Anastasia Amoroso on Hiring Slowdown, AI Impact, and Inflation Outlook

Labor Market Weakness and Hiring Slowdown

• 📌 The current labor market is characterized by weakness and a lack of significant net new hiring, with activity primarily limited to replacements and churn.
• ⚠️ A key factor contributing to this hiring slowdown is the tariff impact on corporations, which have had to absorb costs and maintain margins without expanding their workforce.
• 💡 The Fed's potential for significant interest rate easing (75 basis points) could help cushion the impact of tariffs and potentially stimulate corporate investment and hiring.

Artificial Intelligence and the Future of Work

• 🤖 Artificial intelligence (AI) is identified as a potential external force that could push the labor market off its current stall speed, leading to layoffs.
• 📈 Companies are increasingly experimenting with AI, and while it currently represents 9% of businesses, its adoption across verticals suggests it could be a significant driver of job losses.
• 💬 The discussion touches on the changing nature of work and employment growth due to AI, with concerns about its impact over the next several years.

Immigration Policy and Labor Supply

• 👥 Changes in immigration policy have altered the labor supply, and the current job creation rate is insufficient to absorb this supply.
• 📉 The break-even rate for job creation is around 90,000 jobs per month, a level that is not currently being met, indicating a need for the Fed to address this imbalance.

Inflation Outlook and Fed Policy

• 📊 Near-term inflation is not a significant concern, as core PC inflation for services has been stable, and goods inflation is being tempered by companies' inability to pass on cost increases to consumers.
• ⚠️ While inflation might perk up in 2026 if the Fed successfully cushions the economy, the near-term outlook suggests limited inflationary pressure.
• 📉 The market may need to adjust rate cut expectations ahead of the next FOMC meeting, but after working through excess exuberance, the path is likely higher for interest rates.

Market Sentiment and Seasonal Patterns

• 📈 September defied seasonal patterns with strong performance, particularly for the NASDAQ, leading to less of an overbought condition than previously.
• ⏳ After consolidating and working off excess enthusiasm, the market may see a clearer path forward, potentially influenced by upcoming FOMC meetings and adjusted rate cut expectations.