And I am doing the No. We got a lot of questions before this episode, and we really do appreciate those questions about unemployment and employment. Today's report seemed quite scary, I would say, to people, and I understand why. We are not as worried, but there are a lot of changes taking place. So I just want to talk a little bit about what this employment report told us. Overall, employment was supposed to be up — or the consensus expectation was up 80,000. And you know what I'm supposed to be facing here now, so we're starting, and so I'll start here. You can tell this is impromptu. So the employment report today was somewhat scary on the surface, and we understand the fears. The actual employment number — so this is the increase or decrease in nonfarm payroll employment — was minus 23,000. Expectation was for plus 80,000, and perhaps more important, the previous three months were revised down by 103,000. So that means the three-month moving average employment increased only 20,000 per month. So that's very slow. Now if you look inside the report, there are a few things we found interesting. The participation rate dropped dramatically, but if you parse through the various age cohorts, it was the boomers who were retiring — they accounted for the biggest drop in the participation — and the 16 to 24 year old category. We've been talking a lot about that, and that was the second biggest contributor. The prime-age employment, so between 25 and 55 years old, that participation rate increased, so that was good news. The other interesting data coming out of this report was average hourly earnings up only 0.1%. The expectation was 0.3%. So on a year-over-year basis, I believe the average hourly earnings went from 3.4% year-over-year increase to 3.2%.
Now what's also interesting is we believe that the productivity growth is starting to approach that 3% level. And so that means that unit labor costs are very well behaved — almost zero increase on a year-over-year basis. Now we believe that as productivity growth accelerates, that some of the benefits will accrue to workers over time. So we would not be surprised to see wage gains accelerate. So that's something to look forward to. Now, what does this drop in the participation rate at both ends of the spectrum mean? Well, a couple of things. As the boomers are leaving — and they're leaving more rapidly, I would say, than we expected — this is the 55-plus year old category. They may be leaving because AI can do a lot of their jobs, and you know they are not interested in the next chapter. They're interested in retirement, and hopefully their retirement accounts have been well diversified but with a good slug of stocks, since we are approaching all-time highs in stocks. So that's one category.
The second category — and we talk about this a lot, and many people viewing may be in that category and worried — and I'm just going to repeat what I've been saying. As we learn more and more how powerful AI is, and it's getting more and more powerful, and the cost of innovation is collapsing — Brett Winton, our chief futurist, recently calculated the rate at which inference costs are dropping. So the cost to answer one of your questions to ChatGPT or Grok or Claude — that is dropping, get this, 99.99% per year. So the cost of innovation is collapsing. And while we hear a lot about how much it costs to be at the frontier — $200 a month, $2,000 a month — and for those who need the frontier to advance their knowledge, great. It's great for the OpenAIs and the Anthropics of the world, and we think ultimately the SpaceX AIs of the world. But if you don't need the frontier frontier, you can start using these models and create businesses all by yourself. I wish I had had this kind of tool when I started ARK in 2014. I didn't know what to do with the white sheet of paper, how to do a deck, how to do — well, I knew how to do a financial plan. I should know how to do that. But there were so many general and administrative tasks that I needed to do, and I just didn't know the first thing about how to go about doing them. Well, now you identify a problem out there or a frustration, and you are looking for a job — so keep doing that. Definitely keep doing that. But in the meantime, identify that frustration, that problem that you would like to solve out there and go solve it with AI only. So that when you continue to interview for your jobs, you will go to the top of the ranks in terms of employers wanting you. Why? Because you are showing initiative, starting a business to solve a problem and make the world a better place. And you are becoming expert at AI, and it is much easier to do. It does take some patience, but it's much easier to do than I think many people expect. It's called vibe coding — I think they're starting to call it something else now, I've forgotten what the word is. But it's kind of fun and it's kind of mind-blowing too to see what we can do, given that we are not coders or programmers, engineers, developers, whatever you want to call them. So don't lose hope, because we do believe there's going to be an entrepreneurial explosion.
And the other interesting news out of this employment report was even though the number of jobs went down, the unemployment rate went down. Why? A lot of people are dropping out of the labor force. So what does this mean for those at the younger end of the spectrum and those even in the middle spot? It means that you have an opportunity to be promoted much faster than otherwise would have been the case. So if you're in a company, look for, you know, how you might be able to help take over a job with AI — a job that a baby boomer was doing. And if you're young in a company and you're natively AI already and very productive, make your boss look brilliant and make other people look brilliant, so you can make your way through the organization much faster than otherwise would have been the case. And then finally, starting your own business. Now there's only a 10% chance that it will work. Maybe the odds will go up because AI is helping, but it might — and I can tell you as a founder, there is nothing like starting your own business. It's the most exhilarating thing in the world. And if you're funding it by yourself, as I did for four years, it at times is the most terrifying experience in the world. But on balance, the exhilaration far overwhelms the terrified moments. So with that, I'm going to close out on the live part of this and stay tuned for later. We'll go through the charts and I'll show you some of our other thoughts about employment, fiscal policy, monetary policy, economic indicators, and market indicators. So thank you for tuning in.
