{"text":[[{"start":6.74,"text":"The writer is founder and president of MacroPolicy Perspectives and clinical associate professor of finance at University of Texas at Austin"}],[{"start":18.18,"text":"In cutting interest rates last week, the Federal Reserve pointed to “downside risks to employment”. The Fed is right to worry."}],[{"start":27.92,"text":"Policy disruption is leaving its fingerprints all over the US labour market, and it doesn’t bode well for the outlook. Even as the artificial intelligence boom has spurred a surge in investment and boosted a handful of equity valuations, hiring has ground nearly to a halt. At the heart of every economic growth cycle is a virtuous interplay between jobs and consumer spending. The latter comprises more two-thirds of the US economy and if you lose the engine of job gains, the economy won’t grow."}],[{"start":64.7,"text":"The trade war has meant universal tariffs on imports at levels not seen since the Great Depression. Companies are finding it challenging to pass along higher costs to consumers and are increasingly managing pressure on margins through more cautious hiring. Someone has to absorb the cost of tariffs that are being collected from US importers at an annual rate of $350bn and rising, more than double estimates of the recently passed corporate tax cuts. The pressure on employees was captured in the third-quarter Business Roundtable survey of chief executives, which showed an uptick in economic sentiment on optimism around capital spending, but the employment index remained in recessionary territory for the second quarter in a row."}],[{"start":119.14,"text":"Cuts to public spending and contracts are leading to job losses in the federal, state and local governments and adjacent sectors, such as healthcare. Many spending cuts are subject to court challenges, but the Supreme Court has been allowing most of them to proceed and job losses are spreading."}],[{"start":141.53,"text":"This might not yet be showing up in headline unemployment rates. That is because restrictive immigration has dramatically slowed labour supply and dented demand. In Fed chair Jay Powell’s assessment, the break-even rate of job gains needed to keep unemployment steady has slowed from 150,000 to 200,000 per month to somewhere between zero and 50,000 in just a matter of months. The fact the seasonally adjusted annual GDP growth rate slowed to 1.4 per cent in the first half of the year from 2.5 per cent in 2024 without a rise in unemployment confirms that restrictive immigration begets lower trend growth."}],[{"start":189.62,"text":"While hiring has ground down to an average pace of just 29,000 over the past 3 months from 168,000 in 2024, the unemployment rate has only edged up a tick to 4.3 per cent from the average 4.2 per cent rate that prevailed over the past year, leading Powell to characterise the labour market as being in a “curious balance”."}],[{"start":218.41,"text":"We think more trouble lies ahead. We are entering hiring season for the education sector at a time when spending by the Department of Education has been slashed more than 50 per cent. Back of the envelope calculations suggest that this could reduce hiring in the state and local education sector by more than 200,000 this fall."}],[{"start":244.35,"text":"Severance and buyout programmes at the federal level are coming to a close, implying another couple hundred thousand people will lose their jobs. Cuts to healthcare and research spending are starting to result in hospital lay-offs and closures."}],[{"start":260.99,"text":"At the same time, immigration raids are expanding with chilling spillovers to the willingness of workers to show up to work, leading farmers and builders to sound alarm bells. This will have an economic growth cost. Meanwhile, tariffs remain high, trade relationships are still chaotic and there is a sobering realisation that tariffs should be viewed as a permanent feature of the landscape. And indices measuring the number of industries hiring versus firing have already dropped into contractionary territory. The dynamic of the US economy is close to shifting from a positive to a negative feedback loop."}],[{"start":304.93,"text":"This gloomy assessment of the labour market is at odds with steady improvement in stock market sentiment since April. It is possible that tax cuts along with some reduction in interest rates will be enough to offset the fistfuls of policy sand being lobbed into the gears of the US economy."}],[{"start":326.98,"text":"But if two-thirds of growth comes from consumers, and companies are relying on reduced hiring to protect their margins, then current projections of more than 13 per cent nominal earnings growth in 2026 for S&P 500 companies may be too optimistic. At the end of the day, investment in AI is designed to deliver products and services more efficiently to consumers. If their incomes aren’t growing, neither will the economy."}],[{"start":369.12000000000006,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1758890372_9763.mp3"}