Plus, AI’s structural impact on the economy and gold’s all-time high.
The Bureau of Labor Statistics reported today that U.S. employers added just 22,000 jobs in August, marking one of the weakest three-month streaks of job growth since the Great Recession. Job losses continued in manufacturing, professional and business services, the government, and financial services, with modest gains posted in education and health services, and retail and hospitality. Among the unemployed, the share of people searching for a job for more than 27 weeks has risen to 25.7%. Average hourly earnings rose 0.3% over the previous month and are up 3.7% compared to last year. The unemployment rate ticked up to 4.3%, though for now it remains near historical lows.
The U.S. has only added an average 28,000 jobs a month over the three months ending in July, which marked a significant slowdown from the roughly 196,000 jobs added on average over the previous three-month period, according to the BLS. Today’s report also further revised down the payroll data release for the month of June. This moved the number down to negative 13,000 jobs, making it the first month of net job losses for the U.S. economy since December 2020.
Notably, this report is the first release following the firing of BLS Commissioner Erika McEntarfer. President Trump has said he will nominate E.J. Antoni, the chief economist at the Heritage Foundation, to the post. Antoni has been a longstanding critic of the BLS and its methodology—even floating the possibility of doing away with the monthly jobs report in an interview with Fox News. That approach of less transparency and data would rattle financial markets and shake investor confidence. Trump responded to today’s news by posting on Truth Social that “Jerome ‘Too Late’ Powell should have lowered rates long ago. As usual, he’s ‘Too Late!’”
On that point, the market is now fully pricing in a 25-basis-point rate cut for the upcoming September 16-17 Federal Reserve meeting. The Fed appears increasingly willing to adjust policy closer to neutral in an effort to achieve the delicate balance of both stable prices and full employment. In other words, the Fed remains committed to—eventually—achieving price stability, but as the Federal Open Market Committee has shown for years, policymakers are willing to continue to tolerate above-target price pressures to stave off more pronounced weakness in the economy.
Investors may not be so placated by a rate cut, given what it says about slowing growth and the risks building in the system thanks to tariffs and artificial intelligence-related job-market shifts.
Speaking of AI, President Donald Trump hosted 33 tech leaders at a White House Rose Garden dinner this week, including the likes of Sam Altman, Mark Zuckerberg, Tim Cook, and Bill Gates; Elon Musk was not in attendance. The gathering followed an AI education summit hosted earlier in the day by First Lady Melania Trump, who balanced the excitement of the moment with a warning that “we must manage AI’s growth responsibly,” and that “during this primitive stage” it should be subject to “watchful guidance.” CEOs made commitments to invest in training Americans to meet this moment, including IBM CEO Arvind Krishna, Code.org President Cameron Wilson and Google and Alphabet CEO Sundar Pichai, who specifically pledged to spend $150 million on AI education out of a three-year, $1-billion education commitment in the United States.
Taking all this news in, we seem to be moving toward an inflection point for the economy as it recalibrates from the post-COVID era of rapid growth and hot inflation. This new stage is characterized by an economy grappling with growth and inflation amid major structural shifts due to aging demographics and AI.
It is probably not surprising to see that those changes are bringing forward fear factors. As such, the price of gold hit an all-time high, trading above $3,600 per ounce this week. Gold is traditionally perceived as a safe haven when the dollar and other currencies are less strong, and when people are afraid. Gold is also benefiting from foreign central bank buying, as Barron’s reported this week.
For those who may be wondering, at RWA we share Warren Buffett’s point of view on gold, which he expressed best by saying, “Gold… has two significant shortcomings, being neither of much use nor procreative… If you own one ounce of gold for an eternity, you will still own one ounce at its end.”
We see the risks of the economy and in pockets of the market right now due to valuations but discourage trading on fear. Instead, we urge a focus on your balance of assets and a prioritization on liquidity. Better outcomes are achieved by having the liquidity to withstand a crisis or market downturn and stay invested in your long-term portfolio versus trying to change your investments and get the timing right on when to get out and when to get back in.
Wishing you a wonderful weekend and a Happy Grandparents’ Day to all those grandparents out there and thank you for your love and support!
Written by a human.