Let's turn back to today's jobs number. Payrolls rising 22,000 in August. That's less than expected and a further sign of a hiring slowdown. Joining us this morning with first reaction from the White House, National Economic Council Director Kevin Hassett. Kevin, welcome back. Happy Friday.
Great to be here, guys. Yeah.
Jim and I were just talking about when the numbers out of BLS will start to reflect the tone of investment that we got at the dinner last night. Is it just too early?
No. Well, first of all, I think what you have to do is remember that when you're looking at an economy, you have to look at the whole portfolio of numbers that we have to look at. This jobs number was certainly a little bit of a disappointment right now. But one of the things there was a Goldman Sachs study that came out yesterday that showed that because the BLS hasn't really done a good job on its seasonal adjustment in August, they tend to revise this number up by almost 70,000 jobs when they give you the revised number a month later. You have to sit back and think, what's really going on in the economy depends on lots of indicators, and here are the ones that we're looking at that are giving us the judgment that the economy is sound and inflation is low. First of all, we're having a capital spending boom. Capital investment is up 8% over the first half of the year, which is really record growth in capital spending. We've got industrial production at the highest level it's ever been. And so we're really cruising into the kind of capital spending boom we had last time, the last time that we had the big corporate reform. Against that backdrop, that's exactly what you want to see in terms of supply side driven growth. Therefore, you're not putting inflationary pressure on as well. Finally, with respect to the great dinner last night, we're already seeing productivity going way up because firms are using artificial intelligence to improve what they do. Right now, it could be that our productivity is kind of hard to guesstimate, but it's looking like it could be going at about a 3% rate this year. If you figure that you're going to get 1.5% growth potential GDP growth out of labor and capital, that means that you're looking at an underlying trend of almost 4% growth or even bigger than 4% growth because of this AI. So we're very excited about where things are going. It's a little bit of a disappointing job number, but I pretty much expect it's going to revise up.
All right, Kevin, Jim, so glad you're on. I kind of want you to settle a bet I have with some people at the game last night. I've got people who are telling me that we're in an economy where when you come out of college, come out of business school, come out of law school, there are no jobs for you. And then I got others who tell me, hey, listen, it's never been this good and everybody's got a job. Can we just tell me, are people getting hired when they go to graduate school? Are people getting hired if they graduate college, or is it longer than when you and I went to school?
Right. Well, the hire rates are about what you would normally see. Members of my family have been hired. Both of them started their new jobs about a week ago, and so you are seeing that people are being hired. Perhaps in some areas it's slower than people thought. For example, we know that people who invested heavily in computer programming skills, their jobs are being squeezed a little bit by AI being able to code. But for the most part, we're seeing labor force participation go up and the unemployment rate stay about steady.
All right. So also, just in terms of what people are spending on, we had a company Lululemon. I don't want to get too granular with you, but you're a person who knows a lot about business, that reported really bad numbers. And I'm starting to think, you know what, the American people have gotten pretty smart. They're not spending $78 on t-shirts anymore. And then I start thinking, are they getting smart or are they getting strapped? I can't tell. But there does seem to be a wisdom among the consumer that just says, if you're charging a lot, we don't like you anymore. Democrat, Republican, we want reasonable prices. Do you see that?
Yeah. Well, I think the one thing we know is that people have more money in their pockets. In this job report, there were very good news, right? All of the job creation was private sector. Government jobs are down about 100,000 since President Trump took office. And it was all native-born workers that were getting the jobs. On average so far this year, the typical worker is making $500 more than he was in January. So that $500 could be spent on a $70 t-shirt or perhaps they're doing better things with their money than that. But they do have more money in their pockets.
Kevin, there was a nice report yesterday out of BNP Paribas. The title was 'Bye-Bye Buffer' and the argument was that we're entering a new phase of the tariff story where companies increasingly can no longer rely on their pre-tariff inventory levels. They think that buffer is largely depleted by August or September. Do you think the economy is prepared for that?
I think the economy is definitely prepared for the tariffs. The way you're seeing it is we're having this capital spending boom. I was meeting with a CEO, I won't say which one yesterday because I don't want to get ahead of the earnings announcement, but he talked about the billions and billions of dollars that they were spending here in the US so that they can get the production to be built here. That's the other reason why you're looking at the investment number that I said, up 8% over the first half of the year. That's because everybody's rushing to make stuff here. That's going to drive incomes higher here, and I guess the only thing that it might do is make tariff revenue be less than it has been in the last few months because everything's being onshored.
Now I do want to go back on the executives who were at the White House yesterday. The construction job number has literally been pretty much unchanged. I don't understand this. I've been in data centers, Kevin, to build these things. It's just monumental. Whether it be the cement, the aggregate, all the different racks, all the different people moving things around, the warehouses are connected to it. Who's doing that? Because you need construction people to do it. And we're not seeing that pick up. I'm not being political. I'm trying to figure out how are we building things better than we used to.
