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Is it time to get concerned about the labor market? · The Financial Exchange Show

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Speaker 1: and Mike Armstrong.
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Speaker 2: Chuck, Mike, and talker with you as we continue through
1:13
Speaker 2: a busy, busy week economic data.
1:18
Speaker 3: This morning.
1:18
Speaker 2: We got a few different pieces that we're going to
1:20
Speaker 2: talk about. We got eighty p jobs data at eight
1:24
Speaker 2: fifteen am. We got Balance of Trade data at eight
1:28
Speaker 2: thirty am. We got weekly jobless claims data at eight
1:32
Speaker 2: thirty am. We got ism services data at ten am.
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Speaker 2: And Michael, it is a dealer's choice. Where do you
1:42
Speaker 2: want to start today?
1:44
Speaker 4: You know, simplest and quickest, and the weekly data we get,
1:47
Speaker 4: let's start there at the weekly jobless claims of two
1:49
Speaker 4: hundred and thirty seven thousand, a decent size increase from
1:53
Speaker 4: the previous week of two twenty nine, but still keeps
1:58
Speaker 4: that four week moving average in that I guess two
2:00
Speaker 4: thirty one range now, which again bit of an uptick,
2:04
Speaker 4: but in my mind at least we can file this
2:07
Speaker 4: one under no significant change in the overall trend line.
2:12
Speaker 4: Is that where you would put it? Or are you
2:14
Speaker 4: worried about an eight thousand uptick?
2:15
Speaker 2: I am unexcited about this. Where I am with you know,
2:19
Speaker 2: weekly jobless claims. We've seen these wiggles between you know,
2:23
Speaker 2: two hundred and ten and two hundred and fifty thousand.
2:25
Speaker 3: For basically the last three years now, yep.
2:28
Speaker 2: In order for me to think that there's anything meaningful
2:31
Speaker 2: afoot in terms of, hey, should I be worried about
2:34
Speaker 2: what's happening with, you know, initial jobless claims, I need
2:38
Speaker 2: at least back to back weeks over two sixty and
2:40
Speaker 2: even then it's more like, Okay, is there anything you know,
2:45
Speaker 2: really going on here? You know, if you really want
2:48
Speaker 2: to get me, you know, all this looks not good.
2:52
Speaker 2: I think we're talking like three to four weeks north
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Speaker 2: of two hundred and seventy five thousand, and then I'm saying, yeah,
2:57
Speaker 2: there's there's.
2:58
Speaker 3: Problems going out there.
2:59
Speaker 2: Yeah, but at this point, you know, we're we're still
3:02
Speaker 2: well within a normal range. If you look at prior years,
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Speaker 2: we're actually, you know, even with the uptick here, we're
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Speaker 2: in line with last year from a seasonal perspective. It's
3:10
Speaker 2: just the last few weeks we are much better than
3:12
Speaker 2: last year. And so I'm just I'm I'm unconvinced that
3:17
Speaker 2: there's anything interesting happening with initial claims, even though the
3:21
Speaker 2: trend has been upward for the last month or so.
3:25
Speaker 2: These wiggles more often than not work themselves out, and
3:28
Speaker 2: it's not worth, you know, getting your intestines all twisted
3:31
Speaker 2: just because you know, claims went up.
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Speaker 3: For a couple of weeks.
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Speaker 2: Here, good continuing claims also pretty consistent right now, one
3:41
Speaker 2: point nine to four million. If you do the math
3:44
Speaker 2: and compare it to last year, it's about five percent
3:48
Speaker 2: higher than last year, which is pretty much where we've
3:50
Speaker 2: been for most this year. It doesn't make you feel great,
3:53
Speaker 2: it doesn't make you feel terrible.
3:55
Speaker 3: It just is.
3:56
Speaker 2: And so I think, ultimately, all right, it's it's fine,
4:01
Speaker 2: it's not a huge problem. It's not suggesting, you know,
4:04
Speaker 2: the labor market's improving. It's not suggesting it's worsening in
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Speaker 2: a clip that's going to cause real problems. Once again,
4:11
Speaker 2: sorry to all the doomers out there, it's not the
4:13
Speaker 2: end of the world. To all the people who think
4:15
Speaker 2: it's the best economy ever, it's not that either. It's
4:18
Speaker 2: just nah, like that's that's what this this week says,
4:21
Speaker 2: which is kind of what the labor data has been
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Speaker 2: showing since last August. Quite honestly, Should we stay on
4:27
Speaker 2: labor then and go to ADP Yes, let's continue laboring ADP,
4:31
Speaker 2: which no one pays attention to, even though to be
4:35
Speaker 2: to be fair, the interesting thing is, even though no
4:37
Speaker 2: one pays attention to ADP, uh, it's got a pretty
4:40
Speaker 2: you know, good track record recently, at least for the
4:43
Speaker 2: last you know, six months or so of trending. You know,
4:46
Speaker 2: with the BLS data on a three month moving average,
4:49
Speaker 2: they're pretty much you know, in line. So hey, they're
4:52
Speaker 2: they're pretty good at you know, predicting where that's going
4:55
Speaker 2: to go, not month to month. But again that three
4:57
Speaker 2: month averages is pretty spot on.
4:59
Speaker 3: Right now.
5:00
Speaker 2: ADP employment change came in at fifty four thousand for
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Speaker 2: the month, that is blow expectations of sixty five thousand. Again,
5:08
Speaker 2: no one really cares about ADP, so this is not,
5:12
Speaker 2: you know, a tradable event. It's not, you know, something
5:14
Speaker 2: that people get all hyped up about. But if you're
5:18
Speaker 2: just trying to say, hey, you know, what does this
5:20
Speaker 2: say about you know, what Friday could mean? Not really
5:23
Speaker 2: suggesting any meaningful shift in job growth as well. But
5:27
Speaker 2: the thing that I keep coming back to, we need
5:29
Speaker 2: to spend less time focusing on job growth right now
5:32
Speaker 2: and more time focusing on the unemployment rate because the
5:35
Speaker 2: unemployment rate is what the.
5:37
Speaker 3: FED cares about.
5:38
Speaker 2: Ultimately, job growth is not something that they can influence.
5:42
Speaker 2: The unemployment rate is something. I know that that's you know,
5:45
Speaker 2: kind of a weird distinction. But the reason why is
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Speaker 2: the FED cannot add to the population or add to
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Speaker 2: the you know, the working age population. They don't have
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Speaker 2: that tool in their quiver. Anything that Jay Powell does
5:58
Speaker 2: on that side is outside his duties as FED chair
6:01
Speaker 2: and so as such, it's something where the FED focuses
6:05
Speaker 2: on the unemployment rate, not on the pace of job growth,
6:09
Speaker 2: because the population is not something that they can control.
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Speaker 4: And that's the piece that I think everybody's that looks
6:17
Speaker 4: at this closely as scratching their head on is what
6:19
Speaker 4: are we going to see happen with this unemployment rate?
6:21
Speaker 4: Given the changes A and baby boomers retiring, but more
6:25
Speaker 4: significantly in the massive change in the trend line on immigration.
6:30
Speaker 4: Last two years, I think we were averaging what three
6:32
Speaker 4: million new people entering the United States per year and
6:38
Speaker 4: this year we're at something like negative three hundred thousand.
6:40
Speaker 2: Yeah, well, no one knows. I don't think we're very
6:43
Speaker 2: good at you know, knowing exactly. Yeah, the numbers I mean,
6:46
Speaker 2: it's a best guess. Here's the thing, if you knew,
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Speaker 2: then you probably you know, would have a better sense
6:52
Speaker 2: of exactly like what's going on from an immigration perspective,
6:55
Speaker 2: which it's clear that we haven't.
6:57
Speaker 3: So interesting piece on this.
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Speaker 2: One of the things in the Joltz report yesterday that
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Speaker 2: a lot of people are talking about in social media
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Speaker 2: is the quits rate in the construction industry. And I
7:10
Speaker 2: don't know if you happen to see this mic, but
7:13
Speaker 2: like everyone's talking about this because the quits rate in
7:17
Speaker 2: the construction industry fell to under one percent. The last
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Speaker 2: time the quits rate was that low in the construction
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Speaker 2: industry was two thousand and nine.
7:27
Speaker 3: So you look at.
7:28
Speaker 2: It, you know, and and naturally you get, you know,
7:30
Speaker 2: everyone who's all gloom and doom saying, oh, the quits
7:33
Speaker 2: rate is the lowest since the Great Financial Crisis. We're
7:37
Speaker 2: gonna like the S and p's going to eight, you know,
7:41
Speaker 2: Like that's what you get, like the people saying that's
7:44
Speaker 2: the voice they used to ye and all them. I
7:47
Speaker 2: think the interesting read through on this to me is, okay,
7:51
Speaker 2: one read on this, quits rates tend to go down
7:53
Speaker 2: when people are nervous about losing their jobs, and so sure,
7:57
Speaker 2: if there's less construction activity, which by the way, there is.
8:00
Speaker 2: You look across the board year over year, now residential manufacturing,
8:05
Speaker 2: all private construction is now contracting year over year, so
8:09
Speaker 2: that that is happening. So I can understand, Okay, maybe
8:13
Speaker 2: the quits rate falls a bit on the construction side.
8:16
Speaker 2: But here's the thing about this, this jolt's number that
8:18
Speaker 2: I want to point out. The first is when you
8:22
Speaker 2: look at industry specific quits rates, they're really volatile month
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Speaker 2: to month, Like you can see like half a percent
8:29
Speaker 2: wiggles within a trend. So it's very possible that with
8:33
Speaker 2: next month survey this bounces back up to like one
8:35
Speaker 2: point two or one point three percent. And I'm not
8:38
Speaker 2: saying that's good. I'm just saying it's not. You know,
8:41
Speaker 2: one data point does not necessarily mean a ton here.
8:44
Speaker 2: But the other piece is, if you think about this
8:48
Speaker 2: from the perspective of, hey, of the undocumented workers that
8:53
Speaker 2: are working in you know, the United States, a lot
8:57
Speaker 2: of them are you know, focused in two major areas,
9:00
Speaker 2: agriculture and construction. Yes, if a lot of those workers
9:06
Speaker 2: either have been deported or are nervous about being deported,
9:10
Speaker 2: and so they're not showing up to work. Then the
9:13
Speaker 2: remaining workers are saying, great, pay me more in order
9:17
Speaker 2: to get me to show up, and so they're not
9:19
Speaker 2: necessarily quitting at the.
9:21
Speaker 3: Rate they used to.
9:23
Speaker 2: I'd buy that we've been conditioned over the entirety of
9:28
Speaker 2: the data, that we have to believe that labor demand
9:32
Speaker 2: is the only thing that matters, because we've always had
9:35
Speaker 2: not an unlimited labor supply, but a consistently growing one.
9:38
Speaker 4: And that's been kind of what has set by the way,
9:41
Speaker 4: like you take a look at American demographics compared to
9:44
Speaker 4: most other developed nations, that's part of what has set
9:47
Speaker 4: us apart here. I mean, there's plenty of other things
9:49
Speaker 4: about the US economy that make it unique, but the
9:52
Speaker 4: supply of labor and our birth rates has been one
9:54
Speaker 4: of them that has bucked the trend of other developed nations.
9:58
Speaker 3: Right.
9:58
Speaker 2: I'm not saying that you know, our you know, birth
10:00
Speaker 2: rates and everything are great, but they're better than just
10:02
Speaker 2: about everywhere else that is, you know, broadly developed. And
10:06
Speaker 2: so I think the interesting thing is to look at
10:09
Speaker 2: some of this data not through the lens of oh, gee,
10:11
Speaker 2: does this mean that labor demand is cratering in construction. Hey,
10:15
Speaker 2: what if labor supply is moving down significantly too, And
10:19
Speaker 2: this is something that we have never had to consider, never,
10:24
Speaker 2: Like the working age population has always been growing in
10:28
Speaker 2: the United States. Yeah, I'm not saying this is going
10:31
Speaker 2: to be a long term trend, but what if there's
10:32
Speaker 2: a couple of years here where the working age population shrinks?
10:37
Speaker 4: Then it works in the same direction as a few
10:39
Speaker 4: other things when it comes to inflation.
10:41
Speaker 2: We have to think about you know, these data sets
10:43
Speaker 2: a little differently. So I'm not saying this is good
10:46
Speaker 2: or bad. I'm just saying, hey, this is something that
10:48
Speaker 2: we need to think about when we're looking at some
10:50
Speaker 2: of this data. So we got through weekly jobless claims,
10:54
Speaker 2: we got through.
10:54
Speaker 4: ADP Chuck, I know we need to shift to other things,
10:58
Speaker 4: but there's one other piece on the labor market I
11:00
Speaker 4: think I want to cover when we come back, and
11:02
Speaker 4: that specifically the labor market in Massachusetts in particular. I
11:06
Speaker 4: know we don't usually get state by state here, but
11:08
Speaker 4: there seems to be something unique going on in mass
11:12
Speaker 4: I don't know how much you've covered it, but I
11:13
Speaker 4: want to cover that when we come back. Is Massachusetts
11:16
Speaker 4: labor market and maybe some trends that are differing from
11:19
Speaker 4: the national scenario that we should talk about.
11:21
Speaker 3: Ticks.
11:22
Speaker 1: Do that.
11:22
Speaker 3: We're right back.
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12:23
Speaker 4: So Chuck, Earlier this year we were kind of just
12:27
Speaker 4: wondering and talking about like, Okay, you know, government funding
12:30
Speaker 4: cuts R and D cuts. How does this affect different
12:34
Speaker 4: economies in particular, you know, I think you and I
12:37
Speaker 4: folks a little bit on the Boston based biotech and
12:40
Speaker 4: education economy and labor markets, said that could be interesting
12:44
Speaker 4: in terms of how it shapes out. I was then,
12:47
Speaker 4: you know, just over the last week, having meeting up
12:50
Speaker 4: with a few people that work in the biotech industry
12:54
Speaker 4: and either had lost their job or were nervous about
12:57
Speaker 4: potentially losing their job. And then we had the Harvard
13:00
Speaker 4: news from yesterday about the funding cuts to Harvard, and
13:03
Speaker 4: so I wanted to take a look again at what's
13:06
Speaker 4: been the trend line on Massachusetts versus national unemployment. And
13:11
Speaker 4: as we've spoken about, when it comes to the national
13:13
Speaker 4: unemployment scenario, over the course of the last year, you've
13:16
Speaker 4: been in a very narrow range.
13:18
Speaker 3: I think the high has.
13:19
Speaker 4: Been four point two, the low's been four point zero,
13:23
Speaker 4: So you haven't really gone anywhere on total national unemployment.
13:28
Speaker 4: But taking a look at the Massachusetts data, and Chuck,
13:31
Speaker 4: I'm comparing all the seasonally adjusted data here. The last
13:35
Speaker 4: time the national and Massachusetts unemployment rate were the same
13:39
Speaker 4: was back in December. Since then, like I said, national
13:42
Speaker 4: scenario just been kind of bumping around, but right around
13:46
Speaker 4: four one four two, Massachusets now climbed to four point
13:49
Speaker 4: eight percent. I just find that interesting. I don't think
13:54
Speaker 4: you can look at that and definitively say, hey, here's
13:57
Speaker 4: the stuff we were talking about, but it would certainly
14:00
Speaker 4: fit in with that narrative. We don't, I believe, get
14:02
Speaker 4: the state by state level data when it comes to
14:04
Speaker 4: certain industries, so we can't really tie that piece out.
14:08
Speaker 4: But I took a look at the surrounding New England area.
14:11
Speaker 4: None of the other states are experiencing something like this,
14:14
Speaker 4: and so something to monitor, I guess for those of
14:17
Speaker 4: us that make our living here in New England, make
14:21
Speaker 4: our living here in the Boston area, might we be
14:24
Speaker 4: seeing a bit of a change in the trend line
14:26
Speaker 4: when it comes to what has historically been a labor
14:30
Speaker 4: and housing market that does not fluctuate quite as much
14:34
Speaker 4: as the national market.
14:36
Speaker 2: Let's talk about a couple alternate explanations. Sure, we've talked
14:40
Speaker 2: about how nationally, if it weren't for the labor force
14:44
Speaker 2: participation rate going down, the unemployment rate over the last
14:48
Speaker 2: six months would have risen to four point eight four
14:50
Speaker 2: point nine percent. Yes, pretty much in line with what
14:53
Speaker 2: we would have seen in Massachusetts.
14:54
Speaker 3: Yep.
14:56
Speaker 2: Could one hypothesis be because Massachusetts has fewer people in
15:02
Speaker 2: industries that are typically staffed with higher percentages of undocumented workerstruction, construction,
15:08
Speaker 2: and agriculture, food processing.
15:10
Speaker 3: Could it be that we.
15:11
Speaker 2: Are not seeing similar reductions in the labor force and
15:14
Speaker 2: so Massachusetts is behaving as the rest of the country
15:18
Speaker 2: would if the labor force weren't shrinking the way it is.
15:21
Speaker 4: Yeah, that could be. In either case, It doesn't. I
15:26
Speaker 4: guess that if it makes you feel great about anything, right,
15:28
Speaker 4: it doesn't. It doesn't matter a whole bunch if you
15:31
Speaker 4: still have the unemployment rate climbing for one reason or
15:33
Speaker 4: another because of you know, your concentration in a specific
15:36
Speaker 4: industry or lack of concentration in an industry. But something
15:40
Speaker 4: to certainly keep an eye on, because let's be honest, tck.
15:43
Speaker 4: If this had been the national trend on unemployment, people
15:46
Speaker 4: would be bringing out the som rule again. People would
15:49
Speaker 4: be very concerned about recession on the national stage.
15:53
Speaker 2: Yeah, I'm just pulling up a couple other ones here,
15:57
Speaker 2: give me just one second while I pull this up.
15:58
Speaker 2: So I'm pulling up unemployment rates in Florida, Texas, and California,
16:02
Speaker 2: and I have no idea what I'm going to see. Yeah,
16:05
Speaker 2: uh so come on, where are you California? I know
16:09
Speaker 2: you're here, you do exist. Okay, here we thank you, Tucker.
16:12
Speaker 2: It's on the West coast. You're I had no idea.
16:16
Speaker 2: Unemployment California, Okay, that one just does not here.
16:20
Speaker 3: We go there it is.
16:22
Speaker 2: Okay, So we got all three, all four of these.
16:24
Speaker 2: Now if we take a look right now, and I'll
16:27
Speaker 2: start from where do you want me to start? From
16:28
Speaker 2: the beginning of this year, beginning.
16:29
Speaker 3: Of last year. I compared December to now, so grab this. Okay.
16:33
Speaker 2: So December, Massachusetts was four point one, Texas was four
16:37
Speaker 2: to two, Florida was three four, California was five to five.
16:42
Speaker 2: As of today, Texas has gone from four to two
16:46
Speaker 2: to four zero. That meshes if you think that, sure
16:50
Speaker 2: bunch of people have been deported from Texas. If you
16:55
Speaker 2: look at Florida, we've gone from three four to three seven. Okay,
17:01
Speaker 2: modest move up, not quite what we've seen in Massachusetts.
17:04
Speaker 2: California you've gone from five to five two five five,
17:11
Speaker 2: No change, big conclusion. I don't know that you can
17:14
Speaker 2: tell anything from any of this at a state level
17:16
Speaker 2: right now.
17:17
Speaker 3: Yeah, I don't know.
17:19
Speaker 2: Listen, all we do when we look at this stuff,
17:21
Speaker 2: you try to come up with a story that might
17:23
Speaker 2: make sense, right. I don't know that there's a coherent
17:25
Speaker 2: story on any of these at the moment. The biotech
17:28
Speaker 2: thing could be with Massachusetts because you're not seeing you know, a.
17:33
Speaker 3: Well, maybe you want maybe.
17:35
Speaker 4: Let's be honest, too, California, Texas, and Florida, because of
17:38
Speaker 4: the size of their states, their unemployment or their employment
17:41
Speaker 4: scenario is just much more diversified than.
17:43
Speaker 3: Massachusetts it is, you know, I mean.
17:46
Speaker 4: You wouldn't expect to see necessarily as big a change
17:49
Speaker 4: because if california unemployment rate had risen by one percent,
17:52
Speaker 4: then the national unemployment rate risen by quite a bit.
17:55
Speaker 3: That's true as well.
17:56
Speaker 4: So I don't know, I don't know what to make
17:58
Speaker 4: of it, but I definitely think it is worth keeping
18:01
Speaker 4: an eye on, especially for those of us who either
18:05
Speaker 4: own a restaurant in the Boston area or you know,
18:08
Speaker 4: you don't necessarily need to work in biotech to want
18:10
Speaker 4: to be focused on this and mean and keep an
18:14
Speaker 4: eye on what it could be changing here.
18:16
Speaker 2: Yeah, I'm I'm I'm curious, Tucker, what's the text line again?
18:19
Speaker 3: Six one, seven, three, six, two thirteen eighty five. I'm
18:22
Speaker 3: not Mike. My name's not Tucker, but it was right
18:23
Speaker 3: in front of me, so I knew the answer to
18:25
Speaker 3: that one.
18:26
Speaker 2: Just interested to hear from any business owners in terms
18:28
Speaker 2: of what you're seeing as far as you know, hiring,
18:30
Speaker 2: firing trends, as far as business activity you know in
18:32
Speaker 2: the New England region.
18:34
Speaker 3: I'm I'm interested.
18:35
Speaker 2: I'm always looking for, you know, just anecdotes and things
18:38
Speaker 2: like that. So if you've got anything, what's that text
18:40
Speaker 2: line again? Uh, Tuck or Mike or both?
18:44
Speaker 3: Should we do it in unison six five? Can one
18:49
Speaker 3: of you do it? Because that was awful? That was terrible.
18:51
Speaker 3: Let's not do that again. Six one, seven three, six
18:54
Speaker 3: two thirteen eighty five.
18:55
Speaker 2: Okay, So, uh, anything else that we want to talk
18:58
Speaker 2: about as far as as labor market, I know we've
19:02
Speaker 2: got some Bayes book stuff that we want to get
19:05
Speaker 2: through now.
19:06
Speaker 4: I think the big story will be tomorrow's jobs report,
19:08
Speaker 4: and then also we've got big revisions coming. What the
19:13
Speaker 4: seventh of September is when they do the annual revisions.
19:16
Speaker 3: In I don't know the exact date to be honest.
19:19
Speaker 4: So those are the t big labor market pieces coming
19:22
Speaker 4: up over the course of the next week or so,
19:24
Speaker 4: and we'll see if any of them move the trend
19:27
Speaker 4: line again.
19:28
Speaker 3: Quick break Fallstreet 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
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:53
Speaker 1: Street Watch a complete look at what's moving market so
19:56
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: Markets are modestly higher as Wall Street reacts to a
20:03
Speaker 5: lower than expected eightp private payrolls report ahead of the
20:07
Speaker 5: all important August jobs report DUO tomorrow morning at eight thirty.
20:12
Speaker 5: Right now, the Dow is up by nearly two tenths
20:15
Speaker 5: of one percent. SMP five hundred is up two tenths
20:18
Speaker 5: of one percent, thirteen points higher. Nasdaq also up by
20:22
Speaker 5: about two tenths of one percent or thirty eight points higher.
20:25
Speaker 5: RUSTED two thousand is edging higher, a ten year treasure
20:30
Speaker 5: reeled down one basis point at four point one nine
20:34
Speaker 5: seven percent, and crude oil down over one percent lower
20:37
Speaker 5: today trading just above sixty three.
20:39
Speaker 1: Dollars a barrel.
20:41
Speaker 5: Salesforce is weighing on the Dow, with shares down over
20:44
Speaker 5: six percent after the cloud company posted a second quarter
20:48
Speaker 5: earnings beat on both the top and bottom lines. However,
20:52
Speaker 5: its quarterly revenue outlook was weaker than expected. Meanwhile, recently,
20:56
Speaker 5: iPod software company Figma reported a double digit rise in
21:01
Speaker 5: quarterly revenue, but profit missfecasts, sending that stock tumbling by
21:05
Speaker 5: nineteen percent. Sticking with tech, where Hewlett Packard Enterprise posted
21:09
Speaker 5: a fifty four percent jump in quarterly networking revenue, boosted
21:14
Speaker 5: by its acquisition of Juniper Networks. Shares in the server
21:18
Speaker 5: and cloud software company are climbing four percent. Elsewhere, American
21:22
Speaker 5: Eagle Outfitters said it anticipates a sales boost from marketing
21:26
Speaker 5: campaigns featuring actress Sidney Sweeney and NFL star Travis Kelsey.
21:32
Speaker 5: The retailer also beat second quarter earnings in revenue estimates,
21:36
Speaker 5: sending shares flying by thirty percent See what I did there.
21:41
Speaker 5: Shares in C three dot Ai are sinking four percent
21:44
Speaker 5: after the maker of custom AI applications posted a wider
21:48
Speaker 5: than expected quarterly adjusted loss while it's revenue missed the mark,
21:52
Speaker 5: and get Lab is retreating eight percent after the provider
21:55
Speaker 5: of software development tools swung to a loss but raised
21:59
Speaker 5: its annual outlook. The company CFO is also leaving to
22:03
Speaker 5: join Snowflake. I'm Tucker Silva and that is Wallstree Watch Mike.
22:08
Speaker 2: Yesterday, the Fed put out their Beije Book, which is
22:13
Speaker 2: named because the cover is beige, presumably one of J.
22:17
Speaker 3: Powell's favorite callers, but not purple. Uh.
22:22
Speaker 2: It basically is a not a measure, but it's a
22:25
Speaker 2: survey of businesses within all of the Federal Reserve Branch regions,
22:31
Speaker 2: asking them about what's going on with their businesses. And
22:35
Speaker 2: I'll quote here. Most of the twelve Federal Reserve districts
22:38
Speaker 2: reported little or no change in economic activity since the
22:40
Speaker 2: prior Beige Book period. Across districts, contacts reported flat to
22:45
Speaker 2: decline in consumer spending because for many households, wages were
22:48
Speaker 2: failing to keep up with rising prices. So this is
22:52
Speaker 2: where we have to kind of reconcile a whole bunch
22:54
Speaker 2: of different things.
22:55
Speaker 3: The first is that.
22:57
Speaker 2: When you look at credit card data, payment process data,
23:01
Speaker 2: you know, basically anything banking related, it shows pretty consistent
23:06
Speaker 2: four to five percent year over year growth compared to
23:11
Speaker 2: last year. Trying to reconcile that with this showing Hey,
23:17
Speaker 2: you know, flat to decline in consumer spending. How do
23:22
Speaker 2: we do that? I have a couple thoughts. Do you
23:23
Speaker 2: want me to give mine or do you want to
23:25
Speaker 2: give yes? Okay, couple thoughts that I have on this.
23:29
Speaker 2: The first is the bulk of that consumer spending growth
23:34
Speaker 2: is being driven by families in the top twenty percent
23:38
Speaker 2: of income.
23:39
Speaker 3: Sure, we're seeing this.
23:41
Speaker 2: We're seeing this whether you're talking about travel anything else.
23:46
Speaker 2: The remaining eighty percent, in particular the bottom fifty percent,
23:49
Speaker 2: are really struggling and are needing to pull back. So
23:52
Speaker 2: this could very easily be something where in terms of,
23:55
Speaker 2: you know, the quantity of businesses reporting bad news, it
24:00
Speaker 2: could be high because there are only so many businesses
24:02
Speaker 2: that sell that, you know, luxury, high end item. So
24:06
Speaker 2: I think that could be something that's that's realistic. Here
24:09
Speaker 2: another piece, that four to five percent spending growth is
24:14
Speaker 2: nominal if you assume that inflation is running somewhere between.
24:20
Speaker 2: And again this is just looking at the inflation data
24:23
Speaker 2: that we have, because well it's it's the data that
24:26
Speaker 2: we have. If you assume that inflation is running somewhere
24:30
Speaker 2: between two point seven and three point three percent, which
24:35
Speaker 2: is what we're seeing on you know, the big price indices,
24:38
Speaker 2: call it three percent. Hey, if if you've got consumer
24:41
Speaker 2: spending growing at four but inflation's three, in real terms,
24:46
Speaker 2: you're only seeing you know, one percent actual growth in
24:48
Speaker 2: product sales. And that's not uniform across all businesses, obvious, Right,
24:53
Speaker 2: So I think you can reconcile it that way. But
24:57
Speaker 2: the big thing that I come back to is, can
25:00
Speaker 2: you find me, aside from AI capex, where the where
25:05
Speaker 2: are the real bright spots in the US economy right now? Like,
25:07
Speaker 2: what's the part that you look at and you're like,
25:09
Speaker 2: that thing is growing like crazy at the moment.
25:13
Speaker 3: Yeah, it's few and far between. Check.
25:14
Speaker 4: I Mean, the good news on the AI capex is
25:17
Speaker 4: that it infiltrates into more areas than just buying semiconductors,
25:22
Speaker 4: So it does spread out across the economy, whether it's
25:25
Speaker 4: construction or you know, utilities and electricity and energy production.
25:31
Speaker 3: But I mean it's doing that and we're still getting
25:34
Speaker 3: these numbers. Yeah.
25:35
Speaker 2: Yeah, So like I think that the big takeaway is, Look,
25:40
Speaker 2: the economy is not falling off a cliff. It's it's
25:44
Speaker 2: not growing particularly fast either. Yeah, it's just I'm meddling
25:49
Speaker 2: along which is, Look, if you were concerned about recession
25:53
Speaker 2: from tariffs, and the worst that you get is, hey,
25:56
Speaker 2: the economy slows to like one percent GDP growth for
25:59
Speaker 2: a year or so, that's not terrible.
26:03
Speaker 3: No, no, no, it's not so.
26:06
Speaker 2: I think that in terms of, you know, looking at
26:09
Speaker 2: all this, there's nothing right now that points to the
26:12
Speaker 2: economy decelerating further. There's nothing that points to it really
26:17
Speaker 2: perking up. It's just kind of how it's been, which
26:21
Speaker 2: I'm sorry that this has been. Like, I know, the
26:23
Speaker 2: year in markets has been really exciting, and I'm sure
26:25
Speaker 2: that you know for individuals, you know, whether you own
26:28
Speaker 2: a business or working, you know, trust me, it hasn't
26:31
Speaker 2: been like a boring year in the micro sense of
26:35
Speaker 2: it from a broad sense of, hey, like, how's the
26:39
Speaker 2: US economy doing?
26:40
Speaker 3: Eh? Fine, could be better, could be worse. About the
26:42
Speaker 3: same as last year.
26:43
Speaker 2: Yeah, but it's growing not as fast as you'd like
26:46
Speaker 2: to see, not as slowly as it could.
26:47
Speaker 3: Like it's I was gonna say, fine, check that.
26:49
Speaker 4: The commentary from the Beige Book kind of aligns with
26:52
Speaker 4: a number of other things that we've been talking about,
26:53
Speaker 4: such as the national unemployment rate just kind of where
26:57
Speaker 4: it's been for the last year or so, not ticking up.
27:01
Speaker 4: Total employment is growing, but not substantially, kind of just
27:05
Speaker 4: where it is. The The other thing that occurs to
27:08
Speaker 4: me is we I think we got an email or
27:10
Speaker 4: a text from a listener a couple of weeks ago
27:12
Speaker 4: asking us to try and measure or estimate, like, hey,
27:17
Speaker 4: you know what a bubble and pop on the artificial
27:19
Speaker 4: intelligence valuations and just overall attitude towards AI. Would that
27:26
Speaker 4: be enough to dramatically reshape the US economy?
27:30
Speaker 3: And to what degree?
27:32
Speaker 4: I think the answer, you know, based on what we
27:34
Speaker 4: just talked about is yeah, most certainly, because what we
27:37
Speaker 4: are seeing that's you know, people are drawing optimism from,
27:40
Speaker 4: is that artificial intelligence spend an innovation, and without it,
27:44
Speaker 4: there's not a whole lot of other you know, real
27:46
Speaker 4: shining bright spots at the moment.
27:48
Speaker 3: No, No, it's just it's kind of what it is,
27:51
Speaker 3: not to say they won't come right.
27:52
Speaker 4: Like, you know, we are talking about a massive change
27:55
Speaker 4: in a number of different things being driven by the
27:58
Speaker 4: White House and men. Facturing in tariffs is just one
28:01
Speaker 4: of them. And so we've been open to the idea
28:04
Speaker 4: that five ten years from now, that looks different. But
28:07
Speaker 4: for this moment in time, it ain't housing, it's not
28:11
Speaker 4: business hiring, it's it's nothing. It's not you know, energy investment.
28:16
Speaker 4: It's really the AI investment that's keeping this thing chugging along.
28:19
Speaker 3: Quick break here.
28:20
Speaker 2: When we come back, we're talking about Google anti trust
28:24
Speaker 2: and why this ruling sucks.
28:28
Speaker 1: Text es six one seven, three six two one three
28:31
Speaker 1: eight five with your comments and questions about today's show.
28:35
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29:28
Speaker 2: Couple pieces in the Wall Street Journal. The first Google
29:30
Speaker 2: ruling shows anti trust tools struggle to keep up with
29:33
Speaker 2: tech markets. The second is AI wins the Google anti
29:36
Speaker 2: trust suit. The first headline is wrong because anti trust
29:41
Speaker 2: tools didn't struggle to keep up with tech markets. The
29:43
Speaker 2: judge just decided, Hey, I'm here's the best quote that
29:47
Speaker 2: I've seen on it. Quite honestly, the judge effectively decided that, hey,
29:53
Speaker 2: you know what, if you find someone guilty of robbing
29:56
Speaker 2: the bank, send it them to writing a thank you
29:58
Speaker 2: note for the.
29:59
Speaker 3: Loot, because that's basically what happened here.
30:03
Speaker 2: And like, I gotta tell you, like, it's been a
30:06
Speaker 2: long time since I've been this upset about something anti
30:10
Speaker 2: trust related. And the reason why is the judge a
30:13
Speaker 2: year ago found that Google engaged in anti competitive practices
30:18
Speaker 2: basically by you know, paying Apple a bunch of money
30:22
Speaker 2: to have its search engine as the default on Apple devices,
30:26
Speaker 2: and by using its Chrome browser to you know, collect
30:29
Speaker 2: a bunch of information and then share that with Google's
30:32
Speaker 2: ad business. And then the judge said, no, you can
30:36
Speaker 2: continue doing all of that, and like, that's kind of
30:39
Speaker 2: the ridiculous part of this whole thing. And so so
30:44
Speaker 2: like the most ridiculous piece inness the more I've like
30:46
Speaker 2: read on this and thought about it, the judge said, hey,
30:49
Speaker 2: you know what, you can keep paying Apple the twenty
30:52
Speaker 2: billion dollars a year to be the default search engine
30:56
Speaker 2: because otherwise Apple might be harmed and might not be
30:58
Speaker 2: able to make as good a phone. That's literally, so
31:02
Speaker 2: you did something illegal, but you did something with the money,
31:05
Speaker 2: and so now because someone else might be harmed, we
31:08
Speaker 2: can't take that money back. That's basically saying, hey, Bernie
31:11
Speaker 2: madeof you ran a Ponzi scheme, but we can't call
31:15
Speaker 2: any of the money back because someone might be harmed
31:18
Speaker 2: by that.
31:18
Speaker 4: Yeah, so I'm with you on the piece about Frankly,
31:24
Speaker 4: they committed a crime, they became an as they committed
31:29
Speaker 4: a crime, and then he did not punish them for
31:31
Speaker 4: it whatsoever. And that piece, to me is just confounding. Like, Okay,
31:36
Speaker 4: so because you think there's some threat to their business
31:40
Speaker 4: artificial intelligence, you're not going to take any action.
31:43
Speaker 3: At the very minimum, you.
31:46
Speaker 4: Find them some severe dollar amount for past behavior that
31:50
Speaker 4: was unacceptable, and god knows Google can afford it. I
31:54
Speaker 4: don't know if he has the capability to do that
31:56
Speaker 4: or not. And I'm getting a little bit out of
31:58
Speaker 4: my you know, out of my expertise when it comes
32:00
Speaker 4: to anti trust cases and what the judge can enforce
32:02
Speaker 4: versus not enforce. I buy the argument that breaking up
32:06
Speaker 4: the company at this stage is unnecessary because of the
32:09
Speaker 4: threat of artificial intelligence. I think it's a weak argument.
32:11
Speaker 4: But let's be honest, you and I aren't as close
32:14
Speaker 4: to this judge disagree, is no, Mike, here's the worst part.
32:17
Speaker 2: A year ago in his writing, the judge said that
32:20
Speaker 2: generative AI is not a capable threat to search. A
32:26
Speaker 2: year ago, he did, how can you come back a
32:28
Speaker 2: year later and be like.
32:29
Speaker 3: Well, you know what, well it is.
32:32
Speaker 4: That's exactly what he did, because I know metacredited the
32:35
Speaker 4: rise of nasson competitors such as open ai andthropic in
32:37
Speaker 4: Perplexity with posing a threat to Google Search business in
32:40
Speaker 4: those companies. Quote changed the course of this case.
32:43
Speaker 3: It sounds to me.
32:45
Speaker 4: Like the last year worth of development made him change
32:49
Speaker 4: his mind, and had he known about the direction of
32:52
Speaker 4: AI a year ago and done enough research and to
32:54
Speaker 4: understanding it might not have found them to be a monopoly,
32:57
Speaker 4: which I don't know how you do that given what
32:59
Speaker 4: they were found guilty, But nonetheless that seems to be
33:03
Speaker 4: what the judge mike.
33:04
Speaker 2: In the last year, Google stock is up forty seven percent. Like,
33:09
Speaker 2: how can you say credibly the business has been like
33:11
Speaker 2: under threat? Yeah, when it's not like it's not like
33:20
Speaker 2: they're making less money. Their earnings are up, their revenue
33:23
Speaker 2: is up. We talked about how great their quarter was
33:26
Speaker 2: just you know, a couple of weeks ago. I'm sorry,
33:30
Speaker 2: this is out in la la land, Like, this is insane.
33:34
Speaker 2: This you literally the judge found them guilty and then
33:39
Speaker 2: said keep doing what you were doing.
33:42
Speaker 3: That I didn't like. Yep, this is insane.
33:47
Speaker 2: If any actual human being and not a two point
33:49
Speaker 2: seven trillion dollar company did this, you'd be in jail, jail,
33:53
Speaker 2: you get your crime jail. That's what happens. It happens
33:58
Speaker 2: to Google. What what what do they get?
34:00
Speaker 3: You know what? Here's the other part that's just ridiculous
34:03
Speaker 3: on this.
34:04
Speaker 2: In the the decision, Google cannot use the same anti
34:10
Speaker 2: competitive playbook for gen Ai products that it used for
34:12
Speaker 2: search so why is it okay for them to use
34:15
Speaker 2: it for search but not generative AI?
34:19
Speaker 3: Like what, it's either wrong or it's not.
34:23
Speaker 2: And furthermore, if you wanted to make a case, shouldn't
34:25
Speaker 2: they be allowed to use it for generative AI because
34:28
Speaker 2: they don't have any market power in that space where
34:31
Speaker 2: as they do in search.
34:32
Speaker 3: Is that what he's saying is that they can't do
34:34
Speaker 3: it because they have no market power. I don't know.
34:37
Speaker 3: Like either way, it's just insane. It is.
34:43
Speaker 4: I would agree with you that we have had a
34:45
Speaker 4: complete utter failure of the anti the of US laws
34:48
Speaker 4: and judges to understand and then police big tech companies.
34:54
Speaker 4: And I one hundred percent agree with you Chuck that
34:57
Speaker 4: for Google to have been found to break the law
35:00
Speaker 4: for the last more than a decade and have literally
35:04
Speaker 4: no punishment is is pretty obscene. This is why can't
35:08
Speaker 4: don't like big companies because, like Chuck's no, here's the
35:14
Speaker 4: problem is, any normal human being breaks the law and
35:18
Speaker 4: they have to pay consequences, whatever those are. It might
35:21
Speaker 4: be a ten dollars fine, it might be spending you know,
35:25
Speaker 4: thirty days in jail, it might be a.
35:26
Speaker 2: Pre trial diversion program. But you have to do something right.
35:32
Speaker 2: Google was found to break the law and the punishment
35:36
Speaker 2: was keep doing it, man, do it.
35:40
Speaker 3: Again, because we don't want to hurt you.
35:42
Speaker 2: Do it again because Apple needs that twenty billion dollars. Yeah,
35:46
Speaker 2: like Tim Cook couldn't find twenty billion dollars under his seat.
35:51
Speaker 4: Folks, want to talk to you about an upcoming event
35:54
Speaker 4: that we would love for you to attend. There's actually
35:57
Speaker 4: two of them this fall. We are hosting a live
36:00
Speaker 4: broadcast of this show, The Financial Exchange, followed by a
36:03
Speaker 4: couple of seminars. Chuck is gonna be there. I'm gonna
36:05
Speaker 4: be there. We're doing one of them down on Cape Cod,
36:07
Speaker 4: another one at the Showcase super Lucks in Chestnut Hill.
36:12
Speaker 4: The first date for Cape Cod it's at the Margaritaville
36:16
Speaker 4: Resort on Cape Cod on October ninth.
36:19
Speaker 3: Following that, we're gonna do one a.
36:20
Speaker 4: Week later at the Showcase super Lucks in Chestnut Hill
36:23
Speaker 4: on October sixteenth. If you're in the area, whether you've
36:26
Speaker 4: been to one of these in the past, they are
36:28
Speaker 4: a fun time. You can sit down chat with other
36:30
Speaker 4: listeners and fans of the show, and then we'll be
36:32
Speaker 4: sitting down with folks after the fact to talk about
36:35
Speaker 4: our views on just where this economy is headed. And
36:37
Speaker 4: I know there are a lot of question marks. That's
36:39
Speaker 4: what we talk about every day on this program. If
36:42
Speaker 4: you would like to get more information on potentially attending,
36:45
Speaker 4: please give us a ring at eight hundred three nine
36:48
Speaker 4: three four zero zero one. Those dates once again October
36:52
Speaker 4: ninth on Cape cod at the Margaritaville. October sixteenth at
36:55
Speaker 4: the Showcase, Super Lucks and Chestnut Hill. We'd love for
36:58
Speaker 4: you attend. Give us a call at eight hundred three
37:01
Speaker 4: nine three for zero zero one.
37:03
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
37:06
Speaker 1: registered investment advisor. Nothing in the ad or in any
37:08
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
37:12
Speaker 1: your own financial, tax, and estate planning advisors before making
37:14
Speaker 1: any investment decisions. Armstrong make contact you to offer investment
37:17
Speaker 1: advisory services.
37:19
Speaker 2: The Golden Canary. What pressures medals are saying about the economy?
37:22
Speaker 2: Gold hit a new all time high yesterday. It's off
37:24
Speaker 2: a little bit in trading today, but still, you know,
37:28
Speaker 2: pretty darn close there, above thirty six hundred dollars per
37:31
Speaker 2: Troy ounce.
37:32
Speaker 3: What does this mean? Michael?
37:34
Speaker 2: What are precious metals, saying about the you tell me, man,
37:38
Speaker 2: choose your own adventure. One is, hey, if the FED cuts,
37:41
Speaker 2: there's going to be more inflation, and you got to
37:43
Speaker 2: watch out for that. Two, if the economy weakens, then
37:48
Speaker 2: there's going to be more money printed, and you got
37:49
Speaker 2: to watch out for that.
37:52
Speaker 3: Right like that, That's basically the two reads that you
37:54
Speaker 3: can have on gold in my opinion. Yeah, people are
37:57
Speaker 3: more nervous about global.
38:01
Speaker 4: Inflation currencies than they were a couple of years ago,
38:05
Speaker 4: and that's potentially moving gold around.
38:08
Speaker 3: Yeah, that would seem to be.
38:10
Speaker 2: You know, those are the kind of explanations either growth
38:12
Speaker 2: is worse or better than expected. In either case, something's off.
38:17
Speaker 2: Let's take a quick break.
38:18
Speaker 3: We had our two coming up in just a little bit.