The wealth effect for the rich, jobs for everyone else.
If you think that’s the recipe for a “healthy” economy, I suppose America’s in fine fettle now that equities have clawed back war losses to trade at new all-time highs. Because the labor market, we’re told, is resilient despite Donald Trump’s best efforts to sow uncertainty “the likes of which nobody’s ever seen before,” as he might put it.
This is a bit of an aside, but with the next round of US jobs data still two weeks away, it’s helpful to fill the proverbial void: ADP’s weekly private-sector hiring report is on a pronounced upswing of late.
As a quick reminder, the payrolls processor began releasing this high-frequency series late last year, when dysfunction in D.C. shuttered the BEA and BLS, putting a premium on alternative macro metrics.
Of course, ADP already publishes a widely-cited monthly jobs tally. The weekly series is separate, and it’s meant to give investors and the general public a “pulse check,” if you will, on the state of hiring across the world’s largest economy.
The figure above shows you the upswing I mentioned. In the four-weeks to April 4 (yes, the figures are still dated, so terms like “high-frequency” are a bit misleading, and “real-time” is a complete misnomer), private employers added an average of 54,750 jobs a week.
That may not sound like a lot, but it’s the highest four-week average in the (very short) public history of the series, which begins in November. The trend’s improved for five weeks running.
With initial jobless claims still loitering at historically low levels (sub-210,000 on the four-week average), it’s beginning to look like last year’s deceleration was the worst of it for the US labor market.
Meanwhile, this week’s lonely top-tier data release — retail sales covering March — was surprisingly decent on the control group, suggesting a record surge in gas prices didn’t derail discretionary spending.
As the figure shows, the retail sales release was good for a three-tenths bump to GDP “Nowcasting,” which is back above 1% for Q1.
That’s not gangbusters — indeed, it’s barely above the low-end of blue-chip consensus — but it’s by no means a disaster, particularly considering the circumstances both at home and abroad.
On Wall Street, the profit outlook for corporate America weathered the Mideast storm thanks almost entirely to the read-across from higher oil prices for energy-sector EPS and two outsized Tech upgrades.
The figure above’s an up-to-date reminder of where we’ve been and where analysts think we’re going in terms of index-level profit growth and EPS growth for the median S&P stock.
Although 12% YoY growth — i.e., consensus for Q1 — would count as a slight downshift from Q4, that forecast represents the highest bar headed into earnings season since 2021. By Q4, company analysts collectively expect corporate America to be growing profits at a 20% clip.
The irony — and this brings us full circle — is that the bulk of the wealth effect from ever-higher stock prices is attributable in large part to a technology that promises to automate human jobs.
So, if you’re not on the “right” side of the socioeconomic equation yet, you may want to get there in a hurry. Or start working on your UBI lobbying campaign.
Today, more than ever, kids in high school need to understand how their decisions might inadvertently forever make it next to impossible to become part of the investor class in the USA. In today’s world, it might be next to impossible to get ahead on just a paycheck, or even two paychecks.
Does anybody understand what high school kids should do. I have grandkids and I wouldn’t pretend to have answers for them. No wonder there’s a dejected confused generation out there. Whoever’s running things needs to do a much better job or this won’t end well. Time to stop profit being the primary driver and measure for social wellbeing. And while we’re at it, the leaders up front have to ease up on the constant anger and negativity – the ‘dark side’ if you will. It’s a pretty reliable indicator of a twisted soul. The population at large is starting to realize that lies and fake promises aren’t the antidote.
Whatever job you have, it will make heavy use of AI.
You could be a programmer like before — but now you are an AI enhanced programmer.
Or you could be a medical professional — but now you are an AI enhanced medical professional.
Or you could be an architect — but now you are AI enhanced.
Or you could be a writer, specializing in financial and political commentary — but with AI enhancement. You could call yourself Heisen-Borg.
Or you could actually engineer and maintain the AI.
I don’t think the jobs are going away, but there will be a lot of upheaval as jobs are re-fashioned into new forms.
Tough Crowd!
Random thoughts for @Fudd
Assume the worst, that AI displaces a lot of rote business process jobs (call center, claims processing, etc), many technical desk jobs (coders, architect, radiologist, design engineer, etc) and that robotics displaces the simpler physical jobs (driver, packer, trash collector, etc).
More complicated physical jobs (trades, chef, arborist, etc) are not going to be displaced, but will still prematurely wear out your body.
In jobs where customers demand human contact (lawyer, escort, doctor, nursing, consulting, counseling, etc), the person doing the face time will not be displaced even if their supporting team could be (yes, there are AI “therapists”, but mostly for customers who can’t/won’t pay for human therapists)
In the technical desk jobs, the seniors are probably still “people” even if the juniors are “digital employees”.
There are some jobs where we demand the buck stop at a person (ATC controller, judge, LEO, politician).
In general, as you get high up (in the organization) you are probably fine, and at some point you are “capital” not “labor” and that is good.
AI is labor, not capital; an employee, not the boss; and I assume entrenched interests will keep it that way for a generation at least. Entrepreneurs will not be displaced.
So this suggests to me that a young person could
– Go into the trades but start their own company as soon as possible, have employees burning out their bodies
– Go into the technical desk work and get senior fast, either by moving up superfast in a big company, moving up fast in a small company, or starting your own company
– Go into a human face mandatory type of job
– Go into a human required as buck stopper type of job
– Be an entrepreneur
– Be capital
Then you need to think about the knock-on effects if the worst comes to pass. You can start a business but if displaced customers can’t buy your product/service, not good.
Yes, I think being capital is always the best plan.
Low skill work — that is not where you want to be.
High skill work — architect, lawyer, AI-enhanced programmer, doctor, etc. — I think these jobs will do fine. You make heavy use of AI in your work, and you end up delivering tremendous value. Even AI enhanced carpenters or plumbers probably do OK.
AI enhanced soldiers also. https://youtu.be/WpRaPK5qjgs?si=BQ7wo7e0RsOLhiO_
Forget about high school kids – many mid-career professionals are struggling for answers to future proof themselves as well.
This is anecdotal and I am the furthest from an AI expert, so take this for what it’s worth. I work at a liberal arts college and one of our graduates in Computer Science in the 90s who was a bigwig at Microsoft returned to speak about AI and its effects. His overarching take was that in a world where the barriers to coding and other tech skills become much lower, being able to communicate effectively becomes a much more important skill, both to AI and humans . He felt he had drawn upon more of his liberal arts education in the last 5 years than he had prior to AI.
I’ll tell you who is running things, the people my generation taught. 75% of college students (including the next generation’s teachers) admit to have regularly cheated in their studies. My students, and later ones, regularly skipped class, ignored the assignments or were late turning in those assignments. Of my own senior business students, only about 10-15% cared about their education. They wanted a degree but not an education. What they have found out the degree is only paper. The education, for the best students, ones willing to work hard after graduation, leads to a career. It supports personal growth. I read your stuff when you comment. You are current, insightful, and still learning. You’re not one of those everyday guys “in charge.” My daughter has grown into six careers. Her only bad bosses have been older white guys with big egos and no brains. Her best bosses have been clever women. I know this, when I’m dealing with my top non-profits, they are virtually all managed by educated women.
I looked at that report and saw that it did not break those numbers down by job sector (at least not that I could find). It would be interesting to see where those jobs are coming from.
I once wisely counseled a friend’s kids that they should consider carers as prison guards: “You get to wear a uniform & order people around. Plus it’s not a job that can be outsourced to India!” (That was before AI) Thankfully they did not follow my advice now that our president has proven that prisons can be outsourced to El Salvador.
I guess that leaves the trades & garbage collection as well as lawn care services out in the Hamptons.
Oh, your original advice is still pretty good. There’s a lot of money in hate. America is the world leader in incarceration rates (even before including all the ICE business). Currently a little less than 1% of Americans are incarcerated. The lifetime expectency for incarceration in State and Federal prison is 5% (that does not include jails which is much higher…Prison is if your sentence is a year and a day or greater, jails are for awaiting trial and shorter sentences).
Excepting private prisons, the pay and the benefits are pretty good and speaking of good, you get to be a “good guy.” In my experience most officers are professional despite the toxic environment. However, if you are at all sadistic (and there are some) its a very rewarding career.
There are more security guards than school teachers in the USA.
Often narratives on markets and the general economy cite “a robust job market.” That’s what the stats mostly indicate.
But I wonder if some of the job openings are efforts to fill jobs formerly done by immigrants, both legal and illegal. Heck, it’s what the right promised would happen ponce we sweep them the hell out of the country! Not that it matters to stock investors, both human and automatons. Not at all. So I haven’t bothered to delve into it further.