Here’s what the doomsayers are getting wrong about the job market, according to a Wall Street veteran
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"This implies that the weak gains in payrolls in recent months might have something to do with the supply of labor."
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August 4, 2025
05:05 PM
Fortune
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Economy·U.S. jobs reportHere’s what the doomsayers are getting wrong the job market, according to a Wall Street veteranBy Jason MaBy Jason MaWeekend EditorJason MaWeekend EditorJason Ma is the weekend editor at Fortune, where he covers , the economy, finance, and housing.SEE FULL BIO Getty ImagesThe shocking jobs report on Friday wasn’t as bad as it looked and was actually just fine, according to market veteran Ed Yardeni, who cited wage and workweek increases while attributing weak payroll gains to muted labor supply rather than waning demand
That’s as others on Wall Street have raised alarms the U.S. economy nearing a recession
Wall Street’s dreams for a bulletof economy impervious to President Donald Trump’s trade war may have been shattered, but market veteran Ed Yardeni accentuated the positive in what was an otherwise dismal jobs report
That’s as payrolls grew by just 73,000 last month, well below forecasts for 100,000
Meanwhile, May’s tally was revised down from 144,000 to 19,000, and June’s total was slashed from 147,000 to just 14,000, meaning the average gain over the past three months is now only 35,000
While Yardeni, president of Yardeni Re, acknowledged in a note Monday the report was a shocker, he maintained the labor market remains resilient. “It’s hard to put a positive spin on this news, but not for us!” he wrote
Yardeni pointed to solid increases in aggregate hours worked and the average workweek in the private sector
In addition, private-industry wages also saw healthy advances and hit record highs
Meanwhile, he attributed some of the slowdown in payroll gains to the shrinking supply of workers instead of waning demand for workers
The labor force has stopped growing in recent months amid Trump’s immigration crackdown
At the same time, gauges for labor demand have very closely tracked this supply trend so far this year, which is an unusual phenomenon, Yardeni explained. “This implies that the weak gains in payrolls in recent months might have something to do with the supply of labor,” he added. “The demand for labor might have been temporarily weakened by employers’ holding off on hiring until Trump’s Tariff Turmoil.” By contrast, JPMorgan economists interpreted the jobs data as an indication of weaker demand for workers
In a note on Friday evening, they downplayed the increases in wages and average workweeks, while pointing out that hiring in the private sector has slowed to an average of just 52,000 in the last three months, with sectors outside health and education stagnating. “We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal,” JPMorgan added. “Firms normally maintain hiring gains through growth downshifts they perceive as transitory
In episodes when labor demand slides with a growth downshift, it is often a precursor to retrenchment.” The note also warned the depressed job-growth pace is unly to sustain income gains
Bank of America said in its own note Monday a shock to labor demand should lead to a slowdown in wage growth and hours worked
While it’s not demand is deteriorating faster than supply, BofA said the jobs data looks more a supply than a demand shock so far
For now, even though hiring has cooled sharply, there’s no sign of mass layoffs yet, and the unemployment rate has barely changed, bouncing in a tight range between 4% and 4.2% for more than a year
The economy is still seen as holding up
The Atlanta Fed’s GDP tracker points to continued growth, though it’s expected to decelerate to 2.1% in the third quarter from 3% in the second quarter
The supply-versus-demand question could be key in how the Federal Reserve responds, or not, to the jobs data
Given Monday’s big rally in the stock market and continued drop in Treasury yields, Wall Street is betting on Fed rate cuts soon
JPMorgan said job creation is no longer solid, and that when combined with growing headwinds from Trump’s trade war, the recent data point to the Fed moving closer to lowering rates
Meanwhile, BofA backed its forecast that the Fed won’t lower rates this year, and Yardeni similarly reaffirmed his view of a “none-and-done” scenario. “That’s because we expect that the next batch of inflation indicators will show that tariffs are boosting consumer price inflation, especially of durable goods,” he added. “We also expect to see more signs of life in the labor market.” Introducing the 2025 Fortune 500, the definitive ranking of the biggest companies in America
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