate ADP? Oh, yeah. What's wrong with it, Connor? I mean, it's always, they revise it to the BLS data. So it's like, here's our estimate. And then six months later, you revise it. So then the historical data looks fine. But in the moment, it's actually not the same at all.

It's interesting because, you know, people always say, like, ADP. Oh, oh, it missed again. But it is a little weird. And it gets to, I think, some philosophical things, which aren't necessarily worth diving into for a conversation. about what does it even mean to be right or wrong? I mean, NFP gets revised all the time. NFP is just a model for the real economy. You know, a little confusing the map and the territory stuff. Anyway, when people are listening to this, it should have been Jobs Day. And so I don't really think there's going to be a report unless somehow the government gets open.

I don't think that's happening. This is our gift to Odd Lots listeners. Yes. In celebration of our 10-year anniversary, we are bringing you this labor market episode of Lots more brought to you by Odd Lots. And it's a poor substitute, perhaps, but it's the best that we can do. So this morning there was a headline Challenger, which has never been a particularly, like, top shelf data point for me. Like they said the worst month for layoffs in 20 years. On the other hand, initial claims have been steady. Also, there was a headline from Cleveland Fed's hammock. She's more concerned about inflation than employment right now in terms of risk to the dual mandate.

Connor, you've sort of pretty taking the opposite view. You think the labor market situation is pretty serious and urgent, maybe underappreciated as a risk. You probably disagree with a president. We've had this low, hires, low fires labor market for at least 18 to 24 months now. And I think we have evidence over the past few months that at least there's no reason for low fires to still be happening in corporate America. They don't have to hoard labor because if nothing else, if you really want to hire, there's plenty of young people. There's plenty of long-term unemployed people to hire. Unemployment rates kind of low, but there's plenty of slack out there to hire people.

So to the extent that like Amazon has shown the way of we don't need to hold on to our COVID workers anymore, that could give permission to other companies to do the same. And at a time when everybody's trying to cut costs, that could snowball a little bit. Right. So just going back to the ADP data for a second. So sorry, I hate to do this. But according to ADP, payrolls were up. We're going to get a call from ADP. No, I'm sure. We're going to want to come on and defend, which is fine. Well, I'm trying to get to some of the tension here. But okay, jobs up 42,000 for October. And then we get the chance. calendar data for that same month. And as Joe said, it's like the worst job cuts in 20 years, I think over 150,000 cut. Why does it seem like we are getting these two very different streams of jobs data at the moment where we do have some alternative data points that are coming in better than expected? And then we have some that are just coming in that look almost, I don't want to say depression level, but like certainly worse than it feels at the moment. Well, the way the challenger data works is it's announced layoffs. So that could be anything from UPS.

saying we've laid off 50,000 people over the past 12 months or announced job cuts that haven't happened yet. So they're just headlines, not actual job cuts that month. Oh, I see. Okay. So it's aggregating just people saying stuff and we're still not entirely sure whether or not they're going to do it. Yeah, it's headline aggregation, not confirmed layoffs that month. What do we know about initial claims? So the initial claims are still pretty low. I think one thing we're dealing with right now is that the year-over-year is incorporating the hurricane Helene situation from last year. So if you remember, that was end of September. Then you saw claims in North Carolina and Florida in the southeast as people were, you know,

there was flooding. And so companies were closed for a while. So you saw spiking claims in October. So we're kind of lapping that period. And so to the extent that the year-over-years don't look bad right now, that could be partially a hurricane impact. Do you have like a shadow NFP figure in your mind that you're working on? For me, it's just sort of, I don't think jobs are really growing in the aggregate right now,

certainly X health care. And so to the extent that we think corporate earnings are going to grow 10% over the next 12 months, how do you grow earnings 10% if there's no job growth? It just seems like you need a real productivity miracle or some sort of compositional dynamic to get there. If the labor market is substantially weakening, we are going to revisit the cyclical versus structural debate, except this time, the structural argument would be that it has something to do with AI. And if the call in that if AI is driving job loss, which I'm not really convinced by, but if AI is driving driving job loss, then rate cuts aren't going to do much. Like what is your,

yeah. Can I give you my conundrum of what I think is going on? I think about Craig Fuller and pre-commodity markets and all the supply chain episodes you guys did. And I think about there's sort of the contracted rate of like promotions and jobs that people got in 2022, home prices people committed to in 2022. And then like the spot market, which is long-term unemployed, young people, resell housing inventory. And I feel like the spot market wants to get back to 2019 affordability. And then the contracted market wants to stay at 2022 prices. And there's this really growing tension between the two as the spot market's trying to drag down the contracted market, so to speak. So to understand this, to maybe the way to think about this is that there is a seat

that a company has a role, and the person sitting in that seat might be taking in $150,000 currently. But if that seat were open and they had to hire for it, maybe it would only be they could hire for that role for $100,000 or $90,000 or $110,000, and thus the gap between contracted spot. Right. And I think, you know, you think about like a bank analyst program where you hire a bunch of 21-year-olds, maybe they were making $100,000 in 2020. and then that got raised at 150 in 2022 because the job market was so strong. Those analysts then become associates.

And then there's kind of an expectation they're going to leave for business school or private equity or whatever. But because the labor market's so bad, they don't want to leave. And they might be perfectly fine people. But at some point, you're like, well, we need to kind of kick you out to make room for the next 21-year-olds. Almost like if a college, like University of Texas, if the seniors were like, we're not leaving because the job market's week, we're just going to stay.

And at some point, Texas is like, well, we have. freshmen that need beds, you have to leave. And I worry we're kind of getting there. That's a great analogy. There's a whole movie about Ryan Reynolds trying to stay at university because of a lackluster job market. I presume. Anyway, the other thing that everyone seems to be debating at the moment is the impact of immigration or lack thereof on the total labor market and what that means for supply. And depending on where you come out on this particular debate, you might have very different impressions of what's going on at the moment. What side of it are you sort of landing on? I think it's fair to say that the break-even jobs rate is much lower. Like maybe it's 30,000,

but also supply kind of generates demand as well. And I think you can look at housing to show that. I don't know if he'll appreciate me calling him out, but Lee Everett, who you've had on to talk about multifamily a couple times, I asked him, do you think that reduced immigration is hurting multifamily performance because Q3 was pretty soft for apartments. In his view is it's not like, undocumented migrants are living in class A and class B apartments, but if you don't have population growth, you don't need job growth. And if you don't have job growth, you don't need to sign a apartment lease. So it might not be directly leading to weakness and whatever, but it's sort of that demand weakness is showing up elsewhere in housing, in consumer staples, things like that.

Let's get back to the AI question. Do you think it's playing some role in cuts? Because, yeah, I'll leave it at that. I think in two ways. Yes, I don't think it's, but the technology is displacing workers, but I think the companies are first cost constrained, and they feel like they have to invest in AI. So if you have to increase your budget somewhere, you've got to cut it somewhere else. And labor is a good way to do that. And then I just think the vibes in general of, well, if you're hiring a bunch of people, you're probably a loser that doesn't get AI. And so you can't look like a loser. So you're just not doing it. Yeah, this is what I worry about with the optics, which is if there are a bunch of

companies recently who have seen their share prices go down. And we're recording this on lunch time, so all the food ones are on my mind. But for instance, McDonald's, Chipotle, right? Came out with disappointing earnings and shares are going down. If you're a company watching your stock price go down, you're thinking about the levers you can pull to make it go up in the future. Price increases probably aren't going to work when everyone's already complaining that, you know, a cheeseburger and fries over at McDonald's are like more than $10 now. But one thing you can do is say, well, we're going to cut workers. And by cutting workers, look at it. us, we really understand AI and we're in on like the current trend or craze.

Something McDonald's did 18 months ago is they finally, when everything was slumping in 23 and 24, their comp sales in the U.S. went negative. And they had this big earnings call saying, we've always prided herself on value. Our value gap versus our peers has really compressed, but we are going to win at value, whatever it takes, almost like a druggie moment for breakfast, fast food. And they introduced this $5 value meal, this they caught McValue, their new program that they launched earlier this year, and they've really clawed that value gap back. And so it's sort of like, they're going to claim their market share, and then everybody else is going to lose traffic

to McDonald's. And so I think they're kind of fine, but everybody, and that kind of gets to that contracted versus spot economy framework where McDonald's got back to where they need to be. Everybody else isn't there. And they're all trying to figure out how do we deal with this environment where demand is weak and consumers are very price pressured. I want to say, Joe, I have yet to experience the rebound of value at McDonald's. I had a moment of weakness on Monday. Yeah. And it was costly.

It was costly. I went through the drive-thru. I didn't use the app. So that was probably the problem. But like it is not nothing to get a meal from McDonald's nowadays. We do my favorite thing is whenever like a sector comes up, I start like pulling up stock charts on the terminal. Sweet Green. That was a $45 stock last November.

This is maybe the biggest Trump era loser. It was $44. Now it's a $6 stock. Kava was a. a $150 stock, also in late 2024. Now it's a $47 stock. I mean, these are like, you know, these are the tip of the sphere,

the most cutting-edge slot bowls you can get in there. Yeah, I feel like if you were the kind of person working for, like, Jigger Shaw's group and, like, eating lunch in D.C., the kinds of things you're eating, that's like in a bad recession now, those types of workers. I do. Yeah, I mean, that's not funny.

It's true. I also, Tracy, like, when I, I love our D.C. listeners, so I don't want to insult. people in DC. But when I think of like, what is the city, which I'm certain has the highest percentage of people that sort of eat a bowl lunch, I always think in terms of the workforce, it must be DC. And I do think it's actually founded in DC. And sweet green. Both Kava and Sweet Green are like, this is true innovation serving the local market. And so I do think it's

interesting that D.C. is an industrial hotbed for these kind of lunches. I'll just say, I see a lot of sad salad eaters here including me, including Joe. But I am willing to say that Kavis and Sweet Green are certainly that sort of, I guess, liberal, bureaucratic government official coded. Your meal. Yeah. Your rations. They are.

Yeah, they are. Here's your bowl of salad. Oh, man. When you're hearing like Chipoli talked about weakness among 25 to 35 year olds, it's not just 20 to 24 year old. So it does seem like that weakness is kind of creeping up the income scale, the age ladder. And maybe the AMX consumer is still fine, but it just seems like the weakness is moving up the income curve.

We were actually talking about the labor market. And I know this is related. But one thing that kind of worries me at the moment is that even if the government opens up tomorrow and NFP gets released soon after that, it feels like it's just going to be messy. And even if we get the official number, it's not actually going to be that insightful. And we're still going to be spending all our time having the debates that we're having right now. I think we're not going to have a clean read on the data until at least January just because October is going to be a mess. Who knows when we're going to get the data. even if the government reopens, then you have the November data is impacted by the shutdown,

which won't. So, yeah, we're kind of just twiddling our thumbs until you're on. So let's talk about, you know, let's put it in the stakes for the Fed. If you were the Fed share, which, you know, you probably play fantasy Fed share in your mind. There's a non-zero chance that Connor could one day be. Yeah, or certainly, yeah, or certainly the governor. Um, like, what do you, like, is there of an effective move here? Is that, is it keep cutting rates and how effective would they be? Play it out from the Fed framework. What I think they're thinking is that, we keep missing on inflation. We don't know if tariffs are going to lead to

unanchored inflation expectations, even though they don't take the stock market into account, I do think on some vibes level, if the stock market's high, that doesn't force their hand. And they're really anchoring to the unemployment rate is historically low, which kind of, but again, if you look at the long-term unemployment numbers, age 2024, kind of that spot labor market groups, that's actually quite weak. That's more of like a 2015 type labor market. And I just think they don't want to do anything until their hand is forced. But again, for me, I see housing getting worse. The Fed's cut rates 150 basis points.

And housing is worse now than it was a year and a half ago. So I think the whole, when the Fed cuts rates, housing is going to be fixed has not proven to be true. And the labor market doesn't seem to be getting better yet. So outside of AI, it's just hard to see any upward momentum heading into 2026. If you were at the Fed dealing with an AI economy versus the economy of 10 years ago, let alone, 30 or 40 years ago, but let's say 10 years ago. Does that make you think about monetary policy and the transmission mechanism different at all? Joe kind of got at this earlier. Yeah, I think, you know, we all lived through the mid-2000s and then the bust and the bailouts. And it's like,

should the Fed have prevented Open AI from making these commitments? Should the Fed have prevented Nvidia from doing vendor finance on the scale they have? Maybe we'll say in hindsight, yes, but like in the moment, which is right now, come on, like, that's not going to happen. So I'm a little more sympathetic now to the Fed being blind to certain things in the boom, especially when it's sort of outside of their their mandate just because it's... Right. They're not AI regulators. No, exactly. And it's also with Trump, it's not like they're going to be telling Sam Altman, he can't do what he's doing. So I feel like they're going to probably have a role in the cleanup. But in the moment, there's not a whole lot they can do. It's funny that we're already like projecting it so far forward. But it is, I mean, this is, and I really want to do more on this.

I think the politics of AI are going to be huge in 2028. And I expect, I don't know, it's very possible to me that the AI industry at the same time is a very big deal in the U.S. touch and sort of friendless in D.C. It seems very plausible. It seems very plausible to me that in 2028, the story is most people, again, 2028, it's a lifetime from now in both politics and technology. But it could be a story where it's like, here's this thing. It's really important. or there's tons of investment in it, but people for the most part, either mostly see it as

a job killer slash an electricity price booster. And there are some, you know, the stakes are going to be very high. And I expect sort of like, especially on the Republican primary, I would expect, I would expect the Democrats to sort of be more comfortable. Their antagonism towards big tech has obviously been, you know, several years. I think it's going to be some interesting divisions on the GOP side in terms of which lanes. And I think there is going to be an AI lane or an anti-A-line AI lane. You already see Ron DeSantis. He's been tweeting a lot about this.

I think that's very telling. Well, it's also in 2024, the MAGA coalition was kind of working class voters of all races and ethnicities and then tech and VC. Yeah. And it's just hard to see how their interests are truly aligned on AI. Let's talk a little bit more just about the job market right now. Like, you know, let's see we were getting data. Like, do you think, you know, some role, like we're in sorts of.

of it's sort of come down, but how close do you think we are to the snowball? Like, how urgent? How far behind do you think the Fed could get here? I remember when Liberation Day happened and people were wondering how bad I was going to get. And my thought was that companies don't like to change their CAPX plans into April and May. They're going to try to get through the end of the year and then figure out 2026 and Q4. And as they're doing that right now, it's hard to think that they're going to feel like we need outside of AI, like we need to step up investment in hiring. We feel really good about 2026 when the government's shut down.

and share prices going down. And so I worry a bit that it's like we all freaked out in April and May and then it was kind of fine for six months. And then now is when people are going to make their investment in spending plans for next year. And those are going to come in lower than they did a year ago. And we're going to start to see that show up in Q1. So I don't think it's a next week, next month thing.

But could the unemployment rate go? Certainly into the high four is yes. And I think we probably will get there. Does it get beyond that? I don't know. But I just think three to six months from now, it's still going to be worse than it is today. How concerned are you about like, just while we're here and have you, some of the first brands, treacleore, some of these dodgy credits, you know, Jamie Diamond used to be cockroaches.

Cockroaches, right. Like, you know, what's your sense? I feel like the whole private asset thing is that it was small in 2008, so there weren't really any problems there. And then in the early 2010s, you had ZERP and then very cheap assets, and they had a great decade of performance based on that. And then the asset class kind of just kept getting bigger just because, like, I don't know if there's a real fundamental reason for it. It just became, like, a thing that institutions do. And so it's like, are they really underwriting very well? Like, you look at the stock prices of a firm and upwork or all these like AI fintech lenders are getting destroyed. And you've had, like, that's the treating guy talked about

Blue Owl. Yeah. It's just hard to think underwriting is really, really great right now. And so if anything worsens the economy, I assume that those guys are going to be in trouble. The Blue Owl thing is worth talking about more, and I think we have an episode coming up that we'll touch on that. You know what I should say? We've been speaking with Bloomberg Opinion columnist Connorson. Oh, yes. That's very important. I wanted to make sure.

I knew there was one more thing I wanted to get in the conversation. And so I wanted to establish who the guest we are actually talking to was, I guess. Connorsen person with non-zero chance of becoming Fed Chair. Non-zero chance of becoming Fed Chair. We said that. That's the real title. That's the real title. We should leave it there.

should go, I kind of want McDonald's again. Yeah, it's lunchtime. Lots more is produced by Carmen Rodriguez and Dashel Bennett with help from Moses Ondom and Kail Brooks. Our sound engineer is Blake Maples. Sage Bowman is the head of Bloomberg podcasts. Please rate, review, and subscribe to Odd Lots and Lots more on your favorite podcast platforms. And remember that Bloomberg subscribers can listen to all our podcasts ad-free by connecting

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