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All right, let's get right to it. Big changes here. Change in non-farm payrolls. We're expecting 90,000 jobs. We're only getting 29,000. The prior month also revised downward from 162 to 133,000. The unemployment rate rising to 4.2%. The expectation was 4.1%. Average hourly earnings on a month-over-month basis coming in much less than expected, just a tenth of a percent. The expectation was for three-tenths of a percent. You mentioned that two-year yield down eight basis points right now, 4.7%. We check the markets for you all day long right here on Bloomberg Radio. I'm John Tucker. That's your unemployment report, the jobs report for this Friday. Paul and Tom.
John Tucker, thanks so much. 4.2% on the unemployment rate. There's a lot of noise in there. I got a C-minus on this. Dr. Sam marked me down years ago on his 4.2% here, and you know everything, folks. As I said, it was a real stasis survey, and the answer is the numbers are not 29,000. And the two-month payroll revision is -60,000. I'm going to nail this. That's a negative 29,000. Okay. Negative over, you know, a summation here as well. The hourly earnings come in light, light, light, 0.3. And they came in substantially below that, 0.1. Average hourly earnings, you know, annualized down a tick, 3.1. Down to 30. Equities lift up 61 on futures, up 30. Dow up 60. NASDAQ up a full stick, 1%. The VIX, as Paul mentioned, at 16 comes in at 15. Paul, to let Dr. Sahm massage the data. What do you see here, Paul?
Right now, I'm just looking at the bond market right here, Tom. The two-year is down nine basis points. It was down two basis points before this report. So we're now at 4.69 on the two-year. The ten-year off about eight and a half basis points. The ten-year is now at 5.15%, Tom. So yields coming in, bond prices higher.
In Duluth, Minnesota, think Gordon Lightfoot and Lake Superior. Claudia Sahm is with us as she is honored by the University of Minnesota. Dr. Sahm, this is a report that a select group of people said would happen, would come in light, what David Rosenberg called a catchdown. What do you do with one month's data?
Well, I think this does undercut the story that had been coming in today that maybe we have some strengthening in the labor market, right? That maybe the hiring is picking up some. Like, this just shows, no, the labor market is much more stable. Like, job creation has stabilized relative to last year when it was really sliding, but we are not in an uptrend, right? So the August number, it was a pop. Even with the downward revisions today, it's probably well above what it takes to keep the unemployment rate stable. But we didn't get another month of that, right? It popped back down. So I think we're just in this place of very low job creation in the US, which does fit with low growth in the labor force. And the unemployment rate, it did tick up, but basically it's unchanged. I mean, 4.2, 4.1. And those aren't big differences.
I was talking to Veronica Clark about this at Croup and the GDP, and I guess it comes into Claudia. I'm thinking of the late laureate Ned Phelps at Columbia. The dynamism of the American economy. Are we getting sclerotic in our non-AI world?
Well, it is really frustrating to look at the labor market at a moment like this where there really isn't a lot of dynamism. One thing I watch so closely, in addition to the hiring rate, is the quit rate, because that's the opportunity for people to go find better jobs, better pay, deal with, you know, higher prices. And that quit rate is also low. We are just not moving people around. So it really is, there's so much tension to have a labor market that feels kind of stuck and an economy where we're talking about transformative technology. Like, things are out of sync in a way that just doesn't feel like it can keep going, and yet it has. We are, like, you know, at least three years into this low, higher, low fire labor market. This is not normal.
How do you think the Fed is going to view this print here this morning?
I don't think this gives the Fed a lot of information. I don't think it'll really change their approach to monetary policy right now. They're trying to contain supply-driven inflation, like keeping a bad situation from getting worse. Fed officials have talked about what's a pretty modest adjustment in interest rates. They've done a quarter point, maybe they do another, maybe two more this year. That is not a hiking cycle like 2022 when the labor market's overheating. We have 9% inflation. Like, we are not in that world. The labor market is pretty stable. It's not in a great place. It's not the Fed's focus right now. And really, given their mandate and their tools, I think it's appropriate for them to be focused on the inflation side. But again, they've had a pretty modest approach to monetary policy. Markets seem to think something a little more aggressive, and maybe they should tone it back a little today, but I don't think it really shifts the Fed's thinking that much.
So, with a little bit of hindsight here, what is the changed, reduced, more limited immigration policy? How is that impacting? Do we have any real hard data on how that's impacting the labor market?
There have been, I think, first some measurement challenges, right? Just in both the surveys and also with employers and reporting. And we've had not just a reduction in immigration, we've had, you know, a temporary visa status revoked, and that revoked some of the work status. And then how do employers handle that, and when does it get reported? So we have, with a pretty big time lag, got a sense of what's actually happening in terms of our immigrant workforce. So we don't have a good handle on it. I think you can go to a few immigrant-intensive industries, like maybe in construction, and you see some wage growth pick up, which could be labor shortages. But, oh yeah, we're also building a bunch of data centers, so that's pushing up construction. So it's really hard to pull it out. But it is clear the labor force growth is slowing, not just immigration, but that is a piece of the sharp change.
Claudia, safe travels. Thank you so much for joining us today. Woman's duty here from the University of Minnesota at Duluth. We are ever stronger here with the futures up 69. The VIX 15.60. The ten-year yield in a solid seven basis points. Thirty-year bond even comes in as well. I guess a sigh of relief on worries of an overheating economy. She's expert at this. Rebecca Patterson joins us now, the Council on Foreign Relations. Let me go right to your work. I was at the Greenspan Memorial. Just a fabulous effort by Jane Harmon and, of course, Andrea here with all of the people showing up in honor of Alan Greenspan. Some really frank talk about the arc of his work. And I was greeted by Sebastian Mallaby, whose book, 'The Man Who Knew: The Life and Times of Alan Greenspan.' You have the privilege of doing a podcast with Sebastian at CFR, and your recent, newly minted podcast is on central banks. What kind of bind are they in, given the drama I just saw on the Bloomberg screen?
I mean, let's put the payroll data aside for a second, because the Fed and other central banks are looking not just at one number but at a dashboard of numbers when they're making their assessment on labor and inflation. And I think the challenge for the Fed, the challenge for all these developed markets and even a few emerging central banks today, is that a lot of the pressure coming in are supply shocks, and central bank policy changes can't create a barrel of oil. They can't create more chips, etc. So it's hard for them to know how to respond to that. Now, some of this is demand-driven, as we know. And the way I'm starting to think about the economy today, and AI in particular, is it's too much of a good thing. We have too much capex literally going in the economy. Brookings put out a paper recently suggesting 3.6% of GDP for about a decade. I mean, that's an incredible, incredible statistic.
Okay, folks, let me translate, Paul. Banana Republic. Continue. Not the clothing store. So you've got this boost to growth, but as we just saw, it's not necessarily translating into an equal number of jobs. We have this need for energy that's pushing up inflation at the margin. And as Claudia Sahm just mentioned, love to see her before me, although it's a lot of pressure on me. It sucks away from everything else. And when I say sucks away, I mean you don't have enough construction workers because they're all building data centers. You have pressure higher on Treasury yields because you are now competing with all that AI debt.
Paul, let me give you this statistic here. I think it's really important. I have a huge affection for Duluth that actually has to do with Rome, Italy. The poverty rate in Minnesota is 9%. Booming Minneapolis, data centers, the Mayo Clinic, the Minnesota Wild, everything. I won't mention the Twins, Brian, I'm sorry. I won't mention the Vikings. Okay. In Duluth, the poverty rate is almost double, 16.8%. That's the part of America flat on their back.
Absolutely. So, Rebecca, what a lot of people are trying to understand, and there's a lot of people in this market that have never seen yields at these levels, right? It's been a long time since we've seen yields at these levels. Is it fair to tell them this is kind of the new normal? Well, this is actually normal when you look at it historically, and you better get used to these levels. Is that how you think about it?
Yes, I think we are in a higher-for-longer regime. I think government bond yields, again, across a number of markets, are resetting higher structurally. It doesn't mean they won't go up and down with the economic cycle. But the era that we had for 20-some years after the financial crisis in '08, where we had zero interest rates and very low yields, that's not coming back.
Rebecca, you know that when we make a correction here, we have to do it immediately because the markets are riveted to what we say here in equities, bonds, currencies, commodities. Surveillance correction. Brian Beltski, thank you so much for emailing in. The Vikings are 3 and 0, and they got a gimme this weekend with the lousy Miami Dolphins. Okay. All right. They're going to be on the edge of Duluth, 4-0 in that. Let's continue our conversation on the American economy. So, should we go in and lock in some yield here in the Treasury bond market? I mean, these are coupons we haven't seen before. What do you think here? Do I buy the coupon here, or do I try to take some credit risk? What would you be doing at Bessemer Trust today?
