00:00When you have a lot of these high-profile layoff announcements, we can make a lot of hay out of it.
00:05Finding the macroeconomic needle in the haystack is a little bit harder.
00:08I like to focus on each individual announcement and suss out what's idiosyncratic to the company.
00:14For example, layoffs at Paramount, pretty idiosyncratic, given the merger and reorganization with Skydance.
00:20When you get to something like UPS, announcing that it hadn't shed so many jobs,
00:25let's face it, some of that is downstream from labor renegotiations and contract disputes in 2023.
00:31It's shocking to see how many jobs have been shed.
00:34Something like Amazon, it looks like it's more structural,
00:37and it looks like it has more to do with implementation of AI reverberating through some of management
00:43and reverberating through some of the headquarter operations.
00:45I wonder if we should expect more layoffs,
00:48considering the fact that AI is clearly going to be replacing jobs at companies like Amazon.
00:54Danny yesterday was talking about the fact that Amazon eventually wants to cut 600,000 jobs
01:00because it can replace them with AI,
01:03plus the fact that so many economists have warned companies are going to be beefing up margins
01:09that have been hit by trade tariffs.
01:11Yeah, so when you look at a company like Amazon,
01:13if you look at the IT and just information industry as a whole,
01:17it actually does not look like they're especially bloated with workers,
01:20and it doesn't look like there's going to be a rush to replace people with AI.
01:25It looks more like it's the case that implementation of AI paired with attrition of existing workers
01:31is what's driving labor demand and labor supply in that particular arena.
01:37So I don't really expect to see a surge in layoffs due to the implementation of AI.
01:42But we can expect to see additional labor efficiencies in those industries where they are implementing it.
01:48For example, in information, relative to pre-COVID,
01:50headcount has increased by just under 1%.
01:53Output, as measured by real GDP in the industry,
01:56nearly 25% increase relative to pre-COVID.
01:59So you already are seeing the ramifications of AI implementation there.
02:03If it does, though, lead to job cuts,
02:05isn't that a huge issue because Fed rate cuts
02:08aren't going to bring back jobs that have been impacted by AI?
02:11That's right.
02:11And that's exactly the sort of structural problems we need to try to suss out.
02:15And you're right.
02:16When we have such a tenuous balance in the labor market right now,
02:19if we were to see any sort of acceleration in layoffs,
02:23it would be a major problem,
02:24and it would result in rising unemployment, materially rising unemployment.
02:28When you look at the ADP numbers released today,
02:30it looks like hiring is running at about half the break-even pace,
02:34needed to maintain a steady unemployment rate.
02:36You're right.
02:36If we were to see real material layoffs,
02:39it would result in accelerating unemployment.
02:41But when we look at WARN notices,
02:43when we look at early indications of what we can expect for layoffs 90 days out,
02:47we're still running at a pretty low level,
02:49which is about 20% higher than where we were last year.
02:51Stuart, what about adding jobs?
02:53I mean, the whole point, or at least part of the point of these tariffs,
02:57was to bring manufacturing back to the U.S.,
03:00to add jobs to the U.S. economy.
03:02And I would imagine it's been successful, at least in part.
03:06You know, automakers that were building cars in Ontario
03:10or building cars in Mexico have moved a lot of that production to the U.S.
03:14Are you not seeing substantial manufacturing jobs come back to the U.S. economy?
03:19We have not seen a major increase in manufacturing jobs.
03:22We have to keep two things in mind.
03:23One is that tariff benefits are relatively concentrated,
03:27but the effects, the consequences are really diffuse,
03:30and tariffs are growth negative.
03:32So even if you do have concentrated benefits in some industries,
03:35you could still expect to see at least slowing hiring
03:38and a more broad-based scale when you look across industries.
03:42Second, when we have implementation of tariffs,
03:44you end up having the snarling of supply chains.
03:46Matt, I know you're a car guy.
03:47When you have aluminum imports disrupted,
03:50when you have aluminum manufacturing disrupted,
03:52you can expect slower delivery of Ford F-150s.
03:55We're expecting to see that show up in industrial production data
03:58as that affects manufacturing.
04:01As we're sort of in this, you know, data vacuum,
04:04I guess you could call it without the official government data,
04:06I know ADP this morning started to put out
04:08what they're going to have as weekly figures.
04:10How useful for that is that for you for a signal?
04:13And what else are you looking to right now?
04:15Look, I'll take anything that I can get at this point.
04:17More data is better.
04:18Any additional information I find useful right now.
04:22But when we're looking at moving averages,
04:24specifically in the private sector,
04:25it's not going to be as helpful as the monthly figures.
04:29But look, everybody is training their Nowcast models.
04:32Our Nowcast models are going to be incorporating the weekly figures also.
04:35And so I'm looking forward to incorporating additional alternative private sector data sets.
04:40You're adding it to your AI model?
04:41You have an AI model?
04:42We have, so we have Nowcast, we deploy AI in developing our models,
04:47but it's not as though we have AI specifically building our models.
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