00:00Stephanie Roth of Wolf Research expecting the start of a downtrend, writing immigration will start draining labor supply, tightening the labor market.
00:08We might see an unusual environment with payrolls under 100K, but a steady or even lower unemployment rate.
00:16Stephanie joins us now for more. Stephanie, good morning.
00:18Good morning.
00:18Let's build on that. Where's wage growth if those two things are taking place?
00:23That means we have a slightly tighter labor market at the lower end.
00:26So the payroll gains could shift below 100,000, but that doesn't mean the economy is weakening.
00:31It's the foreign-born workers, which were driving the labor force in the past couple of years and driving employment gains in a big way, are going to be going the other way.
00:39So that just tells us that we have a much slower steady state of growth of payrolls, but we might be tightening the labor market to some extent,
00:45because we have potentially up to 100,000 people per month that are falling out of the labor force from this foreign-born population.
00:50So if we get that negative supply shock, does it lead to higher prices, higher wages?
00:53We just haven't been a big driver of inflation. Sure, modestly so. I wouldn't expect that to be the bigger driver.
00:59The bigger driver is, of course, going to be tariffs, which will probably show up over the summer, and I don't know if the market's expecting that at this point.
01:05So what do you do with that? Is that a good thing, if the unemployment rate drops, even if you don't have a lot of job creation, or is that a bad thing?
01:13I think it's just a new reality that the market has to get accustomed to.
01:17So to the extent that we might have some negative market reaction to a lower payrolls print or two that may play out,
01:23but I think it's just a function of the Fed having trouble cutting this year,
01:26because we're going to see an environment where the unemployment rate is steady to potentially even slightly lower,
01:32in an environment where inflation is higher. That's not a recipe for cuts in the back half of this year.
01:37Are you basically saying that we can just expect lower employment creation for the foreseeable future, and that can be okay?
01:44It might be less mobility when it comes to jobs, but it isn't the world falling off a cliff,
01:49and that isn't necessarily a harbinger of a real weakening in the economic data later this year.
01:54I think that's exactly it, is we should just get accustomed to payroll gains running at a slower pace, but that's not a scary thing.
02:00It could be in an environment where claims are still steady,
02:02and it's just sort of a new reality where immigration is going the other way,
02:07and it's just a slower trend of payrolls growth, and it's not necessarily a scary thing,
02:11although perhaps the market just has to get accustomed to it.
02:13So what is the new 200K, the new 180? What's the number we should get accustomed to?
02:18The new 95.
02:19The new 95. Comfortable with 95. An unemployment with 95 might actually be lower, not higher.
02:25That's correct.
02:26Where does that leave the Fed?
02:28That keeps the Fed on hold for a lot of this year. How are they going to cut in that environment?
02:33Zero cuts for 25.
02:34I think that's the direction of travel. It's hard to envision an environment where
02:39the unemployment rate is steady to slightly slower, job growth is at an okay pace,
02:46and we're not seeing claims rise. How is the Fed going to cut in that environment
02:49when inflation is running above 3%?
02:51You think it stays above 3% for the remainder of the year?
02:54I think there's a very good chance of that.
02:56There's a line for that.
02:57I think there's a huge range of what we should do.
02:59There's a huge amount of time that's necessary.
03:01There's a bigger range of whether our Department of бой raises down shows us
03:02and there's just one percent of really low position of where theальная
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