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Strong Jobs Report Puts Fed Rate Cuts on Ice · The Financial Exchange Show

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Speaker 3: Friday here on the Financial Exchange, and it happens to
1:19
Speaker 3: be a JOBBS Friday, eight thirty am Eastern time. Today
1:27
Speaker 3: we received the Bureau of Labor Statistics Jobs reports, commonly
1:34
Speaker 3: known as the Employment Situation actually uncommonly, but that's the
1:38
Speaker 3: official title. And uh, look, gotta tell you Oprah's hanging
1:44
Speaker 3: out at the BLS because you get a job, and
1:46
Speaker 3: you get a job, and you get a job, and
1:48
Speaker 3: you third straight month of good jobs numbers.
1:52
Speaker 2: In fact, I don't give many a's to jobs reports.
1:55
Speaker 4: This is this one this economy.
1:58
Speaker 3: Not for this economy, Michael, not for this economy. There
2:01
Speaker 3: is no qualifier.
2:03
Speaker 2: Needed on this job's report.
2:06
Speaker 3: This is an a one hundred and seventy two thousand
2:08
Speaker 3: jobs created compared to expectations of.
2:11
Speaker 4: Around one hundred thousand. That follows one hundred and seventy
2:14
Speaker 4: nine thousand in April.
2:15
Speaker 3: No, no, Michael, that follows two hundred and fourteen thousand
2:19
Speaker 3: in April. Because we also had positive revisions. Okay, actually no,
2:24
Speaker 3: April was one seventy nine, March was two fourteen. Okay,
2:26
Speaker 3: I got my months confused, but positive revisions these are
2:29
Speaker 3: great signs as well. One of the things that you
2:32
Speaker 3: see at turning points in the labor market is when
2:36
Speaker 3: things are worsening, you see negative revisions. We covered that
2:39
Speaker 3: last year, like there were negative revisions like every month.
2:41
Speaker 3: It's like, my goodness that the job's numbers were even
2:44
Speaker 3: worse than we thought. This one is no like the
2:48
Speaker 3: late arriving data to the BLS is coming in better.
2:52
Speaker 3: So this is really good the last.
2:54
Speaker 2: Three months now averaging one hundred and eighty eight thousand
2:57
Speaker 2: jobs created.
2:59
Speaker 3: That is fantast I don't care whether you're talking about
3:02
Speaker 3: right now, two years ago, five years ago. This is
3:05
Speaker 3: a really good number for jobs right And those revisions again,
3:10
Speaker 3: what happens here is they send out surveys to businesses.
3:12
Speaker 3: The businesses sometimes get back to them, sometimes don't, sometimes
3:15
Speaker 3: get back to them late, and they use those later
3:18
Speaker 3: submissions to.
3:19
Speaker 5: Revise the numbers upward or downward.
3:21
Speaker 4: And as you can imagine, right if you're a business
3:23
Speaker 4: that is in the thick of things, either hiring spree
3:26
Speaker 4: or firing spree, you might not respond to a survey
3:28
Speaker 4: right away, which is why these turning points sometimes can
3:32
Speaker 4: be defined by big revision.
3:34
Speaker 3: Labor force participation rate stable at sixty one point eight percent.
3:37
Speaker 3: I haven't gotten into the twenty five to fifty four yet,
3:40
Speaker 3: but I'm sure I will at some point. Unemployment rate
3:44
Speaker 3: stayed at four point three percent. That is good to
3:49
Speaker 3: see three straight months that we've been in that range.
3:53
Speaker 3: And remember, as we've talked about, four point three percent
3:55
Speaker 3: is historically low. Yeah, that is not something where you're like, oh, like,
4:01
Speaker 3: you know this is you know, No, that's a good
4:05
Speaker 3: number to see.
4:06
Speaker 2: We covered it earlier this week.
4:08
Speaker 3: That the only couple of times that you've seen in
4:09
Speaker 3: recent history below that peak of the tech bubble.
4:12
Speaker 2: In late twenty nineteen.
4:14
Speaker 3: I throw out twenty twenty one and twenty two just
4:16
Speaker 3: because that labor market was not sustainable in any way
4:19
Speaker 3: with how hot it was. So again, I think, like
4:23
Speaker 3: you look at the data that we have here, and
4:27
Speaker 3: it's pretty darn good. The other thing that I will say,
4:29
Speaker 3: this is not a what I would qualify as a
4:33
Speaker 3: soft four point three percent. It's not because of rounding.
4:36
Speaker 3: It's not like it was four point three four nine,
4:38
Speaker 3: it was four point twenty nine.
4:40
Speaker 4: I'll ask a question that I know the answer, but
4:43
Speaker 4: I think is worth asking. You've added now close to
4:46
Speaker 4: six hundred thousand jobs over the course of the last
4:48
Speaker 4: three months. Yes, how do you do that without the
4:50
Speaker 4: unemployment rate going down two different surveys, is the obvious answer.
4:55
Speaker 4: Household survey has been a little bit weaker over the
4:57
Speaker 4: last couple of months. If you take a look at
4:59
Speaker 4: the deployed numbers from March through May were basically the
5:04
Speaker 4: same there. So we do have a little bit of
5:06
Speaker 4: a divergence that's built between the two surveys because the
5:10
Speaker 4: survey of businesses is what gives us the job growth numbers.
5:14
Speaker 4: The survey of households is what gives us.
5:15
Speaker 2: The unemployment rate.
5:17
Speaker 3: We still one hundred and forty nine thousand jobs added
5:19
Speaker 3: this month in the household survey, so they were aligned
5:21
Speaker 3: this month. Last month there was a disagreement, as the
5:24
Speaker 3: household survey reported around two hundred and twenty thousand jobs lost,
5:29
Speaker 3: whereas the the Establishment survey had that one hundred and
5:36
Speaker 3: seventy nine thousand jobs added.
5:38
Speaker 4: Staying on the establishment survey for a moment, one of
5:41
Speaker 4: the nitpicky items that people who are critics of the
5:44
Speaker 4: last few months of job creation have been pointing out
5:46
Speaker 4: the last few years rather has been that, well, you know,
5:49
Speaker 4: it's all healthcare jobs, and you know, you take that
5:52
Speaker 4: piece out in job growth, looks really poor. Not the case.
5:55
Speaker 4: In the month of May. We saw big growth from
5:57
Speaker 4: areas other than healthcare. We still did see big growth
6:00
Speaker 4: from healthcare, but local government increasing by fifty five thousand,
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Speaker 4: leisure and hospitality adding seventy thousand jobs. In May, you
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Speaker 4: saw the spread a little bit, a little bit more
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Speaker 4: diversification in terms of the job creation over the course
6:13
Speaker 4: of the last month.
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Speaker 3: Mike, it's not just the month of May, the last
6:18
Speaker 3: three months. Now when we look at private payrolls ex.
6:21
Speaker 3: Healthcare and education, we are averaging north of one hundred
6:24
Speaker 3: thousand jobs added there over the last three months. The
6:28
Speaker 3: last time that you could say that was twenty twenty three.
6:34
Speaker 5: Who looks at that specific statistic over year over year.
6:36
Speaker 3: That well, I'm gonna get the chart here. It's not
6:39
Speaker 3: a year over year thing. It's the last three months.
6:41
Speaker 3: The last time we've seen job growth in the private
6:44
Speaker 3: sector like this, excluding healthcare and education, you gotta go
6:47
Speaker 3: back to twenty twenty three. So here is the finally,
6:53
Speaker 3: one other piece because this always comes up like when
6:55
Speaker 3: we see this because again we always get people texting Inlake. Well,
7:00
Speaker 3: these numbers are just made up, guys. The BLS isn't
7:02
Speaker 3: making these numbers up. They don't make them up on
7:04
Speaker 3: the good side. They don't make them up on the
7:05
Speaker 3: bad side. They try to do the best they can
7:08
Speaker 3: at figuring out where these numbers are. And I can
7:11
Speaker 3: tell you if you're sitting out there saying, Chuck, this
7:14
Speaker 3: can't be true. I've applied to a million jobs like
7:16
Speaker 3: nothing's happening. It's not saying that your specific situation isn't accurate.
7:22
Speaker 3: It is saying that your read on the broader situation
7:25
Speaker 3: is not matching the data from and here's the piece
7:28
Speaker 3: I really like to come back to. It's not matching
7:31
Speaker 3: the data from the BLS, which is a government organization.
7:34
Speaker 3: It's not matching the data from Indeed, which is a
7:37
Speaker 3: private organization, from paychecks, which is a private organization, and
7:42
Speaker 3: finally from the IRS in terms of their tax collection receipts,
7:46
Speaker 3: which is you can't really fudge that.
7:49
Speaker 2: It's not a survey.
7:50
Speaker 3: When we talk about payroll tax collections, that's not something
7:54
Speaker 3: where you're just like, well, maybe i'll send them in
7:56
Speaker 3: this month. No, like they're taken out of your paycheck.
8:00
Speaker 3: There's no lying about what that collection is. So broadly,
8:04
Speaker 3: we are seeing signs that in the last few months
8:08
Speaker 3: the labor market.
8:09
Speaker 2: Is picking up.
8:11
Speaker 3: If you want to say, hey, it's great, but it's
8:13
Speaker 3: not working for me, that's true. We still do have
8:15
Speaker 3: a sluggish hiring rate overall. I'm not debating that, but
8:20
Speaker 3: when it it shows when we talk about how this
8:23
Speaker 3: is actually showing up in the data, there's absolutely been
8:26
Speaker 3: a turn in the last three to four months, in particular,
8:28
Speaker 3: after we were really concerned about the labor market in
8:31
Speaker 3: the second half of last year.
8:33
Speaker 2: Let's take a quick break here.
8:35
Speaker 3: When we come back, we got to talk about how
8:37
Speaker 3: this affects the FED, because gotta tell you they're not
8:42
Speaker 3: gonna cut and if they do, it would be one
8:44
Speaker 3: of the most insane moves I have ever seen from
8:47
Speaker 3: a monetary policy perspective since I've been doing this, which
8:51
Speaker 3: is almost seventeen years. Let's take a quick break. When
8:55
Speaker 3: we return, we're talking about the FED and this job's report.
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10:03
Speaker 2: Mike, have you ever used money?
10:05
Speaker 5: Yeah?
10:06
Speaker 3: Okay if if you're familiar with money. The institution charged
10:10
Speaker 3: with maintaining monetary stability stability of prices in the United States,
10:16
Speaker 3: along with full employment in the United States is the
10:18
Speaker 3: Federal Reserve, and the FED meets eight times a year,
10:22
Speaker 3: and at those meetings they say, Hey, here's what we're
10:25
Speaker 3: gonna do with.
10:26
Speaker 2: The money in the United States.
10:29
Speaker 3: The next FED meeting is coming up in twelve days,
10:32
Speaker 3: by the way, sneaky quick. I know that it feels
10:35
Speaker 3: like we just had one, but June seventeenth is the
10:37
Speaker 3: next FED meeting dates and as of right now, there's
10:39
Speaker 3: a ninety six point two percent chance that they are
10:41
Speaker 3: going to do nothing, a three point eight percent chance
10:44
Speaker 3: that they are going to cut interest rates by a
10:47
Speaker 3: quarter percent. If you buy that, I've got a lot
10:51
Speaker 3: of bridges to sell you, because the Fed's not going
10:53
Speaker 3: to be cutting at their next meeting after this jobs
10:57
Speaker 3: report that we just got here, here's the deal. You
11:02
Speaker 3: have inflation right now, depending on the metric that you
11:07
Speaker 3: want to look at, running anywhere between three point eight
11:13
Speaker 3: and six percent six percent of the producer price index,
11:16
Speaker 3: which none.
11:16
Speaker 2: Of us feels so it's not really there.
11:19
Speaker 3: I'll say you generally have inflation right now running somewhere
11:21
Speaker 3: around four percent.
11:23
Speaker 2: That's fair.
11:24
Speaker 3: Core inflation is running again on CPI and PCE, you're
11:29
Speaker 3: running call it three and increasing.
11:33
Speaker 2: So here's the deal.
11:33
Speaker 3: The FED funds rate right now is at three and
11:35
Speaker 3: a half to three point seventy five percent. Uh, there
11:38
Speaker 3: is absolutely no way know how that the FED is
11:43
Speaker 3: going to cut interest rates with three month job growth
11:48
Speaker 3: at one hundred and eighty eight thousand. They don't look
11:50
Speaker 3: at that, But what they do look as the unemployment rate,
11:52
Speaker 3: which has been stable. So you get an unemployment rate stable,
11:55
Speaker 3: job growth increasing, and inflation increasing. If any of y'all
11:59
Speaker 3: out there are hoping for a FED rate cut sometime
12:03
Speaker 3: this summer, it's off the table. You need to recalibrate
12:07
Speaker 3: what your expectations are.
12:09
Speaker 4: Or mortgage rates down, or really any cost of borrowing
12:13
Speaker 4: getting better for us.
12:14
Speaker 3: It is just kind of Mike, here's the deal. If
12:18
Speaker 3: these jobs numbers are legit in terms of their ability
12:21
Speaker 3: to continue into the future, Unemployment's not going to be
12:25
Speaker 3: four point three percent at the end of this.
12:26
Speaker 2: Year, right, It has to come down.
12:27
Speaker 3: It's going to be four because the labor force is
12:30
Speaker 3: not growing that quickly. And so when you start seeing
12:34
Speaker 3: pressure to the downside on unemployment and pressure to the
12:38
Speaker 3: upside on inflation, I gotta tell you there's only one
12:42
Speaker 3: way that the FED can move at that point.
12:44
Speaker 2: It's up.
12:45
Speaker 4: I want to make this not just about oil for
12:48
Speaker 4: a moment, and I know you didn't. You talked about
12:50
Speaker 4: core inflation, but I look at this moment and maybe
12:53
Speaker 4: Kevin worsh disagrees with me, but I think plenty of
12:55
Speaker 4: policymakers on the Federal Reserve would agree.
12:58
Speaker 5: Even if you.
12:59
Speaker 4: Take the oil price shock, the complexities to demand from
13:05
Speaker 4: the AI boom right now, you can make a very
13:09
Speaker 4: compelling argument that in the short term, look inflationary. The
13:15
Speaker 4: industry as a whole is driving up prices on so
13:18
Speaker 4: many things that it is crowding out all sorts of
13:21
Speaker 4: other spending. And you know, again all else equal outside
13:26
Speaker 4: of a recession. You know, outside of a recession. It
13:29
Speaker 4: looks to me like you have just ferocious demand gobbling
13:33
Speaker 4: up all sorts of resources over the course of the
13:36
Speaker 4: next year or so, which has to result in all
13:38
Speaker 4: else equal higher prices. I just like it's not going
13:42
Speaker 4: to the AI demand. I don't think is going to
13:44
Speaker 4: necessarily affect food prices. But like, show me a scenario.
13:48
Speaker 2: Yes, that's the benefit of the robots.
13:50
Speaker 4: They don't need to eat, although you know, who knows,
13:53
Speaker 4: maybe if it's driving up energy prices, then it does
13:55
Speaker 4: drive up food prices.
13:57
Speaker 2: But like I even think about when we power this
13:59
Speaker 2: computer on a care.
14:00
Speaker 4: Even think about like one area that we all really
14:02
Speaker 4: care about housing, Right, So you are pulty homes and
14:05
Speaker 4: you're trying to build a three thousand unit development in Florida.
14:10
Speaker 4: Can you find the electricians and plumbers to go do
14:12
Speaker 4: that right now? Or are they all busy building data
14:15
Speaker 4: centers at this moment. I'm saying that a little bit
14:18
Speaker 4: tongue of cheek, you can find them. But genuinely, this
14:22
Speaker 4: moment is being defined by this AI boom, and I
14:25
Speaker 4: know there's been descriptions of it. Hey, this could be
14:28
Speaker 4: disinflationary in the future, maybe, but not right now.
14:32
Speaker 3: Mike, I want to ask you a couple of simple questions.
14:37
Speaker 3: Was the Straight Ufour Moves closed on December thirty first
14:40
Speaker 3: of twenty twenty five?
14:41
Speaker 4: It was open, okay? I mean I wasn't there. They
14:45
Speaker 4: might have been in the new year. It might have
14:47
Speaker 4: been temporarily closed, but I think it was open.
14:48
Speaker 3: I don't know if they ever like closed the you know,
14:51
Speaker 3: like fireworks time they have now, but you know, I
14:54
Speaker 3: cannot think of a worse place to have a firework show.
14:58
Speaker 2: It's probably true. Uh.
15:00
Speaker 3: Was the Straight of Horn Moves closed on January thirty first,
15:04
Speaker 3: twenty twenty six?
15:05
Speaker 2: It was not.
15:06
Speaker 3: Had the Straight of hor Moves just been closed one
15:08
Speaker 3: day earlier on February twenty eighth, twenty twenty six.
15:12
Speaker 5: Uh yeah, right around then.
15:14
Speaker 3: It actually might not have been closed until that day.
15:16
Speaker 3: The reason that I ask this is because these are
15:20
Speaker 3: three months of data before the straight of Horm moves closed.
15:24
Speaker 3: And here are the core PCE numbers for those three months.
15:27
Speaker 4: PCEE core PCE being an indicator of inflation outside of
15:30
Speaker 4: oil and food.
15:31
Speaker 3: Yeah, it's specifically it's like the Fed's preferred inflation measure
15:36
Speaker 3: point three percent for December, point four percent for January,
15:41
Speaker 3: point four percent four February.
15:43
Speaker 2: You add those together, you.
15:44
Speaker 3: Get one point one percent, which works out to an
15:46
Speaker 3: annualized rate of around four point four percent.
15:48
Speaker 4: So pre war acceleration with oil added on top to
15:52
Speaker 4: fuel the fire.
15:53
Speaker 3: Correct, And this is before memory prices went nutty and everything,
15:57
Speaker 3: and who knows what, like the next iPhone eighteen is
15:59
Speaker 3: going to be price step because the Ramanant's probably going
16:02
Speaker 3: to be more than your previous iPhone alone. So the
16:06
Speaker 3: place that I'm going with this is, hey, even if
16:09
Speaker 3: you look at you know, the last two months and
16:11
Speaker 3: you add it to that, Okay, now you've got one
16:13
Speaker 3: point six percent inflation. Because we did see a cooling
16:17
Speaker 3: in April. On the core PC number they got one
16:21
Speaker 3: point six percent inflation over the last five months still
16:25
Speaker 3: works out to three point eight four percent if that
16:28
Speaker 3: were to continue for the next seven like at that
16:31
Speaker 3: same pace. Core inflation at three point eight four and
16:35
Speaker 3: Fed funds rate at three five to three seven five
16:38
Speaker 3: does not meet any rule for how monetary policy can
16:41
Speaker 3: be restrictive. And here's the problem, the reason why this matters.
16:45
Speaker 3: Talk to any of your friends from Brazil and they
16:48
Speaker 3: will tell you the stories about how when they used
16:51
Speaker 3: to like go to stores there, there'd be a guy
16:54
Speaker 3: there with you know, the price sticker, and you had
16:57
Speaker 3: to stay ahead of him because he was repricing things higher,
17:00
Speaker 3: you know, from the previous day, and so you had
17:03
Speaker 3: to beat him in order to get yesterday's pricing.
17:05
Speaker 4: Don't worry, Chuck, we adopted our technology for that, because
17:08
Speaker 4: now there's digital price tags all of the grocery. So
17:10
Speaker 4: the reason why this matters is when central banks lose
17:12
Speaker 4: credibility on inflation. Number one, inflation tends to go nutty.
17:16
Speaker 4: Number two, the long end of the yield curve ten year,
17:19
Speaker 4: twenty or thirty year tends to go nutty as well,
17:21
Speaker 4: because investors say, fine, you're not gonna be credible on
17:24
Speaker 4: the inflation front. I'm not gonna buy your bonds at
17:27
Speaker 4: four and a half percent interest for ten years if
17:30
Speaker 4: there's a chance that all that gets eaten up by inflation.
17:33
Speaker 4: So what this means is that the FED right now,
17:39
Speaker 4: if they were to attempt to cut number one, they
17:45
Speaker 4: could try, but it would backfire because the very rates
17:48
Speaker 4: that they want to keep low would move up in
17:51
Speaker 4: response to the fact that the Fed would be seen
17:53
Speaker 4: as not credibly addressing inflation. The best move for the FED, counterintuitively,
17:59
Speaker 4: is to really aggressively try to tamp down on inflation.
18:03
Speaker 4: But here's the rub signal a willingness to raise rates. Correct,
18:06
Speaker 4: here's the rub. Even the J Powell Fed, even the
18:11
Speaker 4: Ben Jay Pal's the only one who had to deal
18:13
Speaker 4: with inflation in the last forty years.
18:14
Speaker 2: Yeah, the J. Powell Fed.
18:17
Speaker 3: Never wanted to raise rates unless the market forced its hand.
18:20
Speaker 3: We talked about the poor job they did in the
18:23
Speaker 3: first half of twenty two, being way too slow to
18:27
Speaker 3: hike and I don't anticipate that given what Kevin Warsh
18:32
Speaker 3: has said over the last year or so, is he
18:35
Speaker 3: campaigned for the FED chair job, that Warsh is going
18:38
Speaker 3: to suddenly be like, you know what, I said, all
18:40
Speaker 3: this stuff, but I'm gonna do a hike in my
18:42
Speaker 3: first meeting.
18:43
Speaker 2: Yeah, I doubt that as well.
18:44
Speaker 4: But I will say for a moment here that I
18:47
Speaker 4: see no one other than Kevin worsh who has signaled
18:50
Speaker 4: lower rates that's going to be voting at the next
18:52
Speaker 4: Federal Reserve MEETIA. Yeah, so like, yeah, I have concerns
18:56
Speaker 4: about what Kevin's been talking about on the if you
18:58
Speaker 4: want to call it the campaign trail for his job.
19:01
Speaker 4: But you know, there's nobody left at the Federal Reserve
19:04
Speaker 4: other than him that has known and publicly about that,
19:06
Speaker 4: and so I suspect that the FED will be capable
19:10
Speaker 4: of maintaining its credibility. But I'm now thinking that this
19:14
Speaker 4: press conference and the written statement from the Federal Reserve
19:18
Speaker 4: is one of the more important than the ones we've
19:20
Speaker 4: seen in years, probably since twenty twenty two, in my view,
19:22
Speaker 4: just to see.
19:23
Speaker 2: What we get.
19:24
Speaker 3: Yeah, I do agree, nothing's going to come out of
19:26
Speaker 3: it from a policy perspective, but the guidance I.
19:28
Speaker 2: Think will be interesting. Quick break here when we return,
19:31
Speaker 2: We've got Wall Street Watch.
19:40
Speaker 1: Like us on Facebook and follow us on Twitter at
19:43
Speaker 1: TFE show. Breaking business news is always first right here
19:48
Speaker 1: on the Financial Exchange. Radio Network time now full woll
19:52
Speaker 1: Street Watch treking the stocks, the data, and the headlines
19:56
Speaker 1: driving markets so far today right here on the Financial Exchange, we're.
20:00
Speaker 6: Seeing more rotation out of the tech sector, as Wall
20:03
Speaker 6: Street digest the made job support, where one hundred and
20:06
Speaker 6: seventy two thousand jobs were created in May, much higher
20:10
Speaker 6: than estimates of eighty eight thousand. Unemployment rate also held
20:13
Speaker 6: steady at four point three percent. Treasure yields climbed higher
20:17
Speaker 6: following the jobs report in anticipation of a potential.
20:20
Speaker 2: Rate height from the Fed this year.
20:22
Speaker 6: Right now, the Dow is down a quarter for percent,
20:25
Speaker 6: SMP five hundred down just over nine tenths of one percent,
20:28
Speaker 6: Nasdaq selling off about one point seven percent or four
20:32
Speaker 6: hundred and fifty one points, RUSS two thousand down over
20:36
Speaker 6: one and a half percent.
20:38
Speaker 2: Ten Your treasure reield is up five basis.
20:40
Speaker 6: Points at four point five to three percent, and Oil
20:43
Speaker 6: down nearly two percent, rating right around ninety one dollars
20:47
Speaker 6: a barrel after dropping thirteen percent yesterday in reaction to
20:51
Speaker 6: its underwhelming sales forecast. Broadcom down another five percent today,
20:56
Speaker 6: other chip makers, including AMD, Intel VI, continuing to see
21:01
Speaker 6: losses as well. Meanwhile, Lulu Lemon tumbling seven percent after
21:06
Speaker 6: the leisure retailer reduced its full year earning XAM revenue guidance,
21:11
Speaker 6: citing headwinds including negative commentary around the brand in a
21:15
Speaker 6: weak response to new products. Elsewhere, Docu sign lifted its
21:20
Speaker 6: revenue guidance for the year, where it's AI powered platform
21:23
Speaker 6: help increase its profit and revenue in the previous quarter. However,
21:27
Speaker 6: the stock is down by five percent, and JP Morgan
21:30
Speaker 6: upgraded Chipotle to overweight from equal weight, citing the company's
21:35
Speaker 6: same store sales growth in the first quarter. Chipotle shares
21:39
Speaker 6: up by five percent. I'm Tucker Silvan. That is Wall Street.
21:43
Speaker 2: Watch, Mike.
21:45
Speaker 3: We got a pcre from the New York Times. It's
21:47
Speaker 3: titled for new graduates Job market Scars could linger four years.
21:51
Speaker 3: Just stop with this, Tucker. Do we have any like
21:56
Speaker 3: do you have? Can you give me like this soundtrack from.
22:00
Speaker 5: The World's Tiniest Violin?
22:01
Speaker 2: No something? Can you give me like this soundtrack from
22:05
Speaker 2: What's It Really Like? Downbeat one?
22:08
Speaker 6: The pianist You're thinking like an orchestra type of thing.
22:11
Speaker 2: Yeah, give me all right, I stand by, give me
22:13
Speaker 2: something that's just like sad. I gotcha.
22:16
Speaker 3: Okay, So Tucker's pulling up some some sad music.
22:20
Speaker 2: That we can listen to.
22:21
Speaker 3: Here, just keep going and well, no, I want to
22:24
Speaker 3: time it to like this the start of this.
22:27
Speaker 2: So here we go.
22:28
Speaker 3: You ready kind of okay, he's almost ready.
22:33
Speaker 2: This is actually the song I was thinking of, Wow,
22:35
Speaker 2: look at you. It's okay? What two movies? Is just song?
22:40
Speaker 2: The main song? And what's the second one? Rival?
22:46
Speaker 3: Anyways, young college graduates are facing a gluey economic future.
22:55
Speaker 3: Confronting the toughest job market since the depths of the pandemic.
23:00
Speaker 2: They are likely to make less money in the.
23:02
Speaker 3: Long term and have more trouble events in their careers. Economists.
23:09
Speaker 3: There are going to be lasting effects, said Lisa Khan,
23:12
Speaker 3: economist at the University of Rochester. The cohorts that were
23:15
Speaker 3: lucky enough to just finish a little bit earlier, a
23:18
Speaker 3: little bit later, I think, are going to be doing better.
23:21
Speaker 3: The full impact of graduating into this hiring downturn will
23:24
Speaker 3: not come into focus for years, and much remains uncertain,
23:28
Speaker 3: especially about AI's role. Okay, that's enough, Tucker, So here's
23:32
Speaker 3: the deal. I'm a millennial, which means I eat my
23:34
Speaker 3: avocado toast three times a day, complain about everything, and
23:37
Speaker 3: have all my participation trophies in my living room.
23:40
Speaker 5: Correct.
23:40
Speaker 3: I was also told that my generation was going to
23:46
Speaker 3: have lasting scars from when we came into the workforce.
23:50
Speaker 3: And this is not to say that like everyone just
23:52
Speaker 3: like came out of everything like perfectly fine.
23:55
Speaker 2: But here's what it is saying.
23:56
Speaker 3: When you look at things in terms of either salary
24:00
Speaker 3: or net worth, at inflation adjusted numbers and compare it
24:03
Speaker 3: to baby boomers Gen X, you basically see we're either
24:06
Speaker 3: doing the same or better in many cases as a whole.
24:09
Speaker 2: Wow.
24:10
Speaker 3: It's not to say that individual millennials are not struggling.
24:13
Speaker 3: I'm sure some of you out there listening are like
24:14
Speaker 3: Chuck Lake, I'm really having a tough time.
24:17
Speaker 2: I get it. I'm not talking about you personally.
24:19
Speaker 3: I'm talking about millennials, the seventy million of us that
24:22
Speaker 3: exist as a whole.
24:23
Speaker 4: Rates of home ownership are about the same, if not
24:26
Speaker 4: better than where they were.
24:27
Speaker 3: If worth is the same or better, incomes are the
24:29
Speaker 3: same or better. And so I'm not saying that there
24:33
Speaker 3: isn't a risk of you know, gen zers having a
24:37
Speaker 3: tough time. But I also want to, like look at
24:40
Speaker 3: this in terms of listen, Yo, here's the deal. If
24:46
Speaker 3: you look at millennials and when they graduated from college
24:50
Speaker 3: and came into the workforce, they were coming in with
24:54
Speaker 3: unemployment double what it is today.
24:58
Speaker 4: I want to even take a step back and let's
24:59
Speaker 4: go more. This isn't the toughest job market since the
25:02
Speaker 4: depth of the pandemic last year was correct, So like,
25:07
Speaker 4: this is just factually inaccurate. New York Times, pull some
25:10
Speaker 4: data and actually support your argument. The unemployment rate in
25:14
Speaker 4: May of twenty twenty five for people between the ages
25:16
Speaker 4: of twenty and twenty four was eight point two percent.
25:19
Speaker 2: What is it now?
25:20
Speaker 5: It is now seven point two It was worse last.
25:22
Speaker 2: Year, full percentage point improvement.
25:24
Speaker 4: And if you want to support some if you want
25:26
Speaker 4: to show me some data that tells me it's worse now,
25:28
Speaker 4: then I will listen to you.
25:30
Speaker 5: But I don't see it. You didn't cite any You
25:33
Speaker 5: gave me nothing.
25:35
Speaker 3: Guys, Like, I really think that we need to acknowledge
25:38
Speaker 3: that the data that we have on this topic, like
25:42
Speaker 3: how does the how does the environment in which you
25:46
Speaker 3: begin work affect your full career earnings. That data SIT's
25:50
Speaker 3: got some real problems because it's a small sample size
25:53
Speaker 3: of like four business cycles for which we have good data,
25:57
Speaker 3: and just because there's one that was skewed by by
26:00
Speaker 3: the way that one is hey like interestingly enough, like
26:05
Speaker 3: gen X is the one that always does end up
26:06
Speaker 3: kind of getting screwed in all these conversations, partly because
26:09
Speaker 3: no one ever pays attention to them, but it's it's
26:11
Speaker 3: usually them. So I'm sorry, gen X, Thank you. I
26:15
Speaker 3: feel for you because you're the ones that no one
26:17
Speaker 3: wants to acknowledge, even though your pain is greatest.
26:22
Speaker 2: But when we look at the millennials, they turned out
26:27
Speaker 2: in the aggregate just fine economically, even though they came
26:31
Speaker 2: in in the worst hiring environment in one hundred years,
26:35
Speaker 2: a significantly.
26:36
Speaker 5: Worse one than we're facing right now, Yes, so much worse.
26:39
Speaker 4: And look, I was hearing from somebody who's nephew or
26:44
Speaker 4: somebody had graduated with a computer science degree recently and
26:47
Speaker 4: they've spent a year trying to find a job in
26:48
Speaker 4: that space and haven't. I don't know the context, but
26:51
Speaker 4: their brother got an engineering degree and guess what employee doing. Well,
26:55
Speaker 4: everything's great, you're gonna have a really tough time convincing
26:59
Speaker 4: me that's somebody that just graduated from I don't know,
27:04
Speaker 4: you masked with a nursing degree, or from Cornell's what's
27:09
Speaker 4: their hospitality school that they have there.
27:11
Speaker 5: It's like the school, you.
27:12
Speaker 3: Know, the Cornell Hospitality It's like the school of Hotel
27:14
Speaker 3: Management or something like that.
27:16
Speaker 4: Like, those people aren't having a tough time finding jobs
27:19
Speaker 4: right now. It's just yes, there might be some pressure
27:23
Speaker 4: in some areas where AI seems to be having a
27:26
Speaker 4: big effect, and those people might be having a tough
27:28
Speaker 4: time finding a job, But in the aggregate, things are
27:32
Speaker 4: so much better than they have been at very recent
27:35
Speaker 4: times in history that I find these stories to be,
27:37
Speaker 4: I'm sorry, laughable.
27:39
Speaker 3: If I've said this before, if you transported a gen
27:43
Speaker 3: z Or back in time to the summer of twenty
27:46
Speaker 3: ten and said go get.
27:48
Speaker 7: A job, they would be crying, would be they would
27:54
Speaker 7: be putting together tiktoks that haven't been invented for ten
27:57
Speaker 7: years yet because they're so sad about just what the
28:01
Speaker 7: prospects look like. I'm just so like, we can't always say,
28:08
Speaker 7: man like college grads have it so hard. There has
28:12
Speaker 7: to be some time in history that college grads had
28:14
Speaker 7: it easy.
28:15
Speaker 4: By the way, Granted, I don't want to pick on
28:17
Speaker 4: the gen Zers too much, because fair enough, the gen
28:20
Speaker 4: Zers aren't the ones who wrote this, right. That's my
28:22
Speaker 4: point is like I don't know many gen Zers, but
28:24
Speaker 4: I don't hear from them about this problem. No, this
28:26
Speaker 4: I hear about all their professors, all the people speaking
28:29
Speaker 4: at their graduations and the New York Times about how
28:31
Speaker 4: tough they have it, rather than from the kids who
28:33
Speaker 4: are graduating and honestly, from what I can tell, seem
28:37
Speaker 4: to be putting their nose down, applying and applying.
28:38
Speaker 3: To jobs and now, by the way, starting to take
28:42
Speaker 3: them now that like early twenties, unemployment is dropping. So look,
28:50
Speaker 3: we just can't always have it be the worst.
28:55
Speaker 2: I know that.
28:56
Speaker 3: I know it's like bad news, cells and everything. But
29:00
Speaker 3: sometimes things are just okay, Like they don't always have
29:02
Speaker 3: to be the worst or the best.
29:04
Speaker 2: I think this hiring environment.
29:06
Speaker 3: Is okay and improving. It's okay and getting better. Yeah,
29:10
Speaker 3: it's last year was bad and getting worse. This year
29:15
Speaker 3: is okay and getting better, And that's fine. It doesn't
29:18
Speaker 3: always have to be like amazing or awful. Sometimes it
29:22
Speaker 3: can just be like, Okay, we'll figure it out and
29:24
Speaker 3: move on, you know, which is what you have to
29:26
Speaker 3: do with most things in life is figure it out
29:28
Speaker 3: and move on.
29:30
Speaker 2: So we're gonna do that. We're gonna move on from this.
29:32
Speaker 3: Segment by taking a quick break, and when we come back,
29:35
Speaker 3: Anthropic is telling us that we're all gonna die if
29:39
Speaker 3: we don't pause research on AI. As they continue to
29:43
Speaker 3: do more research on AI, we'll discuss that's right.
29:48
Speaker 1: Fine. Daily interviews and full shows of the Financial Exchange
29:51
Speaker 1: on our YouTube page. Like us on YouTube and get
29:54
Speaker 1: caught up on anything and everything you might have missed.
29:57
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30:03
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30:05
Speaker 1: Exchange on Instagram. Face is the Financial Exchange.
30:27
Speaker 2: Anthropic is a company.
30:29
Speaker 3: They make intelligence that is artificial and they recently, I
30:37
Speaker 3: think this was yesterday, they put up a blog post
30:41
Speaker 3: because everyone's just blogging these days, and they said, quote,
30:46
Speaker 3: we believe it would be good for the world to
30:48
Speaker 3: have the option to slower temporarily pause frontier AI development
30:51
Speaker 3: to enable societal structures and alignment research to keep up
30:55
Speaker 3: with the advance of technology. Basically, they think that they're
30:57
Speaker 3: going to get to the point in the next couple
30:58
Speaker 3: of years where the AIS will be able to do
31:01
Speaker 3: all of the work improving themselves, but we don't know
31:03
Speaker 3: what the consequences of that might be. Yep, two things
31:06
Speaker 3: are true in my opinion. Number One, Anthropic has an
31:09
Speaker 3: IPO coming up probably in the next couple months now
31:13
Speaker 3: that they are likely trying to gin up as much
31:15
Speaker 3: excitement for as possible, And one of the ways that
31:18
Speaker 3: you do that is by telling people that your technology
31:20
Speaker 3: is so powerful that we need to stop developing it
31:23
Speaker 3: because otherwise we might end the world.
31:25
Speaker 4: Yeah, it's a nuclear arms race effectively, and we need
31:27
Speaker 4: to have some way of pausing it because that's where
31:31
Speaker 4: it's heading.
31:31
Speaker 3: So I do think some of this is like some
31:36
Speaker 3: of the type you're not gonna get every AI company
31:39
Speaker 3: just be like, Okay, we pause, We'll take a break
31:42
Speaker 3: like water break, Like no, that's not gonna happen. But
31:46
Speaker 3: the other piece is, and this is evidence by what
31:48
Speaker 3: we found out after their mythos released to a small
31:52
Speaker 3: group of companies a couple months ago.
31:54
Speaker 4: Yeah, my read on this is mythos genuinely scared the
31:57
Speaker 4: leadership at Anthropic.
31:59
Speaker 3: And elsewhere and I think it's scared a lot of
32:01
Speaker 3: these financial institutions and tech companies. Yeah, so the two
32:05
Speaker 3: things that I think can be true. Yes, there's some
32:08
Speaker 3: scary stuff that we definitely need to sort through one AI,
32:12
Speaker 3: but I also think some of this is them trying
32:14
Speaker 3: to jemp excitement for their IPO. And I also don't
32:23
Speaker 3: think that any amount of time is going to allow
32:28
Speaker 3: us to possibly develop the proper safeguards that we need,
32:33
Speaker 3: because I don't think those safeguards can be instituted at
32:36
Speaker 3: the corporate level. I think they would need to be
32:38
Speaker 3: at the governmental level. And I don't think our politicians
32:42
Speaker 3: know enough about this to be able to make informed decisions.
32:47
Speaker 3: And the reason why is because I think there are
32:49
Speaker 3: probably a couple hundred people in the world that know
32:52
Speaker 3: enough about this to be able to make informed decisions,
32:55
Speaker 3: and they're not in any government.
33:00
Speaker 5: Yeah.
33:02
Speaker 4: Well, frankly, if we're going to use the nuclear analogy
33:05
Speaker 4: here and drive it home, it took a pretty big
33:08
Speaker 4: event before anybody agreed that we should put the pause
33:10
Speaker 4: on that.
33:11
Speaker 2: Yeah, two of them.
33:14
Speaker 3: So this is something that like you have heard at
33:17
Speaker 3: AI conferences, which is okay, like, when are we finally
33:21
Speaker 3: going to actually like take a step back and make
33:23
Speaker 3: sure we're doing.
33:24
Speaker 5: The right thing when something really scary happened.
33:26
Speaker 3: And like the stuff that I've heard has been like
33:29
Speaker 3: when tens of million people, tens of millions of people
33:31
Speaker 3: die because of something related to AI, which isn't like
33:34
Speaker 3: a great answer, but it's kind of what we do
33:38
Speaker 3: with most new technologies. It's just that most ones aren't
33:41
Speaker 3: this brought.
33:43
Speaker 2: Like what you will get.
33:46
Speaker 3: We'll get airplanes in the nineteen fifties and sixties, Like
33:50
Speaker 3: airplane crashes were relatively common back then, you know, like
33:56
Speaker 3: how many times did you hear about, you know, this
33:59
Speaker 3: crash that killed like these celebrities and this one that
34:01
Speaker 3: killed this sports team and this way, they were pretty common,
34:06
Speaker 3: in pretty common back in the like the fifties and sixties.
34:10
Speaker 3: And we learned, okay, like you have to make these
34:12
Speaker 3: improvements and this is the safety stuff that you put in,
34:15
Speaker 3: and flying is now as safe as it's ever been
34:18
Speaker 3: and basically safer than any motive travel ever has been.
34:21
Speaker 2: But it took us a while to get there.
34:23
Speaker 5: Did Sam Cook dined a plane crash too?
34:26
Speaker 2: Name by Tucker.
34:27
Speaker 3: We'll research that the problem with AI is that if
34:33
Speaker 3: the equivalent of a plane crash happens, it's not necessarily
34:37
Speaker 3: affecting the one hundred people on that plane. It could
34:41
Speaker 3: affect millions of people in ways that we don't understand
34:45
Speaker 3: right now, depending on the applications that you have in place.
34:49
Speaker 3: And that's the issue with this as opposed to other
34:52
Speaker 3: new technologies. Hey, if if you were trying to wire
34:56
Speaker 3: a house with electricity, you know, for the first time
34:59
Speaker 3: back in the late eighteen and you did it wrong,
35:01
Speaker 3: the house would burned down and it might kill the
35:04
Speaker 3: people in the house. Not saying it's not sad, but
35:08
Speaker 3: it's it's five people. If AI has something that goes badly,
35:13
Speaker 3: it's it's hundreds of thousands or millions of people potentially,
35:15
Speaker 3: depending on the applications.
35:17
Speaker 5: Yeah, it's un well.
35:19
Speaker 3: Yeah, like the development of other technologies couldn't affect that
35:22
Speaker 3: many people negatively that quickly, Right.
35:25
Speaker 2: This one has the potential to.
35:27
Speaker 3: I'm not saying it will, but like that's the risk
35:29
Speaker 3: is we always move forward being like, Okay, we think
35:32
Speaker 3: we're doing the right thing, and it turns out that
35:34
Speaker 3: we're not, because inevitably there's something we didn't think of,
35:37
Speaker 3: you know, or it's something that we did think of,
35:40
Speaker 3: but it like, well, we'll take the risk. Anyways, It's
35:43
Speaker 3: different here because the whole planet's potentially using this stuff.
35:48
Speaker 4: Folks, a few more weeks to sign up for our
35:50
Speaker 4: retirement Planning a seminar on Social Security and Medicare essentials.
35:54
Speaker 4: We've been doing this road show. It's going to be
35:57
Speaker 4: on June twenty fifth at the Marriott and Quincy. It's
36:00
Speaker 4: free to sign up, you must register ahead of time
36:02
Speaker 4: and space is limited. It will fill up in all
36:05
Speaker 4: likelihood Susan Powers Fibastulis both be presenting on social Security
36:10
Speaker 4: and Medicare all those questions you have leading up to
36:13
Speaker 4: retirement about how the program works and how to maximize
36:16
Speaker 4: your benefit from each. You can register at Armstrong Advisory
36:20
Speaker 4: dot com slash events, or if you have questions, you
36:23
Speaker 4: call eight hundred three nine three four zero zero one
36:26
Speaker 4: and someone can help you get registered over the phone.
36:28
Speaker 4: But again Armstrong Advisory dot com slash Events, June twenty fifth,
36:32
Speaker 4: five pm, Quincy.
36:33
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
36:36
Speaker 1: registered investment advisor. Nothing in the ad or in any
36:38
Speaker 1: Armstrong guide a specific financial, legal or tax advice consult
36:42
Speaker 1: your own financial tax into state planning advisors before making
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36:49
Speaker 2: UH.
36:50
Speaker 3: Tucker was kind enough to send over some texts from listeners.
36:55
Speaker 3: You can text us at six one seven three six
36:57
Speaker 3: two thirteen eighty five. You can just tell us high
36:59
Speaker 3: or you could tell us that we're doing a great job,
37:01
Speaker 3: or specific comments where you can tell us that we're
37:03
Speaker 3: losers and you don't like us. Any of that's fine.
37:06
Speaker 3: Six one seven three six two thirteen eighty five.
37:09
Speaker 2: One text.
37:09
Speaker 3: Maybe younger students need to be taught modern history along
37:12
Speaker 3: with economics.
37:13
Speaker 2: Uh listen.
37:14
Speaker 3: As a history major, I think everyone should have to
37:16
Speaker 3: take way more history than they do because again, the past. Uh,
37:22
Speaker 3: you know, history doesn't rhyme. Your history doesn't repeat, but
37:25
Speaker 3: it does rhyme. And I do think, you know, learning
37:27
Speaker 3: from previous mistakes is important. And al'os just giving you
37:30
Speaker 3: some broader context for who you are.
37:33
Speaker 2: Uh what what's this one about?
37:36
Speaker 4: This one is making the point that we made, which
37:39
Speaker 4: is the employment situation is better in the aggregate, but
37:42
Speaker 4: bad for some areas, so not true for all majors.
37:45
Speaker 4: Funding cuts to biotech have made the job market terrible
37:47
Speaker 4: for recent college graduates, even with solid resume with internships
37:50
Speaker 4: and four point oh difficult to apply for jobs with
37:53
Speaker 4: bought doing the hr work. Yes, absolutely, there are entire
37:59
Speaker 4: industries and higher majors that the job outlook sucks right now.
38:02
Speaker 3: But that's always the case. There's always there's always an
38:04
Speaker 3: industry or a major where the outlet sucks. It rotates
38:08
Speaker 3: and it moves, but there always is. Let's take a
38:11
Speaker 3: quick break here. When we return, we've got our two
38:15
Speaker 3: coming up and it's gonna be really fun.