Jobs Report Disaster — Fed Forced to Cut Rates More Quickly

The latest jobs report for August reveals a starkly weakening labor market, with only 22,000 jobs added, significantly below the expected 75,000. This figure is preliminary and likely to be revised downward, mirroring the significant downward revision for June, which went from a reported 147,000 jobs added to a loss of 13,000. The unemployment rate has also climbed to 4.3% from 4.2%, a critical indicator for the Federal Reserve.

Wage growth at 3.7% is failing to keep pace with inflation, estimated around 5%, meaning most Americans are experiencing a real pay cut. The speaker emphasizes that CPI inflation does not accurately reflect true price increases, pointing to money supply growth as a more accurate indicator of inflation, which is at an all-time high. Job openings have fallen to a 10-month low, and for the first time since April 2021, more people are seeking jobs than there are available positions.

Consequently, the Federal Reserve is now expected to cut interest rates, with a 100% chance of a cut at their upcoming September 17th meeting. This is a response to the deteriorating labor market conditions, and many anticipate multiple rate cuts in the coming months. The speaker warns that this easing monetary policy will likely fuel further inflation, urging listeners to protect their assets.

• August jobs report showed only 22,000 jobs added, significantly missing expectations of 75,000.
• June jobs data was revised down from 147,000 jobs added to a loss of 13,000.
• Unemployment rate rose to 4.3% in August, a key factor for the Federal Reserve to consider interest rate cuts.
• Wage growth of 3.7% is lagging behind inflation (around 5%), resulting in real pay cuts for most Americans.
• There is a 100% chance of an interest rate cut by the Federal Reserve at their September 17th meeting due to labor market weakness.

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August Jobs Report Shows Weakness [0:00]

• The jobs report for August indicated a weak labor market, with only 22,000 jobs added, far below the expected 75,000.
• This number is preliminary and expected to be revised downward significantly.
• The labor market has been steadily weakening.

"The jobs report was released and the results, they were bad."

June Jobs Report Revision [1:00]

• The figures for June were revised downward significantly, showing a loss of 13,000 jobs instead of the initially reported 147,000 jobs added.
• This revision contradicts previous statements about a healthy and robust labor market.
• The speaker predicts large downward revisions for both July and August figures.

"So 147,000 net jobs created. So the government said you know at that time the labor market was very healthy. The labor market is very robust. The Federal Reserve said that they're not cutting interest rates because the labor market is so solid. Yeah. But now okay now they revised it. positive 147,000 jobs added to now negative 13,000."

Unemployment Rate and Federal Reserve Policy [2:10]

• The unemployment rate increased from 4.2% in July to 4.3% in August.
• An upward tick in the unemployment rate is a significant reason for the Federal Reserve to cut interest rates.
• The speaker will later discuss the odds of an interest rate cut.

Wage Growth vs. Inflation [2:45]

• Wages are growing at 3.7% annually, while inflation is around 5%.
• This means wages are not keeping up with inflation, leading to real pay cuts for most Americans.
• To maintain purchasing power, pay raises need to exceed the rate of inflation.

"This means that most Americans continue to see pay cuts in 2025. So essentially, if you're not getting a 5% raise, then you're taking a pay cut. That's the reality. That's the truth."

Understanding Inflation and Money Supply [4:00]

• The speaker argues that CPI inflation does not accurately measure price inflation.
• CPI measures the change in the cost of living, which is different from the change in prices themselves.
• True inflation is better reflected by the growth of the money supply, which is at an all-time high according to Federal Reserve data.
• July inflation year-over-year was 4.8%, and acceleration is expected in 2026.

"So what you have to understand is that CPI inflation does not measure price inflation. In other words, it does not measure the change in price. So CPI inflation measures the change in the cost of living which is a completely different thing."

Impact of Inflation on Assets [5:55]

• The increasing money supply is a reason why gold and silver prices are rising and the stock market is not declining.
• This is seen as a way to prop up the system through monetary printing.
• If pay raises don't outpace inflation, people are effectively accepting a pay cut.

Additional Labor Market Data: Job Openings and Layoffs [6:20]

• Job openings fell in July to 7.18 million, the lowest in 10 months, down from 7.36 million in June.
• For the first time since April 2021, there are more people looking for jobs than available job openings.
• Job cuts from January to August are up 13% year-over-year and 39% month-over-month.
• California saw a 24% year-over-year increase in job cuts, while the East Coast experienced a staggering 224% increase, largely due to federal employee cuts.
• In August, the government cut a net 15,000 jobs.

Reasons for Job Cuts in 2025 [7:40]

• The top reasons companies are cutting jobs include:
  1. Loss of government-funded initiatives and contractors.
  2. Market and economic conditions (slowing economy).
  3. Closings, bankruptcies, and restructurings.
  4. Technological updates, including automation and AI implementation.

Federal Reserve Interest Rate Cut Expectations [8:40]

• The labor market is worsening, and the Federal Reserve is expected to cut interest rates at their next meeting on September 17th.
• Before the jobs report, there was a 99.3% chance of a rate cut. After the report, this chance rose to 100%.
• The debate is now about the size of the cut: 0.25% (88.1% chance) or 0.5% (11.9% chance).
• The speaker predicts a 0.25% cut, believing the Fed will want to save some "firepower" for a potential bond crisis in 2026.

"Personally, like if I had to make a bet, I I would expect them to cut interest rates by 0.25%."

Fed Governor's Stance on Labor Market and Rate Cuts [10:00]

• A Fed governor believes the labor market is weaker than reported and that interest rates should be cut now.
• This suggests more rate cuts are likely to follow, not just a single move.
• The governor notes that initial anecdotal evidence of hiring freezes and layoffs didn't align with official BLS numbers, which were later proven to be inaccurate.
• Labor markets can deteriorate rapidly and non-linearly.
• Multiple rate cuts could occur over the next 3 to 6 months, depending on economic data and inflation concerns.

"Well, I've been clear that I think we should be cutting at the next meeting. The labor market has come in much softer."

Conclusion: Weakening Labor Market and Rising Inflation [12:40]

• The labor market is weakening, leading to easier monetary policy (interest rate cuts).
• This is expected to further surge inflation, described as a "hidden tax."
• The speaker urges listeners to protect their assets due to anticipated inflation.