Relax, Folks: Jobs Report Was OK

Episode Overview

• The episode analyzes a recent market downturn, dubbed "Freaky Friday," which was triggered by unexpected tariffs and a surprisingly weak jobs report featuring significant downward revisions.
• Ed Yardeni critiques the political reaction to the data, including the President's dismissal of it as "fake" and the firing of the BLS Commissioner, arguing for a focus on data quality instead.
• Despite the negative headlines, Yardeni presents a counter-narrative that the U.S. labor market remains resilient, pointing to underlying strengths like record-high total hours worked and rising real wages.
• The core thesis is that slowing job growth combined with strong GDP signals a major rebound in productivity, which supports a "Roaring 2020s" economic outlook rather than an impending recession.

Key Concepts

• The market's "Freaky Friday" sell-off was caused by a combination of new tariff announcements and a weak July jobs report, which was exacerbated by significant downward revisions to data from May and June.
• Despite the weak headline payroll number, underlying labor market metrics remain strong, particularly "aggregate weekly hours" (employment multiplied by the average workweek), which is at a record high.
• Real wage growth is outpacing inflation, with low-wage workers continuing to see consistent gains while high-wage workers, who had been lagging, are now starting to catch up.
• The labor market is shifting towards a sustainable equilibrium as the gap between the high demand for labor and the available supply has closed, indicating a mature, healthy market.
• The combination of slower employment growth and strong GDP points to a significant rebound in productivity, which Yardeni believes is the key driver for a long-term "Roaring 2020s" economic boom.

Quotes

• At 1:58 - "But the bigger shocker was the big downward revisions... I think bigger than I recall happening in quite some time." - Emphasizing that the revisions to previous months' jobs data (over 250,000 downward) were more alarming than the weak July number itself.
• At 2:48 - "...the President's reaction should have been, 'We need to give the BLS more money to do a better job of collecting the data...'" - Yardeni's critique of the decision to fire the BLS commissioner, suggesting the focus should be on improving data quality rather than politicizing the agency.
• At 7:45 - "Relax folks, the jobs data was okay." - The title of his morning briefing, in which he argues that the weak employment numbers, when paired with strong GDP, actually signal a healthy rise in productivity.
• At 17:05 - "We're basically at a record high in total hours worked." - He uses this metric to counter the narrative of a weakening labor market, showing that the overall work being done in the economy remains robust.
• At 30:24 - "The market may kind of churn here for a while, as it typically does in August and September, and perhaps set us up for a year-end rally." - He offers his short-term outlook for the market, suggesting a period of consolidation before a potential rally later in the year.

Takeaways

• Look beyond headline payroll numbers to deeper metrics like aggregate hours worked and wage growth to get a more accurate picture of the labor market's health.
• Slower job growth is not necessarily a sign of a weakening economy if it is accompanied by a rise in productivity, which can fuel sustainable, non-inflationary growth.
• Political reactions to economic data can create short-term market noise, but the underlying fundamental trends are more important for long-term investing.
• The U.S. labor market is transitioning from a period of rapid recovery to a more balanced and sustainable equilibrium, which is a sign of a mature economic cycle, not a downturn.