Transcript of Justin Wolfers Discusses Disastrous Jobs Report

So what do con artists do after promising riches, that they're gonna make you so damn rich, and then they destroy you and take your money? Well, they just up the ante and they escalate their con. What does Donald Trump, a lifelong con artist, do when he promised a golden age on day one? And here we are, essentially 2 years into this massive economic Ponzi scheme that he's now run on our country, and people are suffering. You have a horrible jobs report, you have inflation up. What do you do? What do you do? Well, again, you up the ante. You say, not only would I give myself a grade of 100%, I think I'd give myself 150%, folks, because the golden age is here right now. Listen to what he says on an interview from Friday. Let's play it.

But our country right now is doing better than it's ever done. You know, when I see polls on the economy, I should have 150%, not 100%. Oh yeah. Because we have the greatest, this is the golden age of America. What's being built now in this country has never ever been built. And we're really, we are literally in the golden age of America. And I think people are starting, I actually think people are starting.

We'll see, 89 days, we'll see if they—

It's gonna be very exciting.

Very tough interview there brought to you by Punchbowl and Boeing. I don't know if you saw that. Brought to you by Boeing. Oh yeah, yeah, you have, I guess you have.

I don't know.

I could think of one or two follow-up questions I, I might want to ask. But from a Boeing-sponsored interview with Donald Trump to CNBC, Treasury Secretary Bessant declares the K-shaped economy is hereby over because I say so. Just to remind you, the K-shaped economy is meaning like a K where the rich get richer and everybody else is getting screwed. But that's gone. We've solved the equality gap, everybody. Here, let's play this clip.

So we are starting to see— I got sick of hearing about this K-shaped economy. I can say here definitively the K-shaped economy is over.

Oh, good gosh, I got sick of it too. I got sick of it. Really, it's— you could say, guys, everybody, Bessant says definitively it's over. We're good. So, okay, so what were the job numbers on Friday? Is it reflective of this K-shaped economy being over? No, a really bad jobs report, one of the worst ever. Uh, didn't you promise we're gonna have so much jobs, you weren't— we're not even gonna know what to do with it? Well, the US economy lost 23,000 jobs in July. May and June were revised down by a combined 103,000 jobs. Yes, the unemployment rate ticked down ever so slightly, but it's still at 4.1%, which isn't great. But it went down for the wrong reasons, because over 260,000 people left the labor force and said, we ain't coming back. So I guess they just don't get counted anymore. Wage growth, 3.2%. Inflation year over year, 3.5% or so. But that number's gonna go back up. It only went down in my opinion because the memorandum of understanding brought it down temporarily. But I think that's gonna go up. And so clearly the wage growth is not growing. It's being squashed by what the inflation is.

But folks, he says the K-shaped economy's gone. So clearly the stock market's gonna react negatively to those numbers, right? Because everybody's gonna share in the pain, huh? No, it actually looks like the market was ripping. The market was ripping immediately on that news because when you have bad job numbers like that, that may mean the Fed may not raise interest rates. They may have to lower it or keep it the same. Because in theory, if you lower it or you keep it the same or you don't raise it, that means you're going to spur on some hiring by, you know, not by not raising the interest rates on companies to make it more difficult to borrow. We'll get some more expert opinion on that in a moment. But how are they covering this on state regime media Fox? Dun dun dun. A really bad jobs report. Surely they're going to handle it with some tact. Here's what they say.

Let's play it again. A disappointing jobs report. Dow futures way up, doubling where they were before. I'm going to continue We'll continue to dig through to tell you where the jobs are and are not. Maria, all right, thank you, Lauren. 23,000 jobs lost in the month of July. Louie, you wanted a weak report, you got it. Was this too weak?

No, not at all. You know, um, when Palantir announced their earnings, they basically had record earnings by decreasing their sales force. So there's this AI productivity boom underway And, uh, it's obvious what's happening. But no, this is great news. That's why the market's up. And, and now the Fed has an unemployment mandate, and this is great news. And obviously a lot of people disappeared from the workforce if the unemployment rate dropped.

They said disappointing for about 2 seconds, then they went into this is great news. I want to bring in Justin Wolfers of Platypus Economics. Make sure you all subscribe to his YouTube channel by searching Platypus Economics. Justin Wolfers, also chief economist here at the Midas Touch Network. Justin, I'm just going to let you take it from here. What do you— what do you make of— what do you make of that all?

Ben, that was just a truly brilliant comedic setup. I mean, I honestly couldn't have even imagined a world in which anyone thought any of that was real. I laugh so I don't cry. So, look, let me just tell the most important story of the day. You're much better than I am at putting it in the context of the political story. But I think I can get the economics right here, which is If you're a person who likes it when people find work, when they find dignity, when they can put food on the table, then you'd think it's a bad day when the US sheds jobs. We were expected to gain 80,000 jobs today, we lost 23,000. I always try to be a measured economist. So typically if we miss expectations by a small amount, I'll kind of shrug my shoulders and say, "Not a big deal." But this isn't a small miss. This is a big deal. So we lost 23,000 jobs, which puts us roughly 100,000 below what Wall Street had been expecting. And in the previous 2 months, data revisions, which are a normal, natural part of the statistical process, suggest that the economy hadn't been sort of in that B+ territory we'd been hoping for, maybe even A-.

It had been substantially worse. So we revised down recent history another 100,000 jobs. So what we've moved to is, you know, the tightrope. We're worried it's not doing that well. The good news of the past few months, some of it turned out to be something of a statistical illusion. And then there are a range of other things to be worried about. There are some other indicators of how the economy is doing that suggest the job market may even be weaker. Just to deal people in on the nerdy wonkiness of it all, the government measures employment growth using a survey of firms. That's usually what we emphasize because that's more signal than noise. There's a separate survey where they ask Americans, did they find a job? And that's what we get the unemployment rate from. That one suggests things are even weaker and it's suggested that now for enough months that it really is time to be a little bit concerned that yesterday was bad news, but perhaps we need to put an asterisk next to it, which is it may actually be worse than it looks. So mate, I think that we should think about this in very personal terms.

I think that today what happened was one Michigan stadium full of people fewer have jobs than we'd hoped. And another Michigan Stadium— it's a big house, it's a big stadium— we thought had jobs from previous statistics. It turns out that they didn't. And each of those folks are doing a little tougher. And folks at home, even who didn't lose their jobs, they're a little more on edge. They're a little more worried about how their kids are going to get into the labor market, and they're a little more worried about how they're going to get a pay rise to keep up with the rising cost of living.

Because then they are looking for, okay, well, this is a bad news story, right? This is, you know, most empathetic human beings who look at this, common sense, say we want Americans to be gaining jobs, working with dignity. We want all of that. But then you see, you know, on a network like Fox, you know, and in certain circles when we talk about the K-shape, those who are thriving versus those who are struggling to even survive, they're spiking the football as though this was a great day. And so it almost adds an additional punch in the face to the bad news and the bad trend that there are the people— when we talk about K-shape, a lot of these rich oligarchs, there's a trillionaire and the billionaires and all of them who say, aha, this shows AI, we can now replace our workforce. In addition, this may mean the Fed will not raise interest rates, at least yet, or this could stall that a little bit longer and perhaps we could eke out a little more stock gain for the remainder of this year and maybe even, you know, Kevin Warsh, who we know is having daily conversations with Trump, evidently from the least recent reporting.

As you have Treasury Secretary Bessant attacking the Wall Street Journal and Financial Times and other writers who write about the Fed. Maybe behind the scenes they're using this as a way to lower interest rates, which I believe Bank of America and others have basically said even the short period of time, some of this behavior reminds us of developing nations based on some of the posture vis-à-vis interest rates relative to the inflation data that we see.

Ben, talking with you is like having lunch at a buffet. There's just too many things on the buffet to stuff on my plate and get into.

So that's why, by the way, you can't take me to a Vegas buffet. I start making pizza, egg salad sandwiches, and it gets really gross. Really?

That sounds amazing. Count me in for one of those. So let me bite off the K-shaped economy. And then after that, if you want to go back to the buffet, we can talk about the Fed. I'm a one thing at a time guy. I'm just a little simpler, Ben. Sorry, mate. Okay. K-shaped economy. I don't think we have this asset ready, but we might be able to get it up, which is Treasury Secretary Bassett tweeted actually that the K-shaped economy was definitively over. And the evidence that he gave was very interesting evidence. And it's true and it's worth paying attention to. And it shows that he doesn't understand anything. The evidence that he gave was he said, if you look at the workers at the 25th percentile of the wage distribution, so low-wage workers, their rate of wage growth over the past year has been higher than median. And the high-wage workers, those at the 75th percentile, their rate of wage growth was a little bit lower. So that's true. Good job, Secretary Bassett, you found facts and you found facts that were true. But what he's failed to understand— there's some part of this that's understandable if he weren't a Treasury secretary— wages are just one part of income, right?

For working-class families, wages are the most important part of income. For the folks at the very top end, wages are only one part of it because they get investment income. We'd often call that capital income. And so what he's done is he said, "Let's just look at one part of income." And he's shown that's become slightly more equal over the past year. Okay, but here's the other important part. You can think about the total economy, how much pie we make. Pie is a metaphor here. I mean GDP, I mean income, I mean money, I mean stuff. Think about the size of the pie. And then you can just think about one part of it gets sliced off and goes to capital. So it goes to the owners of businesses as profits and the like. The other part goes off to feed the workers. Historically, nearly 3— roughly about 3/5 of that pie went to workers. That's fallen dramatically. And right now it's at the lowest level it's ever been. We call this the labor share of income. So what this means is within the labor share, income has become somewhat more equal. But more income is going to capital.

Guess what? Capital is overwhelmingly held by the rich. And so that is really what the K-shaped economy was all about all along. We've seen the headlines, the stock market's doing well, the AI boom is generating enormous gains. We have these incredibly rich and successful companies, and I don't resent success at all. But who holds stock in those companies? Working-class folks might have a couple of dollars in their 401. Richer folks hold a whole lot of money. They're more likely to be aggressively invested in stocks. And so that chunk of our national pie that we send off to capital, very little of it is getting through to working and middle-class Americans. And so the point here is the K-shaped recovery is quite real, but it's not about rich workers versus poor workers. It's actually much more about labor versus capital. And again, the key point here that hasn't been discussed enough, and I think it's really worth emphasizing some more. Labor's share of the national pie is the lowest it's ever been in recorded history, and that goes back to 1929. This is a big deal. You can measure it a million different ways. Lots of economists have looked at it, and, you know, it's something that really matters.

Which is why our definitions of recession or Great Recession may not even make all that much sense, because if you look at labor going back to 1929 and how labor feels about their economic circumstance, you ask them, look at the consumer confidence report from a great university, University of Michigan, the lowest in history. People are feeling that they're in not just a recession, but a great recession right now. But when we get GDP numbers and other things, you go, ah, you know, it's, it's eking out a little bit slow gain. 1.5%, 1 point, you know, the latest 1.5%. So it does appear though the incongruity is the K-shaped explanation that you just gave, in the sense that capital is kind of hoisting this up but labor is being, uh, kind of pushed down, and that it's not a shared pain, it is a pain on the backs of labor while capital still remains in that K trajectory, and then you have that slight— you're not— you don't have two consecutive quarters, which is, I guess, the technical definition of like recession territory because of that dynamic. Is that, is that a way to think about this, or is that overly simplistic?

So I think you're— so let me start at the beginning. Um, macroeconomics is about the economy as a whole. So when we talk about recessions, we talk about what's happening on average in America. Typically, a recession is on average across a bunch of sectors, the economy is shrinking rather than growing. That's not happening right now. So to be crystal clear, the US is not in a recession. Now, you'll notice I said it's when what's happening across everyone. Now, you know, the truth is there are many different ways of describing the economy. One is what's happening to the average. Another would be go and have coffee with 340 million different Americans and understand that each of us lives a different story. There are vast parts of the country, there are vast sectors, there's workers rather than capitalists and so on where things are a whole lot grimmer. That's not our definition of recession, but it's also a reality of not only their lived experience. I'm not trying to be soft here. It's also very, very clear in the data. Most of the gains have gone to capital. So therefore, if you rely on labor income for, you know, to put food on the table, you haven't gotten your fair share out of all of this.

You haven't gotten— your slice has gotten a bit bigger, even if the pie has got— your slice has gotten smaller, even if the pie has gotten bigger. I want to connect that to, as you did, consumer confidence. So you ask people how they feel about the economy and they feel utterly miserable. In fact, consumer confidence is at its lowest level. I'm going to argue with you a little bit. I don't think that quite makes sense. Things are not as good as we'd like them to be. But I also remember how dark things were during the financial crisis of 2008, 2009. That was a terrifying time. I remember how dark things were during the COVID recession. That was a terrifying time. There's no way— I just find it implausible. And folks at home, if I'm wrong, just tell us all in the comments. But it's hard to believe the level of fear and misery is quite at the levels it was back then. So what's going on? I, you know, that's— I don't want to take the doom and gloom story too seriously, Ben. You know me, I like to be an optimistic bloke. Um, I think that people are really upset about the fact that we do have some forces that are making life harder for people.

That happens sometimes when there's a small virus that locks us in our homes, or a financial crisis. But what's the kick in the teeth here? It's the cause of all of this is the White House, that this is a tariff-driven agenda, that this we have a war in Iran, that the Strait of Hormuz is closed, all of this is utterly pointless. That we've just had a budget that's blown out the deficit, that that budget takes from the poor and gives to the rich. It just feels so stacked against every one of us. The small stories through the day that you often tell, Ben, and you tell them eloquently, you could ask me as an economist, is this a big deal? And I would say, no, Ben, if it's millions of dollars rather than billions, it's a small deal. But that relentless drip, drip, drip, drip, that sense that someone's out there trying to screw you, Jeez, mate, it even gets me down sometimes.

Yeah.

And perhaps when someone in the past, when you would see a crisis, you would say, you know what, this is a crisis, but we've got people working to fix it. And now it's to your, to the point that you're making, I believe, wait a minute, the people who are supposed to fix it are creating it and they're creating it and they're creating it again. And so it is, You're burning it, you're burning the building. You're not, you know, at least in a crisis in the past, it's like, okay, the firefighters are here, they're doing their best to put it out. And so to me, that is, you know, encapsulated in what you said. We're going to do other videos this weekend. And so we'll incorporate some of the back end into that where I really want to go into some currency issues and the overall credibility of the United States market vis-à-vis other central banks. We're going to geek out. But everybody, more importantly, if you really want to geek out, subscribe to Platypus Economics on YouTube. Make sure you all go there. There. And do me a favor, when you watch a Justin Wolfers video, um, put in the comments that Ben says hello so he can see that we sent you, uh, directly.

It's been great, Ben.

I have had so many of our mutual friends say Ben says g'day, and I'm like, all Ben does is say g'day these days.

I love it. That's my goal. Everybody hit subscribe. Let's get to 7 million subscribers.

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