Making Sense of Weak Job Growth Alongside Solid GDP Growth

Bullish:

• $PRODUCT - Productivity growth has rebounded to historical average of 2% from last cycle's 1.5%, with potential for further AI-driven upside beyond current levels

  • “Last cycle came in at about one and a half percent. This cycle, it has rebounded to the historical average of about 2%. And I would say that's mostly pre any effects of AI. So if we do get a further boost from AI, as we expect, we might very well see productivity growth rise above two.”

    David·4:37
• $FISCAL - Fiscal stimulus expected to materialize in 2026, providing a boost to growth as tariff drag abates

  • “Over the coming four quarters, especially in the 2026, I think that will begin to materialize. So when you think about the combined effects of those two things, looking ahead, we think that the drag from tariffs on growth should abate. The boost to growth from the fiscal impulse should begin to kick in”

    David·8:14

Bearish:

• $SEMIS - Semiconductor demand surge in H1 2024 was artificial frontloading ahead of potential 25% tariffs rather than sustainable AI-driven growth

  • “What we think actually happened was the White House was threatening to do large tariffs on semiconductors and other computers and electronics. Companies wanted to buy these already very expensive semiconductors and other goods without paying an extra 25%. And so there was a certain amount of frontloading of investment in these areas.”

    David·9:31
• $IMPORTS - Tariffs have already raised price levels by 0.4% with another 0.6% increase expected, making imported goods less competitive

  • “So we think so far, tariffs have raised the price level by about 0.4%. We think that there's about another 0.6% to come.”

    David·14:14
• $EMPLOY - Labor demand growth slowing faster than supply growth, with unemployment rate rising a tenth of a percentage point in each of the last two months

  • “The issue this year has been that labor demand growth or job growth has slowed down even a little bit more than labor supply growth... over the last couple of months, we've seen the unemployment rate come up a tenth of a percentage point in each of the last two months that we have data for.”

    David·5:15