July 3, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss the monthy jobs report that came in much better than expected and send markets higher to start the day. Why is the labor force shrinking? Markets are breathing a sigh of relief. Trump megabill back in the hands of the House. Trump's Vietnam deal shows China tariffs won't fall much further. Tesla's global vehicle deliveries plunged in the second quarter.
Mark as Played
Transcript
Episode Transcript
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Speaker 1 (00:00):
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(01:03):
Face is the Financial Exchange with Mike Armstrong and Mark Vandetti.
Speaker 2 (01:10):
Good morning, Happy Independence Day Eve. Here on the Financial Exchange,
it's a Jobs Thursday. For some reason, on the Financial
Exchange it feels a lot like a Friday. Today. Speaker
Johnson still wrangling votes in the House to try and
get this big beautiful Bill Act across the finish line.
He was hoping to have a vote by eight am.
That apparently has not occurred. To the vote that they
(01:32):
had at the wee hours of the morning was to
bring this to the floor for a vote. We will
see when or if that occurs sometime in the next
two hours, and be sure to let you know if
it does. In the meantime, at eight thirty am this morning,
we had a few different reports on the state of
the labor market, one being the big monthly jobs report
(01:53):
that's what's getting all the headlines. We also saw weekly
jobless claims come out at the same time. Usually they're
separated by a day. Week is special. Let's start right
off with the Bureau of Labor Statistics Jobs Report Market.
Before we get there, I think it might be helpful
just to set the groundwork for what you and I
(02:13):
think was the dominant narrative about the labor market, and
you know, economic growth generally, but the labor market especially
because I think that the dominant economic narrative was slow down.
Am I? Am I assuming too much more concerns.
Speaker 3 (02:31):
Yeah, the other reports had suggested some weakening, but it
was from feverish levels. You have to keep that in mind.
The economy was overheating, so it could be normal. We
talked about this yesterday too. More of a normalization than
a weakening. That appears to be the case.
Speaker 2 (02:44):
So, you know, evidence that there was some weakening going on.
The unemployment rate had slowly ticked up a bit. I
know it read at four point two percent for the
last several months, but it really went from like four
to one five to four two five, a slight increase
in the unemployment rate. The number of jobs created was fine,
(03:05):
but not stellar, and there were several revisions downward of
previously reported data. The jobless claims number we're not getting
to a exorbitantly high level, but the number of people
still sitting on the unemployment claims and not finding a
new job, we're you know, we're growing. And the overall
(03:25):
state of churn in the labor market has been comparatively low,
to say the last few years, and so the narrative
that I think was dominating markets was keep an eye
on the next few jobs reports because you could swing
towards some really low numbers of job creation based on
what we're hearing about the labor market today completely contradicted
(03:47):
that it showed the resilience of the US labor market,
of employers, of maybe some of that employment hoarding.
Speaker 3 (03:54):
What do we say, what happened yet?
Speaker 2 (03:55):
No, we didn't. Oh so you're just you building I'm
building it all up. Mark, you didn't get the suspense.
Speaker 3 (04:01):
Apparently, I was turned off.
Speaker 2 (04:02):
One hundred and forty seven thousand jobs were created in
the month of June. According to the survey done by
the BLS. The unemployment rate, which had been sitting at
four point two actually dropped down to four point one percent.
The I believe the last month's data also got revised upwards,
if I'm not mistaken, so you had the previous month
(04:22):
looking actually better than it was initially reported here. And
so overall, what you're left sitting here with is a
job market that is a little bit confusing, given what
everybody's been saying, but one that is resilient and is
showing some strength here when everyone is expecting it to
weaken a little bit, which I take as good news
(04:44):
for American workers, but challenges a whole bunch of things
that also been dominating, such as the FED lowering rate,
lowing rates. So let's start with the report itself. I
mentioned the headline hundred and forty seven thousand jobs created,
Unemployment rate dipped. Anything else in the report actually catch
your eyes here?
Speaker 3 (05:00):
I mean, is it worth pointing out that the rate dipped?
So the rate is a rate. So when you hear
rate thing fraction, something on top of something on the bottom.
The thing on the bottom is the labor force that's
shrunk by a little bit. The thing on top is
the number of unemployed people that shrunk by more. So
when the top went down by more than the bottom,
you get a lower ratio. That's how you get to
that point if you've ever wondered, And these are just estimates,
(05:22):
like you said, May and April. Now I'm gonna switch
from household we were just talking about the household survey
to the establishment survey. Where as you set up one
forty seven k. Again, this is a businesses that plus
sixteen thousand new jobs in May and April. That is
just an estimate, So that that's one forty seven plus
(05:45):
or minus one hundred and thirty six thousand with ninety
percent confidence. What does that mean in actuality because it's
a sample. Yeah, it's well, it's a sample, and samples
can be off for a couple of reasons. One is
just statistical. They don't go to every employer in the country. Nope,
they go to about one hundred and twenty thousand, covering
a little over half a million individual locations. Similarly, the
(06:07):
household survey they only go to sixty thousand households. Those
are the limits of our survey capabilities given the amount
of money we spend on it. So pretty sure that
some jobs were added in June that could always be
revised to something much lower.
Speaker 2 (06:21):
It could speaking of those revisions. So again to March's point,
the way this works, they when we're talking about one
hundred and forty seven thousand jobs created, they go out
to how many businesses it's.
Speaker 3 (06:30):
About one hundred twenty thousand or so.
Speaker 2 (06:33):
So about one hundred and twenty thousand businesses, and they
pepper them with questions did you hire anybody? Did you
fire anybody? They send them a.
Speaker 3 (06:38):
Survey, and then they have to mail it back and
some don't, which is why you get measurement error.
Speaker 2 (06:42):
And so you know that portion that doesn't mail it back,
or maybe doesn't mail it back immediately.
Speaker 3 (06:47):
Spills coffee on it or something like it.
Speaker 2 (06:49):
Seriously, whole building burns down. Any number of things I
was thinking caused them to not return these surveys or
not return them on time. And so we did get
more did we get revisions for April and May based
on more of those surveys coming in, And what we
saw was that, in fact, with those revisions, the estimates
are now sixteen thousand jobs higher for the months of
(07:11):
April and May than were previously reported. And true knows
like to Mark's point, this all could get revised downwards later.
But what I keep harping on is that this seems
to contradict the dominant narrative that was in markets before,
which is feder reserve, you're behind the eight ball. You
need to cut because the economy. This isn't what President
(07:33):
Trump was saying, but you know what others have been saying,
The economy is showing underlying signs of weakness. We're not
seeing it yet. In the headline data, but it's going
to show up eventually, and so cut, cut, cut, we're
behind the eight ball. We need to cut and fed didn't.
They've resisted that temptation, And this report is going to
put a bit of a question mark on the next ERLF.
Speaker 3 (07:55):
Backing up a little bit, Unemployment in the threes is exceptional.
It's actually worrisome. That's unnaturally low. We've been there only
a couple of times in the history of record keeping
of this stuff. Unemployment in the fours or fives is good,
assuming it's not going up really fast in the fours
and plateauing or stable. Even in the fives and plateauing
and stable is probably about where the economy should be.
(08:19):
Anything above, say the fives, you're probably looking at something problematic,
apps in a big shift in the composition of the
labor force that pushes up the so called natural rate,
the rate at which the rate at which inflation is
more or less steady. So anything in the fours or
fives is fine, assuming you're not on the way up
to something potentially problematic.
Speaker 2 (08:42):
And that trend in unemployment is what people oftentimes look like.
Speaker 3 (08:45):
Look, they're like mini trends, right, You know, because there
is no long term I'm sorry, I'm being a little
bit finish year.
Speaker 2 (08:52):
No, no, you're fine. But the analysis that's been done is
once an unemployment starts trending in a certain direction up
specific there's a little bit of persistence, tends to be persistent.
Although that broke a little bit last year in terms
of where the jobs showed up seventy three thousand jobs
created in June in government employment, where specifically state government
(09:14):
increased by forty seven thousand, mostly in education, local government
and education up twenty three thousand, whereas federal employment no
surprise here, down seven thousand. So in spite of the
fact that federal government is cutting jobs, still state and
local employment picking up the slack there and continuing hiring.
Healthcare continuing to add thirty nine thousand jobs in the
(09:37):
month of June compared to forty three thousand over the
prior twelve months, so about on target with average social assistance.
Employment trended up nineteen thousand and little changes in a
whole bunch of other fields, including mining, quarrying, oil and gas, construction, manufacturing,
wholesale trade, retail trade, transportation, et cetera. The unemployment rate what.
Speaker 3 (10:02):
About manufacturing, because that's a big political focus. Did you
happen to see we lost what seven k jobs there
last month? I think lost another seven k I think
this month. That just shows how hard it is to
goose employment in a targeted way.
Speaker 2 (10:17):
So no real move in manufacturing. Let's take a let's
take a quick break. I want to come back to
this and discuss this a little bit more, but let's
take a quick break. I want to cover two things. Next.
One would be that drop in unemployment. We've been talking
about the labor force and what could be happening there.
There's a lot of theories. Let's talk about that and
(10:38):
the federal reserves reaction to this type of labor market report.
Next on the Financial Exchange.
Speaker 1 (10:44):
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(11:42):
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Speaker 2 (11:47):
Mark As you know, there is a question and answer
section in the results that get posted every month from
the Bureau of Labor Statistic and Statistics, and I think
one of the questions is potentially relevant today. Are undocumented
immigrants counted in the surveys? And this is a quote
from the survey itself. It is likely that both surveys
(12:08):
include at least some undocumented immigrants. However, neither the Establishments
nor the Household survey is designed to identify the legal
status of workers. Therefore, it is not possible to determine
how many are counted in either survey. The Establishment survey
does not collect data on the legal status of workers.
The household survey does include questions which identify the foreign
(12:28):
and native born, but it does not include questions about
the legal status of the foreign born. So if you're wondering, hey,
this survey from three years ago, did it include a
group of people who weren't of legal status working in
the country, The answer is probably yes. It probably still
does today because you're asking employers and employees about whether
(12:50):
or not they are working. The question that I have
why I'm asking this question, is we saw a drop
in the unemployment rate Mark, and I believe that was
from a shrinking size of the labor force. Am I am?
I correct? But so it was it wasn't you know? Again,
to Mark's point, it's a fraction. You can have the
unemployment rate drop because a whole bunch of new people
(13:13):
got jobs. That partly happened today, But the bigger drop
in the unemployment rate came from a smaller labor force itself,
meaning a smaller group of people actually pursuing work. Right.
Speaker 3 (13:27):
Yeah, that both the numerator and the denominator went down.
The numerator went down by more.
Speaker 2 (13:32):
Yeah, So what we I guess. What I conclude here
is we have in this survey at least this month
a shrinking labor force. This date is all seasonally adjusted,
so it accounts for the fact that, you know, there's
a bunch of new college grads that may have entered
the labor force, but we have this shrinking labor force
at least in this one month. And you know, one
month does not make a trend. But if we assume
(13:54):
for a moment that that might continue, where could it
be coming from? You know, we talked obviously a lot
lot about immigration, We talk a lot about baby boomers
and retirees. Is there a compelling case that I guess
I've been talking about this now for a few weeks.
Is there a path where this labor market in fact
(14:15):
turns out to be the exact opposite of what everyone's
been predicting, which is loosening, cause for lower rates, potential recession.
I'm seeing a path here where we could get to
a pretty tight labor market that could actually be inflationary
due to what we're seeing here. Maybe not tomorrow, but
I'm starting to see this path developing.
Speaker 3 (14:34):
That's plausible to me. I don't really know, it's not
really my area to tell you the truth. I do
just a general gust. So there are people I've read
stuff by people who do specialize in labor in the
labor market, and they are concerned about the supply of
(14:54):
new workers from immigration being constricted by present policies. So yes,
that's certainly plausible. In the long run. That will also
translate into fewer hours worked and thus lower growth, presidential growth,
lower actual Well yeah, it's it's mathematical sort of certainty
all else EQUL a very important qualifier. So yeah, I'm like,
(15:15):
that's that's plausible and something worth keeping eye on it.
Speaker 2 (15:17):
I'm just always interested in when everyone's talking about something
going in one direction, it just gets suspicious. And that's
what everybody's been talking about for the last few weeks,
is unemployment's going to go up. You look out for
the unemployment claims, they're going to spike. We're going to
see unemployment click up, We're going to see a slowing
number of jobs created because one hundred and forty seven
(15:38):
thousand rights that's above what you would need to just
keep the labor force where it is, or about where
you would need it to keep the labor force where
it is. And I'm just very intrigued by this idea
that look, inflation eight dead. We've got terrorists, we've got
tax cuts, and now we have potentially a shrinking labor
force that all contribute to potentially higher demand for workers,
(16:02):
and just a tightening of conditions.
Speaker 3 (16:07):
Underlying inflation trend. Inflation is definitely not dead. We can
measure that just the question of what direction it goes in,
which is not a very helpful thing to say. Most
measures that you would put into your little model if
you're a researcher, to account for how much slack there
is or isn't in the economy. Point two, not a
(16:27):
lot of slack. GDP is growing seemingly according to things
like the Atlanta Fed's GDP now, and there are others
at or above trend, so there's very little slack. Probably
their industrial production is still high. Capacity utilization not so high,
but it hasn't been throughout this cycle. Vacancies to unemployed people,
(16:47):
the jolt support that we talk about from time to time.
That ratio is still way above where it used to
be in the twenty tens and in prior decades. So
there are a lot of things that point to elevated
core using it in the ex Food and energy sense.
I'm talking about trend inflation. There are a lot of
things that point to elevated underlying or core or trend.
Those all mean the same thing, inflation. On top of that,
(17:09):
inflation expectations have gone up consumer expectations anyway, by some
surveys a lot more than others. So yeah, this is
why the FED is standing Pat Mike, It's not that
they're digging their heels in because they want to irritate
The President agreed.
Speaker 2 (17:25):
I feel like I'm being a bit negative. This is
a really good jobs report. I want to be pretty
clear about that.
Speaker 3 (17:30):
Labor market's strong.
Speaker 2 (17:31):
Yeah, a bunch of jobs are created, unemployment rate dropped.
We have nothing but really good news to say here.
What it means bad news for is the President's wishes
to get lower interest rates. A day ago, there was
about a one in four chance of the FED cutting
rates according to Chicago Mercantile Exchange at their next meeting,
the July thirtieth meeting. Is that where we are July
(17:55):
thirtieth meeting one and four today about one and twenty
sha But the same bet.
Speaker 3 (17:59):
That's like saying, well, it's bad news. I don't get
to enjoy hospital food because I don't have cancer.
Speaker 2 (18:03):
Like this is.
Speaker 3 (18:04):
This is a good thing.
Speaker 2 (18:05):
This is a good thing. It is you cut the interest,
you cut interest? Yeah, yeah, because you're concerned about the direction.
Speaker 3 (18:10):
We can demand. And that still may be the case.
By the way, as you said in the last second,
very wisely, I think there's wow.
Speaker 2 (18:17):
They're whipping out the compliments the day before July fourth.
Speaker 3 (18:19):
Market well and my semi annual employee reviews coming up
to We don't know. This could get revised down. Other
measures could point in a different direction. Everything could fall apart.
Tariffs could we don't we have? Isn't there? There are
so many of these deadlines on tariffs running concurrently. Yes
I've lost track too, but many of them could get
implemented over the next few weeks. So the wheels could
(18:42):
fall off the economy as a result of that, and
the Fed may feel like easing is the right thing
to do.
Speaker 2 (18:48):
Yep, still could, But I think the narrative for today
is American economy showing.
Speaker 3 (18:55):
Resilition, snapshot point in time, absolutely showing to any other conclusions.
Speaker 2 (18:58):
The only conclusion you can come, whether it's this report,
the Weekly JABA claims confirmed the same thing you've got
interest rates up, stocks up. This is a day of
American economy is resilient as we head into that July
fourth holiday. We're going to take a quick break here.
When we come back, Ben's going to give us a
full market recap, including what we are seeing on those
(19:19):
interest rates because it is a fairly substantial move to
the upside on yields. Quick break. We'll be back with
that next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
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Watch a complete look at what's moving market so far
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Speaker 4 (20:03):
Well, markets are on the rise almost across the board
here as traders continue to digest this morning's monthly job
support that came in higher than expected non farm payrolls
increased to seasonally adjust it one hundred and forty seven
thousand for the month, higher than the estimate of one
hundred and ten thousand and just above the upwardly revised
one hundred and forty four.
Speaker 2 (20:21):
Thousand in May.
Speaker 4 (20:22):
Currently, the Dow Jones is up over three hundred three
hundred points, the S and P five hundred is up
just under forty three points, the Nasdaq is up one
hundred and seventy nine points, and the two year yield
is up nearly ten basis points and the ten year
yield is up nearly or just over half a basis
(20:42):
point as we speak right now. Cloud monitoring provider data
Dog is up twelve percent after SMP Global added it
to the S and P five hundred index, effective before
trading starts July ninth. The move will force passive index
funds to buy data Dog shares to reflect the composition
of the underlying benchmark index. Online travel review company trip
Advisor is up nearly eighteen percent following a Wall Street
(21:05):
Joeneral report that activist investors Starboard took a nine percent stake,
and finally, online brokerage Robinhood is down four percent, giving
back some of its six percent rally yesterday. Robin Hood
was seen as a leading candidate to replace Juniper Networks
in the S and P five hundred and privately held
Open Eye. Open Ai is pushing back against robin Hood's
recent anount announcement of token I shares in the artificial
(21:30):
intelligence startup I Am ben Kitchen, and that is Wall
Street watch.
Speaker 2 (21:34):
I think you can pretty much see Trip Advisors World
headquarters from one of our windows in this office.
Speaker 3 (21:40):
Yeah, right off the it's right there the way.
Speaker 2 (21:42):
I don't ever see anybody there, but no, it's true.
Speaker 3 (21:46):
I've never seen anyone there even before COVID. And where
do they park?
Speaker 2 (21:50):
Precisely? What do you do here?
Speaker 3 (21:52):
Is that an actual bill? It's like a Potemkin village
out there.
Speaker 2 (21:56):
But yeah, big news from Ben's look here. The market
reaction to this job report this morning is what I'm
seeing is a cyber relief. Equity markets up expectations for
a rate cut down, therefore yields up as well. Those
that were betting on an immediate FED rate cut have
just been wiped out on that overall bet. A nine
(22:21):
basis point move into your treasuries is a fairly significant
one day move that that indicates something to me. At
this stage, the chances of a rate cut at that
July thirtieth meeting are now quite low, at about six percent.
The odds of a quarter percent rate cut at the
September meeting our gaining steam here. We're still at about
(22:42):
seventy percent likelihood on that September rate cut compared to
where we were. But to be fair, a day ago
before this Job's report, there was a ninety three percent
chance of rates being lower by that September meeting. So
this definitely reverses all that. And again good data. Yeah,
(23:06):
just yeah, full stop. I wanted to do a full
stop there. It's good data. It indicates a positive thing
for the state of the US economy. It indicates a
positive thing for demand for labor. What it doesn't help
you with is getting rates lower if you are if
you are betting on that and looking for that, and
it definitely justifies what to the federally. But this is
(23:26):
again a really good thing.
Speaker 3 (23:27):
It's like, you don't you don't lament not having back
pain so you could pop some oxy, like this is
a good this is I'm sorry.
Speaker 2 (23:35):
That's a good analogy.
Speaker 3 (23:36):
Mark, Well, I think it was better than liking hospital food,
so being you know, disappointed you didn't have a serious
illness or something. So this is this is a good thing.
Speaker 2 (23:44):
You know, some people.
Speaker 3 (23:45):
Online or nitpicking, just like they did under the last president. Well,
it was mostly state, it was mostly government. Hiring a
job is a job. There are other potential weaknesses. Wage
growth slowed, but wage growth has been pretty round. I
think you're being unreasonably nitpicking if you look at anything
other than sort of the top line results. Those are
(24:07):
the things that tend to go into our big picture
forecasting models. Anyway. Unemployment is historically low, job growth is
strong enough to maintain that, and then some apparently last month.
I'm mixing surveys there, but you know, you get the
larger point.
Speaker 2 (24:21):
And to be clear, I mean you might be able
to nitpick on federal government employment and say, oh, you know,
that's why that's down. You guys big government, but that's down.
You know. The uptick in employment we saw was at
the state level, at teachers, cops, you know, those types
of jobs. And I don't know that you can nitpick
and say, oh, well that's not that's not good employment
(24:41):
for the economy. That that that's elment. No, No, it is.
Speaker 3 (24:46):
This is these are lagging indicators, both the payroll and
the unemployment rate and all the others.
Speaker 2 (24:51):
Best surveys.
Speaker 3 (24:52):
Yeah, they're a good snapshot of the health of the economy,
maybe two or three months ago.
Speaker 2 (24:58):
Uh. This morning, h in the wee hours of the morning,
the House voted to bring the Big Beautiful Bill Act
at least to a vote. That vote has not yet
taken place. We do not think the House is attempting
to make a bunch of revisions to this bill, although
to be clear, it's not at all clear what's going
(25:19):
to happen next. Johnson can only lose I think three
votes on this bill to get it through. It would
be immensely surprising to me if it did not pass
in some way, shape or form. I think the only
real question is candid all get done by the July
fourth self imposed deadline that Republicans have put themselves under.
We covered yesterday a bunch of the changes to taxes
(25:42):
as part of this. I think the biggest actual changes
that I can point to would obviously be the spending
cuts on Medicaid and snap. It would be the additional
tax credit for the tax deduction rather for those over
the age of sixty five. Other than that, it's mainly
a bill that locks in current tax law.
Speaker 3 (26:01):
I don't think it's gonna change. Look, there's a lot
of hysterics on both sides about the deficits and the debt,
and many of those concerns are very well placed.
Speaker 2 (26:09):
But this and also so many of them are disingenuous.
But yes, yes, oh yeah, totally hypocritical.
Speaker 3 (26:14):
Oh yeah, obscenely hippo Democrats are, Mike, I've given up
on that.
Speaker 2 (26:18):
I've given up.
Speaker 3 (26:20):
On anybody ever cutting spending meaningfully. I'm glad I was
alive in the nineteen nineties and brought up and I
come to see it. It's like seeing Haley's comet, which
I also saw in eighty six. So I may never
see either one of those two things again. I'm gonna
leave it to U two and posterity to look for that.
I've given up hoping on meaningful cuts. The deficit probably
(26:43):
all else equel won't get that much bigger under this bill.
People who are accusing them of trickery are pointing out
that it assumes that the previous tax cuts didn't happen.
That the the real dier. I'm misphrasing that a little bit.
You know, I'm not even a because I don't care.
At this point, deficits will be a little bit, not
much worse. The debt is the real problem. If you
(27:06):
want an analogy, the debt is like your cholesterol level.
Your doctor says you're at two fifty. If you know
what that number means. We all know what it means.
That would be high. Is it gonna kill me this year? Doc, Well, possibly,
but probably not. The debt is sort of the same thing.
At some point, there's gonna be a reckoning. It's gonna
push interest rates up. Is it gonna happen quickly slowly?
(27:26):
I really don't know, but nothing imminent, probably, though it
could be. We just don't know, Mike. I don't see
any reason for anybody to panic more about the deficit
and debt this week as opposed to last week. So
that segment of the of the commentariat can calm down.
Those claiming that this that these sets of tax changes
(27:49):
will somehow increase economic growth are equally those those assertions
are equally misplaced. It will do nothing for the trend
and growth, which is all we should really care about,
So Mike, no big. It'll make the situation slightly worse
the dead situation, but it's not going to really change
anything else. It might bring our reckoning up. I don't know,
six or twelve months, you know, so doom doomsday. You
(28:10):
can move that up, Fiscal dooms day, but only by.
Speaker 2 (28:13):
Like a year. In the words of Ernest Hemingway and
a lot of people have been quoting him recently. When
described in the US fiscal situation, he uses the phrase
it happens slowly and then all at once when describing
the process of going personally bankrupt. And maybe that's how
it all plays.
Speaker 3 (28:31):
There could be a sudden stop. There are some it's
called the international economists call it a sudden stop because
it's happened elsewhere Greece, for example, Suddenly creditors say for you,
you're not a bankable credit, I will not lend to
you at any interest rate. Unlikely that would happen to
the United States. I see more of a sort of
this unfolding gradually in terms of rising interest rates and
(28:52):
a permanent rise in the level of inflation. We can
adjust to those things, probably so it'll means slower growth
and lower standards of living. But you won't. You won't
be conscious of the alternative. It's like the other universe
where I'm taller and more and handsome, and I have
more here, and I don't know that guy, I can't.
I can't lament it. We'll never know what we left behind.
Speaker 2 (29:16):
All right, So so far I've gotten an oxy Cotton
analogy and doctor strange, Doctor Strange. We have to take
a break now, go out when you're on top quick.
That's so when we come back, we're talking trade deals
in Vietnam in particular, next on the Financial Exchange.
Speaker 1 (29:34):
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Speaker 2 (30:00):
Because we just didn't have enough going on this week
in a shortened trading week with multiple jobs reports and
a giant tax bill that's trying to get passed, President
Trump's team announced a new deal with Vietnam on trade
just yesterday, so we've had a bit more time to
(30:20):
digest that. And I think, look, US trade with Vietnam
is fairly significant, especially for some big household brands that
we're all familiar with, Nike, Lululemon, Gap, to name just
a few of them. So it is a fairly significant
trade partner, especially in those specific areas. It's also a
(30:41):
country that I think the word accused is appropriate here,
has been accused of kind of facilitating Chinese made goods
to go through that country. And then back to the
United States and vice versa, so it gets a lot
of attention for a number of those different reasons. The
deal that has been announced here is for a zero
percent tariff rate on American goods going into Vietnam, with
(31:05):
a twenty percent tariff rate on any Vietnamese made goods
going into the United States, as well as some supplemental
rates on Chinese goods that get rerouted through Vietnam, which
is I don't know how you track that, given the
only reason you would put them through Vietnam is to
avoid tariffs in the first place. It seems to be
that would be pretty difficult to enforce some of those details,
(31:28):
but nonetheless attempting to impose a higher rate there, I
think the only relevant question that's not true. There's a
few relevant questions to me on this one, I believe
from my reading, and I'm getting a little bit out
over my skis here, so I don't want anyone to
take this one to the bank. But I believe that
the rules the President is using, the White House is
(31:50):
using right now to impose these tariffs are the same
ones that are being looked at in terms of the
legal authority and probably land in the Supreme Court eventually
to determine, Hey, does the President have the authority under
these emergency powers to impose tariffs on Vietnam on China?
And so, depending on how that ruling goes, there's a
(32:13):
path where either Congress needs to ratify this deal, a
new justification needs to be come up with, or I
think there's even well I consider to be a low
probability scenario, a scenario where this twenty percent tariff rate
goes away, things all get blown up again, and possibly
(32:34):
even all the tariffs collected on Vietnam get reimbursed to
the US importers of those goods. I consider that to
be low probability. But we are still working through Hey,
does the President even have the legal authority here to
make these determinant calls on tariff rates on China, on Vietnam,
on all these countries. So more to come on that.
Speaker 3 (32:54):
I just want to point out, this is a tax
increase on Americans. They'll pass some of these tariffs through
cut presumably for Vietnamese consumers. Explain why tariffs are a tax.
I know the administration for some reason insists on calling
them other things. I don't know why you would the
whole point is to tax foreign goods to make them
(33:14):
relatively less competitive and shift manufacturing here, or alternatively, to
tax foreign goods to raise revenue. He keeps The President
specifically keeps saying we're gonna charge China, We're gonna charge Vietnam.
That's not how tariffs work. I'm not sure if he's
had to explain to him and he just chooses to
ignore it because he thinks it's better to frame it
this way.
Speaker 2 (33:32):
Well, but I mean, my answer, Mark would be that
a core tenant of MAGA in the first place, you
go listen to interviews with Steve Bannon and others, the
entire tirety of the idea here. One of the core
tenants is we want to lessen free trade right and
build giant Paris to build up the US manufacturing base.
That's and the word taxes are immensely unpopular.
Speaker 3 (33:55):
They just that is a legitimate point of view. We
can argue about it. The evidence suggests that makes people worse,
not better off. Yep, we can have a level headed
discussion about that.
Speaker 2 (34:06):
Obfuscating works better than level headed discussions.
Speaker 3 (34:09):
I don't think it's not I don't think it's helpful.
I don't think it's advancing their cause. So this is
a tax increase. The hope is it will reduce consumption
of Vietnamese goods, so the production of them is shift
here is shifted here. Excuse me.
Speaker 2 (34:22):
We ain't making Nike shoes with a twenty.
Speaker 3 (34:24):
Pers and even if we were that to happen, you
wouldn't be raising revenue from tariffs. So that is intention
with the stated the other stated purpose, which is to
raise revenue. I still don't understand what the objective of
all these machinations is. They're doing a lot of dancing
around and ending up in the same place we were
at three months ago, and the result is higher uncertainty,
(34:48):
which may be impacting the dollar and therefore capital markets.
Something I think we're going to.
Speaker 2 (34:52):
Talk about where I land on all this, and Mark,
I agree with you entirely. I'm not in favor of tariffs.
I don't think they're going to be a good tool
for make I don't think it's going to make America better.
I guess it would be my main point here. I
think what you can take away from this is Vietnam
is one of the first deals that has been made.
We are seeing where those tariff rates land, it gives
(35:14):
us some form of benchmark for where the rest of
these negotiations go. For example, it's very unlikely, for instance,
that China's tariff rate is going to go down below
twenty percent in my view now. Likewise, for India and
other countries, I see it unlikely. As you know, the
Chinese tariff rate of fifty five percent is going to
go to zero. I don't think so based on what
(35:35):
we're seeing now. And so we're starting to get this
framework for how trade develops. I agree with you, I
would rather have free trade. We're not going to get that.
Speaker 3 (35:43):
Well, it's not so much that as how it's being framed.
Do these guys even understand what tariffs are and do
they understand what they.
Speaker 2 (35:49):
Want from them?
Speaker 3 (35:50):
If they don't get those two things, and given their
public statements, they don't seem to understand what a taro.
The Commerce Secretary doesn't seem to understand what a tariff is,
or if he does get it, he's wilfully misrepresenting it.
Either one of those possibilities is a little bit disturbing.
If these guys don't get what they're doing and don't
have any idea. How they're going to measure success. Let's
measure it using the trade deficit, and we can look
(36:12):
at trump one track record for a proof of how
that works. Trade deficit went up, not down. We lost,
We didn't game manufacturing jobs. You can expect that to
happen again because of the way these things work.
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Speaker 2 (37:13):
Tesla's global vehicle deliveries plunged. This is just too funny.
Global vehicle sales dropped thirteen and a half percent as
the evmaker struggles to reverse months of declining sales. The
final quarterly tallly of three hundred and eighty four thousand
Tesla deliveries missed all expectations of three hundred and eighty
seven thousand deliveries, And quite honestly, I don't know that
(37:37):
Elon Musk cares. He is now kind of phrasing the
company as not a car company, but we're more of
an AI and tax robo taxi company, which is great
if you can pull it off. But from everything that
I understand, one percent of your earnings currently comes from
(37:58):
selling cars. So you've got a lot to prove on
that other business model if it's going to drive the
stock forward. Let's take a quick break. When we come back,
we're gonna have a full market recap, take a look
at that jobs report again and get an update on
the big beautiful Bill actwork in its way through the House.
That's next on the Financial Exchange
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(01:03):
Face is the Financial Exchange with Mike Armstrong and Mark Vandetti.
Speaker 2 (01:10):
Good morning, Happy Independence Day Eve. Here on the Financial Exchange,
it's a Jobs Thursday. For some reason, on the Financial
Exchange it feels a lot like a Friday. Today. Speaker
Johnson still wrangling votes in the House to try and
get this big beautiful Bill Act across the finish line.
He was hoping to have a vote by eight am.
That apparently has not occurred. To the vote that they
(01:32):
had at the wee hours of the morning was to
bring this to the floor for a vote. We will
see when or if that occurs sometime in the next
two hours, and be sure to let you know if
it does. In the meantime, at eight thirty am this morning,
we had a few different reports on the state of
the labor market, one being the big monthly jobs report
(01:53):
that's what's getting all the headlines. We also saw weekly
jobless claims come out at the same time. Usually they're
separated by a day. Week is special. Let's start right
off with the Bureau of Labor Statistics Jobs Report Market.
Before we get there, I think it might be helpful
just to set the groundwork for what you and I
(02:13):
think was the dominant narrative about the labor market, and
you know, economic growth generally, but the labor market especially
because I think that the dominant economic narrative was slow down.
Am I? Am I assuming too much more concerns.
Speaker 3 (02:31):
Yeah, the other reports had suggested some weakening, but it
was from feverish levels. You have to keep that in mind.
The economy was overheating, so it could be normal. We
talked about this yesterday too. More of a normalization than
a weakening. That appears to be the case.
Speaker 2 (02:44):
So, you know, evidence that there was some weakening going on.
The unemployment rate had slowly ticked up a bit. I
know it read at four point two percent for the
last several months, but it really went from like four
to one five to four two five, a slight increase
in the unemployment rate. The number of jobs created was fine,
(03:05):
but not stellar, and there were several revisions downward of
previously reported data. The jobless claims number we're not getting
to a exorbitantly high level, but the number of people
still sitting on the unemployment claims and not finding a
new job, we're you know, we're growing. And the overall
(03:25):
state of churn in the labor market has been comparatively low,
to say the last few years, and so the narrative
that I think was dominating markets was keep an eye
on the next few jobs reports because you could swing
towards some really low numbers of job creation based on
what we're hearing about the labor market today completely contradicted
(03:47):
that it showed the resilience of the US labor market,
of employers, of maybe some of that employment hoarding.
Speaker 3 (03:54):
What do we say, what happened yet?
Speaker 2 (03:55):
No, we didn't. Oh so you're just you building I'm
building it all up. Mark, you didn't get the suspense.
Speaker 3 (04:01):
Apparently, I was turned off.
Speaker 2 (04:02):
One hundred and forty seven thousand jobs were created in
the month of June. According to the survey done by
the BLS. The unemployment rate, which had been sitting at
four point two actually dropped down to four point one percent.
The I believe the last month's data also got revised upwards,
if I'm not mistaken, so you had the previous month
(04:22):
looking actually better than it was initially reported here. And
so overall, what you're left sitting here with is a
job market that is a little bit confusing, given what
everybody's been saying, but one that is resilient and is
showing some strength here when everyone is expecting it to
weaken a little bit, which I take as good news
(04:44):
for American workers, but challenges a whole bunch of things
that also been dominating, such as the FED lowering rate,
lowing rates. So let's start with the report itself. I
mentioned the headline hundred and forty seven thousand jobs created,
Unemployment rate dipped. Anything else in the report actually catch
your eyes here?
Speaker 3 (05:00):
I mean, is it worth pointing out that the rate dipped?
So the rate is a rate. So when you hear
rate thing fraction, something on top of something on the bottom.
The thing on the bottom is the labor force that's
shrunk by a little bit. The thing on top is
the number of unemployed people that shrunk by more. So
when the top went down by more than the bottom,
you get a lower ratio. That's how you get to
that point if you've ever wondered, And these are just estimates,
(05:22):
like you said, May and April. Now I'm gonna switch
from household we were just talking about the household survey
to the establishment survey. Where as you set up one
forty seven k. Again, this is a businesses that plus
sixteen thousand new jobs in May and April. That is
just an estimate, So that that's one forty seven plus
(05:45):
or minus one hundred and thirty six thousand with ninety
percent confidence. What does that mean in actuality because it's
a sample. Yeah, it's well, it's a sample, and samples
can be off for a couple of reasons. One is
just statistical. They don't go to every employer in the country. Nope,
they go to about one hundred and twenty thousand, covering
a little over half a million individual locations. Similarly, the
(06:07):
household survey they only go to sixty thousand households. Those
are the limits of our survey capabilities given the amount
of money we spend on it. So pretty sure that
some jobs were added in June that could always be
revised to something much lower.
Speaker 2 (06:21):
It could speaking of those revisions. So again to March's point,
the way this works, they when we're talking about one
hundred and forty seven thousand jobs created, they go out
to how many businesses it's.
Speaker 3 (06:30):
About one hundred twenty thousand or so.
Speaker 2 (06:33):
So about one hundred and twenty thousand businesses, and they
pepper them with questions did you hire anybody? Did you
fire anybody? They send them a.
Speaker 3 (06:38):
Survey, and then they have to mail it back and
some don't, which is why you get measurement error.
Speaker 2 (06:42):
And so you know that portion that doesn't mail it back,
or maybe doesn't mail it back immediately.
Speaker 3 (06:47):
Spills coffee on it or something like it.
Speaker 2 (06:49):
Seriously, whole building burns down. Any number of things I
was thinking caused them to not return these surveys or
not return them on time. And so we did get
more did we get revisions for April and May based
on more of those surveys coming in, And what we
saw was that, in fact, with those revisions, the estimates
are now sixteen thousand jobs higher for the months of
(07:11):
April and May than were previously reported. And true knows
like to Mark's point, this all could get revised downwards later.
But what I keep harping on is that this seems
to contradict the dominant narrative that was in markets before,
which is feder reserve, you're behind the eight ball. You
need to cut because the economy. This isn't what President
(07:33):
Trump was saying, but you know what others have been saying,
The economy is showing underlying signs of weakness. We're not
seeing it yet. In the headline data, but it's going
to show up eventually, and so cut, cut, cut, we're
behind the eight ball. We need to cut and fed didn't.
They've resisted that temptation, And this report is going to
put a bit of a question mark on the next ERLF.
Speaker 3 (07:55):
Backing up a little bit, Unemployment in the threes is exceptional.
It's actually worrisome. That's unnaturally low. We've been there only
a couple of times in the history of record keeping
of this stuff. Unemployment in the fours or fives is good,
assuming it's not going up really fast in the fours
and plateauing or stable. Even in the fives and plateauing
and stable is probably about where the economy should be.
(08:19):
Anything above, say the fives, you're probably looking at something problematic,
apps in a big shift in the composition of the
labor force that pushes up the so called natural rate,
the rate at which the rate at which inflation is
more or less steady. So anything in the fours or
fives is fine, assuming you're not on the way up
to something potentially problematic.
Speaker 2 (08:42):
And that trend in unemployment is what people oftentimes look like.
Speaker 3 (08:45):
Look, they're like mini trends, right, You know, because there
is no long term I'm sorry, I'm being a little
bit finish year.
Speaker 2 (08:52):
No, no, you're fine. But the analysis that's been done is
once an unemployment starts trending in a certain direction up
specific there's a little bit of persistence, tends to be persistent.
Although that broke a little bit last year in terms
of where the jobs showed up seventy three thousand jobs
created in June in government employment, where specifically state government
(09:14):
increased by forty seven thousand, mostly in education, local government
and education up twenty three thousand, whereas federal employment no
surprise here, down seven thousand. So in spite of the
fact that federal government is cutting jobs, still state and
local employment picking up the slack there and continuing hiring.
Healthcare continuing to add thirty nine thousand jobs in the
(09:37):
month of June compared to forty three thousand over the
prior twelve months, so about on target with average social assistance.
Employment trended up nineteen thousand and little changes in a
whole bunch of other fields, including mining, quarrying, oil and gas, construction, manufacturing,
wholesale trade, retail trade, transportation, et cetera. The unemployment rate what.
Speaker 3 (10:02):
About manufacturing, because that's a big political focus. Did you
happen to see we lost what seven k jobs there
last month? I think lost another seven k I think
this month. That just shows how hard it is to
goose employment in a targeted way.
Speaker 2 (10:17):
So no real move in manufacturing. Let's take a let's
take a quick break. I want to come back to
this and discuss this a little bit more, but let's
take a quick break. I want to cover two things. Next.
One would be that drop in unemployment. We've been talking
about the labor force and what could be happening there.
There's a lot of theories. Let's talk about that and
(10:38):
the federal reserves reaction to this type of labor market report.
Next on the Financial Exchange.
Speaker 1 (10:44):
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Speaker 4 (11:20):
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Speaker 2 (11:47):
Mark As you know, there is a question and answer
section in the results that get posted every month from
the Bureau of Labor Statistic and Statistics, and I think
one of the questions is potentially relevant today. Are undocumented
immigrants counted in the surveys? And this is a quote
from the survey itself. It is likely that both surveys
(12:08):
include at least some undocumented immigrants. However, neither the Establishments
nor the Household survey is designed to identify the legal
status of workers. Therefore, it is not possible to determine
how many are counted in either survey. The Establishment survey
does not collect data on the legal status of workers.
The household survey does include questions which identify the foreign
(12:28):
and native born, but it does not include questions about
the legal status of the foreign born. So if you're wondering, hey,
this survey from three years ago, did it include a
group of people who weren't of legal status working in
the country, The answer is probably yes. It probably still
does today because you're asking employers and employees about whether
(12:50):
or not they are working. The question that I have
why I'm asking this question, is we saw a drop
in the unemployment rate Mark, and I believe that was
from a shrinking size of the labor force. Am I am?
I correct? But so it was it wasn't you know? Again,
to Mark's point, it's a fraction. You can have the
unemployment rate drop because a whole bunch of new people
(13:13):
got jobs. That partly happened today, But the bigger drop
in the unemployment rate came from a smaller labor force itself,
meaning a smaller group of people actually pursuing work. Right.
Speaker 3 (13:27):
Yeah, that both the numerator and the denominator went down.
The numerator went down by more.
Speaker 2 (13:32):
Yeah, So what we I guess. What I conclude here
is we have in this survey at least this month
a shrinking labor force. This date is all seasonally adjusted,
so it accounts for the fact that, you know, there's
a bunch of new college grads that may have entered
the labor force, but we have this shrinking labor force
at least in this one month. And you know, one
month does not make a trend. But if we assume
(13:54):
for a moment that that might continue, where could it
be coming from? You know, we talked obviously a lot
lot about immigration, We talk a lot about baby boomers
and retirees. Is there a compelling case that I guess
I've been talking about this now for a few weeks.
Is there a path where this labor market in fact
(14:15):
turns out to be the exact opposite of what everyone's
been predicting, which is loosening, cause for lower rates, potential recession.
I'm seeing a path here where we could get to
a pretty tight labor market that could actually be inflationary
due to what we're seeing here. Maybe not tomorrow, but
I'm starting to see this path developing.
Speaker 3 (14:34):
That's plausible to me. I don't really know, it's not
really my area to tell you the truth. I do
just a general gust. So there are people I've read
stuff by people who do specialize in labor in the
labor market, and they are concerned about the supply of
(14:54):
new workers from immigration being constricted by present policies. So yes,
that's certainly plausible. In the long run. That will also
translate into fewer hours worked and thus lower growth, presidential growth,
lower actual Well yeah, it's it's mathematical sort of certainty
all else EQUL a very important qualifier. So yeah, I'm like,
(15:15):
that's that's plausible and something worth keeping eye on it.
Speaker 2 (15:17):
I'm just always interested in when everyone's talking about something
going in one direction, it just gets suspicious. And that's
what everybody's been talking about for the last few weeks,
is unemployment's going to go up. You look out for
the unemployment claims, they're going to spike. We're going to
see unemployment click up, We're going to see a slowing
number of jobs created because one hundred and forty seven
(15:38):
thousand rights that's above what you would need to just
keep the labor force where it is, or about where
you would need it to keep the labor force where
it is. And I'm just very intrigued by this idea
that look, inflation eight dead. We've got terrorists, we've got
tax cuts, and now we have potentially a shrinking labor
force that all contribute to potentially higher demand for workers,
(16:02):
and just a tightening of conditions.
Speaker 3 (16:07):
Underlying inflation trend. Inflation is definitely not dead. We can
measure that just the question of what direction it goes in,
which is not a very helpful thing to say. Most
measures that you would put into your little model if
you're a researcher, to account for how much slack there
is or isn't in the economy. Point two, not a
(16:27):
lot of slack. GDP is growing seemingly according to things
like the Atlanta Fed's GDP now, and there are others
at or above trend, so there's very little slack. Probably
their industrial production is still high. Capacity utilization not so high,
but it hasn't been throughout this cycle. Vacancies to unemployed people,
(16:47):
the jolt support that we talk about from time to time.
That ratio is still way above where it used to
be in the twenty tens and in prior decades. So
there are a lot of things that point to elevated
core using it in the ex Food and energy sense.
I'm talking about trend inflation. There are a lot of
things that point to elevated underlying or core or trend.
Those all mean the same thing, inflation. On top of that,
(17:09):
inflation expectations have gone up consumer expectations anyway, by some
surveys a lot more than others. So yeah, this is
why the FED is standing Pat Mike, It's not that
they're digging their heels in because they want to irritate
The President agreed.
Speaker 2 (17:25):
I feel like I'm being a bit negative. This is
a really good jobs report. I want to be pretty
clear about that.
Speaker 3 (17:30):
Labor market's strong.
Speaker 2 (17:31):
Yeah, a bunch of jobs are created, unemployment rate dropped.
We have nothing but really good news to say here.
What it means bad news for is the President's wishes
to get lower interest rates. A day ago, there was
about a one in four chance of the FED cutting
rates according to Chicago Mercantile Exchange at their next meeting,
the July thirtieth meeting. Is that where we are July
(17:55):
thirtieth meeting one and four today about one and twenty
sha But the same bet.
Speaker 3 (17:59):
That's like saying, well, it's bad news. I don't get
to enjoy hospital food because I don't have cancer.
Speaker 2 (18:03):
Like this is.
Speaker 3 (18:04):
This is a good thing.
Speaker 2 (18:05):
This is a good thing. It is you cut the interest,
you cut interest? Yeah, yeah, because you're concerned about the direction.
Speaker 3 (18:10):
We can demand. And that still may be the case.
By the way, as you said in the last second,
very wisely, I think there's wow.
Speaker 2 (18:17):
They're whipping out the compliments the day before July fourth.
Speaker 3 (18:19):
Market well and my semi annual employee reviews coming up
to We don't know. This could get revised down. Other
measures could point in a different direction. Everything could fall apart.
Tariffs could we don't we have? Isn't there? There are
so many of these deadlines on tariffs running concurrently. Yes
I've lost track too, but many of them could get
implemented over the next few weeks. So the wheels could
(18:42):
fall off the economy as a result of that, and
the Fed may feel like easing is the right thing
to do.
Speaker 2 (18:48):
Yep, still could, But I think the narrative for today
is American economy showing.
Speaker 3 (18:55):
Resilition, snapshot point in time, absolutely showing to any other conclusions.
Speaker 2 (18:58):
The only conclusion you can come, whether it's this report,
the Weekly JABA claims confirmed the same thing you've got
interest rates up, stocks up. This is a day of
American economy is resilient as we head into that July
fourth holiday. We're going to take a quick break here.
When we come back, Ben's going to give us a
full market recap, including what we are seeing on those
(19:19):
interest rates because it is a fairly substantial move to
the upside on yields. Quick break. We'll be back with
that next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving market so far
today right here on the Financial Exchange Radio Network.
Speaker 4 (20:03):
Well, markets are on the rise almost across the board
here as traders continue to digest this morning's monthly job
support that came in higher than expected non farm payrolls
increased to seasonally adjust it one hundred and forty seven
thousand for the month, higher than the estimate of one
hundred and ten thousand and just above the upwardly revised
one hundred and forty four.
Speaker 2 (20:21):
Thousand in May.
Speaker 4 (20:22):
Currently, the Dow Jones is up over three hundred three
hundred points, the S and P five hundred is up
just under forty three points, the Nasdaq is up one
hundred and seventy nine points, and the two year yield
is up nearly ten basis points and the ten year
yield is up nearly or just over half a basis
(20:42):
point as we speak right now. Cloud monitoring provider data
Dog is up twelve percent after SMP Global added it
to the S and P five hundred index, effective before
trading starts July ninth. The move will force passive index
funds to buy data Dog shares to reflect the composition
of the underlying benchmark index. Online travel review company trip
Advisor is up nearly eighteen percent following a Wall Street
(21:05):
Joeneral report that activist investors Starboard took a nine percent stake,
and finally, online brokerage Robinhood is down four percent, giving
back some of its six percent rally yesterday. Robin Hood
was seen as a leading candidate to replace Juniper Networks
in the S and P five hundred and privately held
Open Eye. Open Ai is pushing back against robin Hood's
recent anount announcement of token I shares in the artificial
(21:30):
intelligence startup I Am ben Kitchen, and that is Wall
Street watch.
Speaker 2 (21:34):
I think you can pretty much see Trip Advisors World
headquarters from one of our windows in this office.
Speaker 3 (21:40):
Yeah, right off the it's right there the way.
Speaker 2 (21:42):
I don't ever see anybody there, but no, it's true.
Speaker 3 (21:46):
I've never seen anyone there even before COVID. And where
do they park?
Speaker 2 (21:50):
Precisely? What do you do here?
Speaker 3 (21:52):
Is that an actual bill? It's like a Potemkin village
out there.
Speaker 2 (21:56):
But yeah, big news from Ben's look here. The market
reaction to this job report this morning is what I'm
seeing is a cyber relief. Equity markets up expectations for
a rate cut down, therefore yields up as well. Those
that were betting on an immediate FED rate cut have
just been wiped out on that overall bet. A nine
(22:21):
basis point move into your treasuries is a fairly significant
one day move that that indicates something to me. At
this stage, the chances of a rate cut at that
July thirtieth meeting are now quite low, at about six percent.
The odds of a quarter percent rate cut at the
September meeting our gaining steam here. We're still at about
(22:42):
seventy percent likelihood on that September rate cut compared to
where we were. But to be fair, a day ago
before this Job's report, there was a ninety three percent
chance of rates being lower by that September meeting. So
this definitely reverses all that. And again good data. Yeah,
(23:06):
just yeah, full stop. I wanted to do a full
stop there. It's good data. It indicates a positive thing
for the state of the US economy. It indicates a
positive thing for demand for labor. What it doesn't help
you with is getting rates lower if you are if
you are betting on that and looking for that, and
it definitely justifies what to the federally. But this is
(23:26):
again a really good thing.
Speaker 3 (23:27):
It's like, you don't you don't lament not having back
pain so you could pop some oxy, like this is
a good this is I'm sorry.
Speaker 2 (23:35):
That's a good analogy.
Speaker 3 (23:36):
Mark, Well, I think it was better than liking hospital food,
so being you know, disappointed you didn't have a serious
illness or something. So this is this is a good thing.
Speaker 2 (23:44):
You know, some people.
Speaker 3 (23:45):
Online or nitpicking, just like they did under the last president. Well,
it was mostly state, it was mostly government. Hiring a
job is a job. There are other potential weaknesses. Wage
growth slowed, but wage growth has been pretty round. I
think you're being unreasonably nitpicking if you look at anything
other than sort of the top line results. Those are
(24:07):
the things that tend to go into our big picture
forecasting models. Anyway. Unemployment is historically low, job growth is
strong enough to maintain that, and then some apparently last month.
I'm mixing surveys there, but you know, you get the
larger point.
Speaker 2 (24:21):
And to be clear, I mean you might be able
to nitpick on federal government employment and say, oh, you know,
that's why that's down. You guys big government, but that's down.
You know. The uptick in employment we saw was at
the state level, at teachers, cops, you know, those types
of jobs. And I don't know that you can nitpick
and say, oh, well that's not that's not good employment
(24:41):
for the economy. That that that's elment. No, No, it is.
Speaker 3 (24:46):
This is these are lagging indicators, both the payroll and
the unemployment rate and all the others.
Speaker 2 (24:51):
Best surveys.
Speaker 3 (24:52):
Yeah, they're a good snapshot of the health of the economy,
maybe two or three months ago.
Speaker 2 (24:58):
Uh. This morning, h in the wee hours of the morning,
the House voted to bring the Big Beautiful Bill Act
at least to a vote. That vote has not yet
taken place. We do not think the House is attempting
to make a bunch of revisions to this bill, although
to be clear, it's not at all clear what's going
(25:19):
to happen next. Johnson can only lose I think three
votes on this bill to get it through. It would
be immensely surprising to me if it did not pass
in some way, shape or form. I think the only
real question is candid all get done by the July
fourth self imposed deadline that Republicans have put themselves under.
We covered yesterday a bunch of the changes to taxes
(25:42):
as part of this. I think the biggest actual changes
that I can point to would obviously be the spending
cuts on Medicaid and snap. It would be the additional
tax credit for the tax deduction rather for those over
the age of sixty five. Other than that, it's mainly
a bill that locks in current tax law.
Speaker 3 (26:01):
I don't think it's gonna change. Look, there's a lot
of hysterics on both sides about the deficits and the debt,
and many of those concerns are very well placed.
Speaker 2 (26:09):
But this and also so many of them are disingenuous.
But yes, yes, oh yeah, totally hypocritical.
Speaker 3 (26:14):
Oh yeah, obscenely hippo Democrats are, Mike, I've given up
on that.
Speaker 2 (26:18):
I've given up.
Speaker 3 (26:20):
On anybody ever cutting spending meaningfully. I'm glad I was
alive in the nineteen nineties and brought up and I
come to see it. It's like seeing Haley's comet, which
I also saw in eighty six. So I may never
see either one of those two things again. I'm gonna
leave it to U two and posterity to look for that.
I've given up hoping on meaningful cuts. The deficit probably
(26:43):
all else equel won't get that much bigger under this bill.
People who are accusing them of trickery are pointing out
that it assumes that the previous tax cuts didn't happen.
That the the real dier. I'm misphrasing that a little bit.
You know, I'm not even a because I don't care.
At this point, deficits will be a little bit, not
much worse. The debt is the real problem. If you
(27:06):
want an analogy, the debt is like your cholesterol level.
Your doctor says you're at two fifty. If you know
what that number means. We all know what it means.
That would be high. Is it gonna kill me this year? Doc, Well, possibly,
but probably not. The debt is sort of the same thing.
At some point, there's gonna be a reckoning. It's gonna
push interest rates up. Is it gonna happen quickly slowly?
(27:26):
I really don't know, but nothing imminent, probably, though it
could be. We just don't know, Mike. I don't see
any reason for anybody to panic more about the deficit
and debt this week as opposed to last week. So
that segment of the of the commentariat can calm down.
Those claiming that this that these sets of tax changes
(27:49):
will somehow increase economic growth are equally those those assertions
are equally misplaced. It will do nothing for the trend
and growth, which is all we should really care about,
So Mike, no big. It'll make the situation slightly worse
the dead situation, but it's not going to really change
anything else. It might bring our reckoning up. I don't know,
six or twelve months, you know, so doom doomsday. You
(28:10):
can move that up, Fiscal dooms day, but only by.
Speaker 2 (28:13):
Like a year. In the words of Ernest Hemingway and
a lot of people have been quoting him recently. When
described in the US fiscal situation, he uses the phrase
it happens slowly and then all at once when describing
the process of going personally bankrupt. And maybe that's how
it all plays.
Speaker 3 (28:31):
There could be a sudden stop. There are some it's
called the international economists call it a sudden stop because
it's happened elsewhere Greece, for example, Suddenly creditors say for you,
you're not a bankable credit, I will not lend to
you at any interest rate. Unlikely that would happen to
the United States. I see more of a sort of
this unfolding gradually in terms of rising interest rates and
(28:52):
a permanent rise in the level of inflation. We can
adjust to those things, probably so it'll means slower growth
and lower standards of living. But you won't. You won't
be conscious of the alternative. It's like the other universe
where I'm taller and more and handsome, and I have
more here, and I don't know that guy, I can't.
I can't lament it. We'll never know what we left behind.
Speaker 2 (29:16):
All right, So so far I've gotten an oxy Cotton
analogy and doctor strange, Doctor Strange. We have to take
a break now, go out when you're on top quick.
That's so when we come back, we're talking trade deals
in Vietnam in particular, next on the Financial Exchange.
Speaker 1 (29:34):
Breaking business news as it happens only here on the
Financial Exchange Radio Network. The Financial Exchange streams live on YouTube.
Subscribe to our page and stay up to date on
breaking business news all morning. Long Face is the Financial
Exchange Radio Network.
Speaker 2 (30:00):
Because we just didn't have enough going on this week
in a shortened trading week with multiple jobs reports and
a giant tax bill that's trying to get passed, President
Trump's team announced a new deal with Vietnam on trade
just yesterday, so we've had a bit more time to
(30:20):
digest that. And I think, look, US trade with Vietnam
is fairly significant, especially for some big household brands that
we're all familiar with, Nike, Lululemon, Gap, to name just
a few of them. So it is a fairly significant
trade partner, especially in those specific areas. It's also a
(30:41):
country that I think the word accused is appropriate here,
has been accused of kind of facilitating Chinese made goods
to go through that country. And then back to the
United States and vice versa, so it gets a lot
of attention for a number of those different reasons. The
deal that has been announced here is for a zero
percent tariff rate on American goods going into Vietnam, with
(31:05):
a twenty percent tariff rate on any Vietnamese made goods
going into the United States, as well as some supplemental
rates on Chinese goods that get rerouted through Vietnam, which
is I don't know how you track that, given the
only reason you would put them through Vietnam is to
avoid tariffs in the first place. It seems to be
that would be pretty difficult to enforce some of those details,
(31:28):
but nonetheless attempting to impose a higher rate there, I
think the only relevant question that's not true. There's a
few relevant questions to me on this one, I believe
from my reading, and I'm getting a little bit out
over my skis here, so I don't want anyone to
take this one to the bank. But I believe that
the rules the President is using, the White House is
(31:50):
using right now to impose these tariffs are the same
ones that are being looked at in terms of the
legal authority and probably land in the Supreme Court eventually
to determine, Hey, does the President have the authority under
these emergency powers to impose tariffs on Vietnam on China?
And so, depending on how that ruling goes, there's a
(32:13):
path where either Congress needs to ratify this deal, a
new justification needs to be come up with, or I
think there's even well I consider to be a low
probability scenario, a scenario where this twenty percent tariff rate
goes away, things all get blown up again, and possibly
(32:34):
even all the tariffs collected on Vietnam get reimbursed to
the US importers of those goods. I consider that to
be low probability. But we are still working through Hey,
does the President even have the legal authority here to
make these determinant calls on tariff rates on China, on Vietnam,
on all these countries. So more to come on that.
Speaker 3 (32:54):
I just want to point out, this is a tax
increase on Americans. They'll pass some of these tariffs through
cut presumably for Vietnamese consumers. Explain why tariffs are a tax.
I know the administration for some reason insists on calling
them other things. I don't know why you would the
whole point is to tax foreign goods to make them
(33:14):
relatively less competitive and shift manufacturing here, or alternatively, to
tax foreign goods to raise revenue. He keeps The President
specifically keeps saying we're gonna charge China, We're gonna charge Vietnam.
That's not how tariffs work. I'm not sure if he's
had to explain to him and he just chooses to
ignore it because he thinks it's better to frame it
this way.
Speaker 2 (33:32):
Well, but I mean, my answer, Mark would be that
a core tenant of MAGA in the first place, you
go listen to interviews with Steve Bannon and others, the
entire tirety of the idea here. One of the core
tenants is we want to lessen free trade right and
build giant Paris to build up the US manufacturing base.
That's and the word taxes are immensely unpopular.
Speaker 3 (33:55):
They just that is a legitimate point of view. We
can argue about it. The evidence suggests that makes people worse,
not better off. Yep, we can have a level headed
discussion about that.
Speaker 2 (34:06):
Obfuscating works better than level headed discussions.
Speaker 3 (34:09):
I don't think it's not I don't think it's helpful.
I don't think it's advancing their cause. So this is
a tax increase. The hope is it will reduce consumption
of Vietnamese goods, so the production of them is shift
here is shifted here. Excuse me.
Speaker 2 (34:22):
We ain't making Nike shoes with a twenty.
Speaker 3 (34:24):
Pers and even if we were that to happen, you
wouldn't be raising revenue from tariffs. So that is intention
with the stated the other stated purpose, which is to
raise revenue. I still don't understand what the objective of
all these machinations is. They're doing a lot of dancing
around and ending up in the same place we were
at three months ago, and the result is higher uncertainty,
(34:48):
which may be impacting the dollar and therefore capital markets.
Something I think we're going to.
Speaker 2 (34:52):
Talk about where I land on all this, and Mark,
I agree with you entirely. I'm not in favor of tariffs.
I don't think they're going to be a good tool
for make I don't think it's going to make America better.
I guess it would be my main point here. I
think what you can take away from this is Vietnam
is one of the first deals that has been made.
We are seeing where those tariff rates land, it gives
(35:14):
us some form of benchmark for where the rest of
these negotiations go. For example, it's very unlikely, for instance,
that China's tariff rate is going to go down below
twenty percent in my view now. Likewise, for India and
other countries, I see it unlikely. As you know, the
Chinese tariff rate of fifty five percent is going to
go to zero. I don't think so based on what
(35:35):
we're seeing now. And so we're starting to get this
framework for how trade develops. I agree with you, I
would rather have free trade. We're not going to get that.
Speaker 3 (35:43):
Well, it's not so much that as how it's being framed.
Do these guys even understand what tariffs are and do
they understand what they.
Speaker 2 (35:49):
Want from them?
Speaker 3 (35:50):
If they don't get those two things, and given their
public statements, they don't seem to understand what a taro.
The Commerce Secretary doesn't seem to understand what a tariff is,
or if he does get it, he's wilfully misrepresenting it.
Either one of those possibilities is a little bit disturbing.
If these guys don't get what they're doing and don't
have any idea. How they're going to measure success. Let's
measure it using the trade deficit, and we can look
(36:12):
at trump one track record for a proof of how
that works. Trade deficit went up, not down. We lost,
We didn't game manufacturing jobs. You can expect that to
happen again because of the way these things work.
Speaker 4 (36:24):
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Speaker 2 (37:13):
Tesla's global vehicle deliveries plunged. This is just too funny.
Global vehicle sales dropped thirteen and a half percent as
the evmaker struggles to reverse months of declining sales. The
final quarterly tallly of three hundred and eighty four thousand
Tesla deliveries missed all expectations of three hundred and eighty
seven thousand deliveries, And quite honestly, I don't know that
(37:37):
Elon Musk cares. He is now kind of phrasing the
company as not a car company, but we're more of
an AI and tax robo taxi company, which is great
if you can pull it off. But from everything that
I understand, one percent of your earnings currently comes from
(37:58):
selling cars. So you've got a lot to prove on
that other business model if it's going to drive the
stock forward. Let's take a quick break. When we come back,
we're gonna have a full market recap, take a look
at that jobs report again and get an update on
the big beautiful Bill actwork in its way through the House.
That's next on the Financial Exchange
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