Why the U.S. job market remains resilient in face of global pressures and inflation

Geoff Bennett:

So let's make sense of the headline. Hiring was much stronger than expected in August, despite the uncertainty around the Iran war and President Trump's tariffs. Where were the strongest gains coming from?

Roben Farzad:

Leisure, hospitality, FOMO spending. If I hear one more anecdote about a very wealthy boomer grandmother with a puff 401(k) or two houses and enjoying that 3 percent mortgage wanting to splurge on the grandkids, fly them first class, of course, that is a subset of the economy where people are lucky and blessed and fortunate enough to have assets.

If you are a wage earner, if you are a blue-collar worker, you are not keeping up with inflation. It's still coldly comforting to see. OK, this many, 160,000 jobs are created, unemployment rate 4 percent. Well, A.I. is coming for my jobs. My kid can't get a job, and I can't afford to make ends meet with interest rates where they are right now.

I have to use credit card debt to buy groceries. So, very much that K-shaped theme that still persists.

Geoff Bennett:

And where are we seeing the weaknesses?

Roben Farzad:

You're seeing it in information technology and professional services, I think, where there are lots of deer in the headlight stuff, like wow, A.I. is around the corner.

Speak, for example, to a money manager I know who's one of -- one of the her deputies left for paternity leave and in that process discovered all the different things she could do, all the different salaries she could retire with Claude and ChatGPT.

And if you take that in stereo across Wall Street, across the consulting firms, H&R Blocks, tax firms, and the like, it is staggering, and you're starting to see captains of business warning about that in the pages of The Wall Street Journal and The New York Times, that we don't know what's around that corner.

So I think that the companies that realize they're going to be hugely affected by this switch to automation and the artificial intelligence mine, they're not hiring.

Geoff Bennett:

What about manufacturing? Because manufacturers added 16,000 jobs last month, the strongest gain in three years. Is this the beginning of a manufacturing rebound or is it too early to say?

Roben Farzad:

It's been said before.

And, certainly, the dollar's weak. And in that scenario, you would be happy as an exporter to export your wares. But it's not a huge number in the grand scheme of things. I think, if you step back from it, Geoffrey, there are people that are dropping out of the work force.

There's a lot of denominator/numerator legerdemain going on here. Immigration is not filling in the holes where it should, I think, with hospitality and service sector jobs. And so it's very much a no-hire, no-fire economy when you read between all those lines.

Geoff Bennett:

And wage growth. I want to return to what you said about the inflation taking the shine off an otherwise strong jobs report. What does that mean for most workers?

Roben Farzad:

Most workers still have a snapshot in their head of what a Filet-O-Fish Extra Value Meal cost in 2018 or 2019. You can go on Reddit and see all these receipts of Five Guys from yesteryear, of a Walmart trip with your family at the beginning of the month, and what $100 would have bought you back then versus now.

And there's a real deterioration of your purchasing power. And if you're not getting it back in terms of wage gains, you're not even treading water. You're in reverse. And it must really hurt to see people out there was like, oh, stock market has had a rip-roaring 17-year bull run.

Well, if you're one of those people who doesn't have to worry about making a $1,000 emergency expense. So, again, that bifurcated economy. And what's worse is, if you're using credit cards with higher interest rates right now and higher interest rates in the offing to make ends meet to cover your monthly nut, it's ever harder to make those ends meet.

Geoff Bennett:

It's almost a Pavlovian response these days. We get a jobs report, and the immediate question is, well, what's this mean for the Fed?

When you look at this report, does it move the Fed closer to an interest rate hike?

Roben Farzad:

I think it does.

And there's a lot of theater going on between the White House and the new Fed chair. You remember the theater back with Jerome Powell and the hardhat humiliation and everything else that was doing there. This president, as with many other taboos, has shattered the taboo of church and state with the Fed.

And he's out there saying stuff that it's your patriotic duty as the Fed today, I'm sure you can find the quote verbatim, to take rates down. Of course, the entire freaking-out global bond market would go nuts if they were to cut into this news. If anything, it gives Warsh the cover to go in there and push through another rate increase, see that if that finally snuffs out this higher-than-trend inflation.

And I imagine that that's kind of the backdoor whispering that they're saying to each other, like, you do what you need to do. I cannot imagine him undermining the new Fed chief, not even six months into the job.

Geoff Bennett:

Roben Farzad, host of public radio's "Full Disclosure," thanks for being here.

Roben Farzad:

Always a pleasure. Thank you.