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Chapter 1: Why are investors reacting so dramatically to market changes?
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Pushkin. Stocks are down, way down. No, wait, this just in, they're up. No, they're down again. Wait, no, they're definitely up now. Today on the show, some zigzags in the equity markets and other markets too. This is Unhedged, the markets and finance podcast from the FT and Pushkin. I am Rob Armstrong coming to you from New York City, where it's not just markets that are volatile.
It is my internal emotional state. I can't handle all this zigging and zagging. I am joined down the line from London by Dara McFadden, the newest member of the Unhedged team. Dara, are you managing to remain calm in the face of all of this? I'm reverting to the mean, Rob. That is the spirit. So we've had an absolutely wild couple of days in markets, Dara. Friday, abysmal.
Monday, starts strong and then sags drearily. And as of recording time today, we look like we might have a good one. What is all this chaos, Dara, and where did it begin?
Let's go back to Friday. Friday was bad. And the reason it was bad was a jobs report that was actually quite good. So in the US, one of the key economic indicators we pay a lot of attention to is the non-farm payrolls that comes out from the Bureau of Labor Statistics once a month. Last Friday, we got the report for the number of jobs created in May of And it came in far above expectations.
There were 172,000 jobs created, more than double the market was expecting.
And what's amazing about this to me is that if we were talking on this show four months ago, we would be talking. And I'm sure, by the way, we did talk four months ago about how the kind of equilibrium level of U.S. job creation was zero. Right. Working age native born population not growing. Donald Trump cuts off the immigration flows.
America can have a stable unemployment rate with no jobs added. And here we are. This is the third report in a row. We're adding, you know, 100,000 jobs or even more. It's an amazing turnaround in some way.
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Chapter 2: What caused the market plunge after the positive jobs report?
Right, which is kind of the ultimate symbol. There's not ambient risk appetite floating around in the atmosphere. There's just AI appetite floating around. It's really different. Well, maybe that's people selling their Bitcoin so that they can invest in SpaceX. We need a name for that trade. Listeners, we're looking for a name for the sell Bitcoin by SpaceX trade. Any suggestions?
Unhedged at FT.com. I got a question for you, Dara, and I'll ask this question to you about the United States and indeed about the globe. We've talked about how the market is narrow. Is the economy narrow?
Yeah. I mean, the jobs report, even though it added 172,000 new jobs, the other data on the unemployment rate and wage growth weren't as good. So the signs are that the labor force is actually not growing very much in terms of people joining the job market. And the signs are that the unemployment rate actually hasn't come down in the last three months.
So it's kind of stuck around 4.3% at the moment. That's not bad, but it's not a great sign if you're adding 172,000 jobs and several positive job months in a row. But the unemployment rate is kind of stuck at that level.
To pause on that, it is two different surveys, right? Right. One is the jobs added number comes from a survey of businesses, the establishment survey. And the unemployment rate comes from a survey of households. So is some failure a fit there, normal? I don't know. I just want to throw it out there as a possibility.
Yeah, I mean, this is an important point of all these sorts of data releases. They're preliminary. They're imperfect. There's different ways of gathering these numbers. Further data comes in later on, and that's why we have upwards revisions later on. It may be worth adding that for the data that came in on Friday, we also got upwards revisions for March and April. Good point.
And so there's 93,000 additional jobs for those months if you combine the two of them.
But you mentioned this, and I think it is worth hitting hard. We had been seeing real wages. That is wages minus inflation. The growth slowed down and we've hit basically zero now. And that cannot be good for the economy at large in the United States.
Yeah, the story here is that real wage growth has been falling since its peak a few years ago in the aftermath of COVID and that supply shock. Workers were able to negotiate real increases in their wages. But if you look at the trend line over the last few months, it's definitely coming down and it's now slowing at about 3.4%, you know, the annual rate of wage growth.
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