Episode summary
Soft Jobs Data Trims Fed Rate-Hike Bets | Bloomberg Businessweek
Bloomberg Businessweek Daily
· · Hosts: Carol Massar, Tim Stenovec · Guests: Mike McKee, Matthew Luzzetti, Laura Ulrich, Randall Williams, Davide Barbuscia
Summary
US payrolls unexpectedly fell in July, with prior months revised sharply lower, and the guests argued that the labor market is weaker than it had appeared even if it is not yet in outright trouble. Mike McKee said the report suggests the job market is “weaker than it had appeared,” while Matt Luzzetti said the data mainly lowers the estimated break-even pace of hiring and reduces the Fed’s upside risk on employment. They also emphasized that a falling participation rate, retirements, and restricted immigration are all shrinking the labor force and changing how many jobs are needed to keep unemployment steady.
The discussion then turned to the Federal Reserve, where the guests said markets have pulled back from betting on a September rate hike but still face two more inflation readings before the next meeting. Luzzetti argued inflation remains the bigger issue because underlying price pressures are still around 3%, while McKee said the next CPI reports will matter more than any single payrolls print.
Laura Ulrich of Indeed added that the labor market is “cooling, not necessarily cooling,” with job postings flat since last September and early signs of strength in software and other AI-adjacent roles. A later segment shifted to AI-related debt, where Bloomberg reported that investors are becoming more selective as tech companies and data-center projects raise huge sums to finance the buildout.
Key takeaways
- Mike McKee said the labor market is weaker than it had appeared, but not weak enough yet to create a Fed crisis.
- Matt Luzzetti said the lower payroll trend mainly implies a much lower break-even jobs number, possibly near zero.
- Laura Ulrich said Indeed sees a cooled labor market, with postings bouncing along the bottom since last September.
- Luzzetti said September will still hinge on inflation data because underlying inflation remains closer to 3% than the Fed wants.
- Bloomberg’s David Barbucha said investors are growing more cautious on AI debt after several large tech bond deals traded poorly.
Notable quotes
“the labor market here in the US is weaker than previously thought after surprising strength Tim earlier this year”
“the bottom line to just skip to the end of the book is that the labor market is weaker than it had appeared, but it's not weak”
“Buyers have grown wary that massive AI spending will not pay off”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. This is Bloomberg Business Week Daily. Reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy.
Plus, global business, finance, and tech news as it happens. the Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenbec on Bloomberg Radio. So, let's get to it and let's get to the labor market and that report we got this morning at 8:30 a.m.
Eastern. Here's just kind of some of the details. US employers unexpectedly cut jobs in the month of July and hiring the prior two months was uh revised lower, suggesting that the labor market here in the US is weaker than previously thought after surprising strength Tim earlier this year.
The decline in jobs driven by cuts in government, leisure, and hospitality, also retail. Private sector payrolls rose by $30,000 for a second month that was led by healthcare and social assistance. Manufacturing and construction payrolls, those continue to climb.
And then there was the participation rate. The share of the population working or looking for work fell to 61.4% which excluding the pandemic was the lowest since the 1970s. Among those between the ages of 25 and 54, known as prime age workers, participation edged higher but remained near the lowest levels of the fast of the last few years.
White House director of the National Economic Council. We're talking about Kevin Hassenet. He spoke earlier on Bloomberg TV and radio on open interest with Danny Burgerer and Michael McKe.
and labor force participation is kind of on a downward trajectory which means that the break even jobs number that is that the jobs number you need so that unemployment rate doesn't uh go up is has gone from maybe 120 130,000 a few years ago to maybe about 40,000 now and so what it means is that what the market is used to looking at oh it's it's like a normal tread the water cut a jobs number if it's around 100 is no longer true
All right that of course is white house director of the national economic council Kevin Hasset earlier on Bloomberg.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- soft jobs data
- fed rate hike bets
- unemployment and wage growth
- inflation vs employment
- ai in jobs market
Companies and tickers mentioned
- DB
- Deutsche Bank
- Indeed
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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