Market Minute: Sept. 8th, 2025 — Reading Between the Jobs Report Headlines
There was significant chatter from pundits after Friday’s jobs report. Much of the conversation centered on the increased likelihood of Fed action, given the weaker-than-expected numbers and the revisions to June’s jobs report. As in most things, it is valuable to take a step back and delve deeper into the situation.
Consumer Spending: The Driver of the Economy
This weekend, I read a number of reports on the employment market, and it made me reflect on some work I was doing earlier this year when I was at my old firm. When approaching the U.S. economy and the changes in aggregate spending, the first place to look is consumer spending. Why? The consumer represents about 70% of the aggregate spending in our economy, so in a great sense, as the consumer goes, so goes the economy.
Job Creation: Where the Growth Is
When you take a look at job creation this year, a significant portion came from the health care segment. As a father of a Physician Assistant, I am glad to see that healthcare employment remains strong. However, it is home health aid workers who are seeing the greatest growth in employment, a lower-paying segment within healthcare.
The Challenge of Lower-Paying Job Growth
Let’s dig deeper still. If we consider that economic spending is driven by the consumer and the greatest segment of job growth is in lower-paying positions, that does not bode well for expanding overall consumer spending. I have the utmost respect for the people serving in these roles, but the discussion here is about the level of economic growth that can realistically be fueled by these types of jobs. At the same time, there is also evidence that white collar hiring is being slowed as employers assess how artificial intelligence will reshape their businesses.
The Impact of Artificial Intelligence
I am in the camp that, in the longer term, we will see new and varied jobs created by artificial intelligence, and these new jobs will replace positions that were eliminated by technological advancements. That’s a positive outcome from a long-term economic perspective. In the short run, AI will create economic friction, and those caught in that friction are going to be a bit less concerned about the shape of the economy in the long run.
What This Means for Investors and the Markets
If consumer spending is weighed down by a tepid job market, and job creation is largely concentrated in lower-paying positions, we expect this will have a slowing effect on the economy. It may also give the Fed the cover it wants to cut interest rates. If the rate cut occurs at a time when the economy is slowing, we could see inflation reduced and move toward Fed targets. We believe that the Fed remains concerned about a stagflation environment where inflation is rising at a time when the economy is stagnating. We are not projecting a stagflation environment, but it is certainly an economic condition that the Fed is trying to guard against. More to come.
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