Is AI Destroying Jobs? The Data Says Something Stranger | ITK With Cathie Wood

Greetings everyone. This is Cathie Wood. It's employment Thursday, not Friday, going into July 4th weekend. I wish you a happy July 4th, our 250th birthday. The employment report today was weird—when you look at the charts, you'd think we were in a recession. I'm glad Kevin Worsh is at the Fed, and one of his task forces will look at government data and bring in more private data, which I think will be helpful. I just got back from Asia and Europe, and the fear of inflation and higher interest rates was palpable, partly because currencies elsewhere are falling. I'll discuss Worsh's five task forces: Fed communications (too many governors talking), the Fed's balance sheet (still $6.7 trillion), data sources (more private data), productivity and jobs during this technology transformation (productivity is 2.9% year-over-year and should accelerate to 5-6% in the next five years), and the Fed's inflation framework (models may be distorted). On fiscal policy, the deficit relative to GDP is high, but we think growth will surprise on the upside. Debt relative to equities is declining. Foreign holdings of Treasuries are still increasing despite some sales by China and India. The dollar is likely to rise due to higher returns on capital in the U.S., driven by deregulation, tax cuts, and innovation from companies like SpaceX, OpenAI, and Anthropic. Inflation versus money growth: money growth has reaccelerated to about 5.5%, but we don't think it will lead to higher inflation. The yield curve is flattening, suggesting deflationary undercurrents from technology, similar to the Industrial Revolution. Labor force participation and velocity of money are correlated and declining, which could signal the Fed is too tight. Oil prices are falling on a year-over-year basis, and with electric transportation, the bull case for oil is diminishing. Commodity prices are up slightly but the dollar's strength will exert downward pressure. Core CPI vs. core PPI shows margin squeezes or AI-driven efficiency. Trueflation measures show headline inflation at 1.75% and core in the low 1% range, far below official CPI. The employment report was weak: household employment down 500,000, non-farm payrolls up only 57,000. This may reflect companies using AI instead of hiring, and new business creation not captured in the data. Youth unemployment is 9.2%. A Ramp study found that aggressive AI adopters hired 10% more people over two years. We ourselves are hiring engineers because AI has changed the productivity equation. Consumer sentiment is low due to high food and energy inflation, a low saving rate, and rising auto delinquency rates—though consumers are paying credit cards by letting cars be repossessed. Housing affordability is poor, with existing home sales trapped by high mortgage rates. Manufacturing is picking up, and AI capital spending has broken out to new highs. Token spending per million tokens has dropped 17%, but optimization is healthy. The trade deficit is widening, but that reflects capital inflows. Market indicators: metals relative to gold are turning up, and the 10-year Treasury yield may break down if inflation falls to 1-2%. Wealth measures like S&P relative to gold and oil are rebounding. Bitcoin relative to gold appears to have bottomed. Credit markets are quiet; private credit outflows haven't infected the banking system. High-yield spreads are calm. As we enter July 4th weekend, I wish you a wonderful time with family and friends.