Instant Reaction: US Adds 165,000 Jobs, Topping All Forecasts

Claudia Sahm · New Century Advisors

Labor market is low-hire, low-fire; past payroll surprises faded, so more months are needed to confirm acceleration.

Sahm says the labor market has an uncomfortable balance of low hiring and low firing, so job seekers still face a difficult environment, though people holding onto jobs is good. She notes that payroll surprises to the upside have appeared earlier this year and then faded, so she needs several more months of strong data before she is convinced the labor market is accelerating.

“we've seen some big surprises like this earlier in the year, and then they ebb away. So I've got to see some months of this before I'm really convinced we're seeing an acceleration of the labor market.”at 4:25

Claudia Sahm · New Century Advisors

Low quit rate means workers lack bargaining power, which keeps wage growth subdued.

Asked why wage growth isn't higher given a tight labor market, Sahm points to the quit rate, which ticked up in JOLTS but remains low. Quitting is how workers gain leverage to demand higher wages, so with few quits, workers lack the bargaining power needed to push wages up.

“it's still pretty low, and that's that's a good sign of the bargaining power. If workers are out there quitting to get better jobs, that's when they have the leverage for the higher wages.”at 5:20

Constance Hunter · Economist Intelligence Unit

Cyclical job gains now dominate hiring, signalling underlying economic momentum beyond health and government hiring.

Hunter contrasts the post-COVID period, when headline job gains were dominated by noncyclical health care, government and social assistance hiring, with the current year, when cyclical jobs are dominating hiring. She reads this as evidence of underlying economic momentum, though she notes it may take time for people to feel it.

“we can see a surge in in cyclical jobs, and cyclical jobs are not... Are dominating the hiring. That suggests that there's some underlying economic momentum.”at 11:19

Claudia Sahm · New Century Advisors

Without labor force growth, sustaining strong US GDP gains will be hard; the structural labor issue needs policy attention.

Sahm is less focused on the cyclical downturn in the labor market and more worried about structural problems. She argues that without a growing labor force, it will be hard to consistently generate GDP gains, and she links this to immigration and labor force policy, which she thinks may get attention after the election.

“I'm less looking at, you know, the downturn in the labor market, but I am worried about some of the structural pieces of the labor market. And I think without a growing labor force, it's gonna be hard to really consistently have those GDP gains.”at 6:18

Stephanie Roth · Wolfe Research

Nominal GDP growth around 4.5% in 2027, driven by real growth; the economy is firm beyond AI capex.

Roth says the economy's buoyant, and slightly less nominal growth than recent years is expected. She expects 2027 nominal GDP around four and a half percent, increasingly driven by real growth rather than inflation. She argues the economy is running on firm footing beyond AI capex spending.

“You're probably talking more like a four and a half percent nominal GDP for '27 as opposed to something that's notably higher as where we've been.”at 25:22

Constance Hunter · Economist Intelligence Unit

Current inflation is cost-push rather than runaway demand-pull, and the Fed is tightening to curb it.

Hunter says the goal is to avoid runaway demand-pull inflation, but what is visible is largely cost-push inflation. She points to the Fed trying to curb it, noting Barkin, a 2027 voter, saying the Fed should raise rates.

“what we don't wanna see is we don't wanna see runaway inflation that's demand pull. And so what we see here is a lot of cost push inflation, and the Fed is trying to to curb that.”at 10:32

Stephanie Roth · Wolfe Research

Inflation should ease to about 2.5% in 2027 as energy and one-off tariff effects roll off.

Roth says energy prices will not repeat this year's year-over-year surge, and oil prices may sustainably come down, which gives disinflation. Tariff effects will roll off the data, and inflation that was elevated this year because of largely one-off factors will fade into next year. She expects about 2.5% inflation, above the Fed's preference but more tolerable.

“we're looking for at two and a half percent inflation, which is certainly higher than what the Fed would like, but something that's a lot more tolerable.”at 26:44

Constance Hunter · Economist Intelligence Unit

Public opposition to the AI buildout needs sensible policy now, or backlash will grow later.

Hunter notes that markets have focused on a curb on AI buildout this week and asks whether it is an end or just more sensible policy. She argues the public is strongly against the AI buildout, so if policymakers do nothing about it, there will be significant backlash down the road.

“are we talking about an end, or are we talking about some more sensible policies that make it more palpable to the general public? Because public is really against the AI build out, and we have... We don't do anything about it, then we would have such significant backlash down the road.”at 13:31

Kristina Campmany · Invesco

Cautious on hyperscaler bond issuance; huge capex plans through 2029 raise questions about build-out speed.

Campmany says her firm has been cautious on some hyperscaler issuance, so it did not participate in the Meta deal. She notes the market is grappling with massive capex numbers projected out to 2027, 2028 and 2029, and asks whether this could change the speed of the build-out. She also argues that capex has been the driver of US growth this year.

“We have been a bit cautious on some of the hyperscaler issuance. So we were not involved. But I think the market is is also grappling with. There are these massive capex numbers out to twenty seven, twenty eight, twenty nine.”at 18:36

Kristina Campmany · Invesco

Base case is a Fed rate hike in December, despite inconsistent Fed communication.

Campmany says the Fed's chair does not want to give forward guidance, while the rest of the committee does, and messaging has varied meeting to meeting. She notes the Fed did not hike in October, and says that without the communication it would have, the market should expect a hike in December. She is skeptical of recession fears and considers the December hike the base case.

“I think the base case is still that the Fed is going to go in December.”at 17:53

Stephanie Roth · Wolfe Research

Expects the Fed to hike in December and again around March 2027, then hold.

Roth's base case is the Fed goes in December, given firm data and the Fed's stated desire to hike again. Markets have priced down the odds because of AI concerns, but she expects a hike around March next year, after which inflation pressure subsides, activity cools modestly and the Fed holds for quite some time.

“they're very likely to go in December. They certainly communicated that they want to hike again. The data have been firm. ... we think they'll probably go once more at the beginning of next year in Q3, probably at the March meeting”at 28:27

Claudia Sahm · New Century Advisors

Relying on AI productivity gains to sustain strong growth is not a sound strategy; such gains are hard to string together.

Sahm is optimistic about technology improvements on the horizon, but she argues that sustaining productivity growth quarter after quarter and year after year is very tough. She concludes that policymakers should not hang their hopes on AI to keep growth strong and should pursue a multipronged approach.

“I am optimistic about some of our technology improvements on the horizon, but that is really tough to string together quarter after quarter, year after year improvements in productivity growth... Hanging our hats on AI is not the way to go”at 6:38

Constance Hunter · Economist Intelligence Unit

Election results reflected inflation and foreign policy, not unemployment, since the jobless rate is very low.

Hunter argues the election was not determined by the unemployed, because many voters likely had jobs and the unemployment rate is very low. She says the vote reflected foreign policy with Iran and possibly Ukraine, and inflation, which was the number one issue, with people still feeling the effects of COVID-era price-level increases.

“I wouldn't say that this was an election determined by the unemployed. We have a very low unemployment rate.”at 9:02

Constance Hunter · Economist Intelligence Unit

Resolving the Iran war and securing Strait of Hormuz flows would lower oil prices and relieve consumers.

Hunter says the consumer is okay but depends on the Iran war and gas prices. Oil is being moved out of the Gulf under expensive escort operations, and the market is pricing in all risks. If a resolution produces a durable structure for getting oil out through the Strait of Hormuz, oil prices should fall, giving immediate relief to household budgets.

“If we see a resolution to the Iran war, I think you... And you see a really durable structure built around getting oil and gas out of the Gulf Of Hormuz, then you're going to see oil prices come down. That's gonna give immediate relief to people's pocketbooks.”at 12:05

Kristina Campmany · Invesco

Yields have retraced 40–50bp from their peak; the bond selloff looks overdone.

Campmany says yields drifted higher across the board all year, peaking five or six weeks ago. Since then they have retraced 40 to 50 basis points at almost every point on the curve. She thinks this looks overdone, driven partly by positioning and partly by fear about AI, while the underlying fundamentals may not have changed much.

“we kind of got the peak five or six weeks ago. And for five or six weeks, we've retraced 40, 50 basis points... It feels a bit overdone. I think some of that was positioning.”at 17:11

Kristina Campmany · Invesco

Still negative on the dollar; a broader weaker-dollar rally needs Asian currencies like the yen to strengthen.

Campmany says FX is trickier, but overall her firm remains more negative on the dollar, though the dollar has been challenged. She notes Asian currencies have not participated in dollar weakness, so she needs to see Asian currencies resume lower against the dollar before a broader FX rally, with the yen finally strengthening and Korea coming back to the table.

“I think you need to see Dollar Asia resume lower. So the likes of the yen finally participating and strengthening, Korea coming back to the table.”at 20:00

Kristina Campmany · Invesco

Europe has more value than the US; there is value in developed markets, though Europe's growth is weaker.

Campmany says the rally of 40 to 50 basis points has been led by the US more than the rest of the world, so she still sees value in some developed markets. She thinks Europe has more value, while acknowledging a weaker underlying growth backdrop.

“We do still think that there's value in some DM. We think Europe has probably more value. There's a kind of weaker underlying growth system.”at 20:19

Kristina Campmany · Invesco

Most cautious on credit because spreads are historically tight; investors are being choosy.

Campmany says credit spreads have moved but remain tight by historical standards. Her firm is being choosy, knowing a large pipeline of issuance is coming. Among its three levers of FX, credit and rates, it has been most cautious on credit because of how historically tight spreads are, and she says that bias still remains.

“We've been the most cautious on credit just because of how historically tight we are.”at 22:57

Kristina Campmany · Invesco

The AI theme is not going away despite election or equity wobbles; its pace may slow and implementation may change.

Campmany argues that the AI theme is not going away because of the election or an equity market wobble. She acknowledges the pace may slow and implementation may change. She points to her own firm, where how people's jobs have changed over the last six months shows that the shift is not stopping on a dime.

“the theme of AI is because of the election or because of a wobble in equity markets is not going away. Right? The pace may slow down. The way it's implemented may change.”at 24:04

Stephanie Roth · Wolfe Research

Tariffs will stay elevated for a long time because the revenue is too important to deficit financing to cut.

Roth argues tariff policy is largely unchanged because tariff revenues are too high to make adjustments. She expects tariffs to remain elevated for quite some time because of the deficit, and does not think even a Democratic president in 2028 would bring them down much beyond targeted cuts.

“my expectation is the tariffs will remain elevated for quite some time because from a from a deficit perspective”at 27:41

Stephanie Roth · Wolfe Research

Consumer spending stays robust as top earners drive it, masking softness at the bottom end.

Roth says the bottom end of the consumer has been more challenged, but persistent strength among higher-income spenders has masked the softness. Spending should stay fairly robust because it is a function of nominal income growth tied to the labor market, and those trends are moving positively. Lower energy prices could also fuel a pickup next year.

“the strength has been persistent across the the the the spenders that spend more, it's been masking any softness that's been happening at the bottom.”at 29:25