Recent jobs report raises questions over when Fed will lower rates. China unveils an ambitious 5-year plan to overhaul the Hukou system. Stocks fall sharply as worries mount about weakening US economy. Evening report highlights jobs data 'flashing red' ahead of the election.
Sources:
https://www.wmur.com/article/jobs-report-unemployment-interest-rates-lower/61779401
https://thediplomat.com/2024/08/china-unveils-ambitious-5-year-plan-to-overhaul-the-hukou-system/
https://abcnews.go.com/US/wireStory/stocks-fall-sharply-worries-mount-weakening-us-economy-112524126
https://thehill.com/newsletters/evening-report/4808473-us-jobs-data-flashing-red-election/
Outline:
(00:00:00) Introduction
(00:00:40) Recent jobs report raises questions over when Fed will lower rates
(00:02:54) Stocks fall sharply as worries mount about weakening US economy. Dow drops 600, Nasdaq closes 10% below July high (CORRECTS: A previous APNewsAlert erroneously reported the Nasdaq's most recent high occurred in June})
(00:05:30) Evening Report — Jobs data ‘flashing red’ ahead of election
Simply Economics
Fed Rate Cut Speculation, China’s Hukou Reform Plan, and Stock Market Decline
Recent jobs report raises questions over when Fed will lower rates. China unveils an ambitious 5-year plan to overhaul the Hukou system. Stocks fall sharply as worries mount about weakening US economy. Evening report highlights jobs data 'flashing red' ahead of the election.Sources:https://www.wmur.com/article/jobs-report-unemployment-interest-rates-lower/61779401https://thediplomat.com/2024/08/china-unveils-ambitious-5-year-plan-to-overhaul-the-hukou-system/https://abcnews.go.com/US/wireStory/stocks-fall-sharply-worries-mount-weakening-us-economy-112524126https://thehill.com/newsletters/evening-report/4808473-us-jobs-data-flashing-red-election/Outline:(00:00:00) Introduction(00:00:40) Recent jobs report raises questions over when Fed will lower rates(00:02:54) Stocks fall sharply as worries mount about weakening US economy. Dow drops 600, Nasdaq closes 10% below July high (CORRECTS: A previous APNewsAlert erroneously reported the Nasdaq's most recent high occurred in June})(00:05:30) Evening Report — Jobs data ‘flashing red’ ahead of election
- Duration:
- 9m
- Broadcast on:
- 03 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Saturday, August 3rd. On today's show, the recent jobs report raises questions over when the Fed will lower rates, and China unveils an ambitious five-year plan to overhaul the HuCo system. Plus, stocks fall sharply as worries mount about weakening U.S. economy. These coverage and more up next. I'm David, and you're listening to Simply Economics. Welcome back to Simply Tech. Today, we're discussing some exciting new developments from Figma, the collaborative design platform. The company has just announced the addition of three generative AI features to its Fig Jam whiteboard tool. Here to provide more insight is our tech correspondent. So tell us, what exactly are these new features Figma is introducing? Figma is adding three key features to Fig Jam, its online collaborative whiteboard. The first is a tool to help users create new Fig Jam boards more easily. When faced with a blank canvas, users can now describe what they need, like a calendar or project timeline, and the AI will generate a template to get them started. This should make Fig Jam more accessible to a wider range of users, not just designers. That sounds like it could be a real time saver. What about the other two features? The second feature is designed to help organize the digital sticky notes that users often add to their boards. As a board grows, it can become difficult to manage all those notes. The new AI tool can automatically sort the stickies into logical groupings based on themes or the person responsible for each task. This should make it much easier to keep track of everything on a busy board. I can see how that would be helpful, especially for larger projects. And the third feature, the final edition, is a summarization tool. Once a board is full of ideas and notes, the AI can generate a summary of the key points. This should save users a lot of time that would otherwise be spent manually synthesizing all that information. Figma is using OpenAI's language model for these features, with some custom tweaks to understand Fig Jam's specific concepts. It's fascinating to see how AI is being integrated into collaborative tools like this. Do we know how Figma is ensuring the AI is used responsibly? Yamashita, Figma's chief product officer, says they are testing a warning system to prevent users from generating harmful or inappropriate content. The OpenAI model they're using also has some built-in safeguards. It's an important consideration as more companies look to leverage AI in their products. Thanks for the update on Figma's new features and the ongoing regulatory review of its acquisition by Adobe, it will certainly be interesting to see how this develops. Shifting gears now, stocks fell sharply today as worries mounted about a weakening US economy. The Dow dropped 600 points while the NASDAQ closed 10% below its July high. For more on this, we turn to our correspondent at Simply Economics. What drove this sharp sell-off in the markets today? The primary driver appears to be growing concerns about the health of the US economy. A series of recent economic data points, from slowing consumer spending to weakening manufacturing activity, have painted a picture of an economy that is rapidly losing steam. This has investors worried that corporate profits will take a significant hit in the coming quarters. The NASDAQ in particular seems to have been hit hard, now down 10% from its recent high in July. Why are tech stocks seeing such pronounced weakness? Tech stocks tend to be particularly sensitive to changes in the economic outlook given their high valuations and reliance on strong growth to justify those valuations. With signs pointing to a slowdown, investors are reassessing whether current tech stock prices are sustainable. Additionally, rising interest rates make the future cash flows of these growth-oriented companies less valuable in present terms. How are other sectors of the market faring in this sell-off? Are any areas holding up better than others? While the sell-off has been broad-based, some traditionally defensive sectors like utilities and consumer staples are seeing relatively less downside. These areas tend to be less economically sensitive and offer steady, if unspectacular, performance in tougher times. However, they are by no means immune and are still trading lower on the day. Looking ahead, what are the key factors that could either accelerate or slow this market decline? A lot will depend on forthcoming economic data and whether it confirms fears of a significant slowdown. Investors will be closely watching indicators like the jobs report, retail sales, and manufacturing surveys. Any signs of stabilization could help put a floor under the market. However, if the data continues to deteriorate, it could fuel further selling. Additionally, commentary from the Federal Reserve will be in focus, with investors looking for hints about the future path of interest rate hikes and the central bank's assessment of economic risks. Certainly, a lot for investors to consider in this volatile market environment. Thank you for that insight and analysis of today's sharp market moves. On the topic of concerning economic indicators, new jobs data sent a chill across Capitol Hill on Friday and could be a wildcard with the election fewer than a hundred days away. The U.S. added 114,000 jobs in July, well below the 175,000 expected by economists. Unemployment rose to 4.3 percent, the highest since October 2021. Here with more analysis is our economics correspondent. What do you make of these troubling job numbers? The jobs report is certainly raising red flags. The unemployment rate has now gone up for four consecutive months, and at 4.3 percent, it's triggering what's known as the Psalm Rule Recession indicator. This says a recession is likely underway if the three-month average unemployment rate grows by a half percentage point or more from its low point in the past 12 months. A year ago, unemployment was at just 3.5 percent. The data suggests the labor market is rapidly cooling, and it seems blue collar workers are being hit particularly hard by the weakening job market. That could have major implications for the election in key Midwest and Rust Belt states. Absolutely. Americans without college degrees saw the biggest jump in unemployment. For those with no high school education, the unemployment rates surged from 5.3 percent last year to 6.7 percent now. High school graduates saw their unemployment rate jump from 3.3 percent to 4.6 percent over the past 12 months. Meanwhile, college graduates are faring better with unemployment at 2.3 percent up from 2 percent last July. This divergence could definitely shape voter sentiment in battleground states. In light of the weakening economic data, Federal Reserve Chairman Jerome Powell signaled that an interest rate cut is likely in September. But some, like Senator Elizabeth Warren, argue he's already behind the curve and should cut rates immediately. Where do you come down on this? There are valid arguments on both sides. Those calling for immediate rate cuts worry that if the Fed waits too long, it risks tipping the economy into a recession. The recent data they argue clearly shows the economy is slowing sharply and needs support now. However, others caution against cutting rates too close to an election, warning it could be seen as the Fed putting its thumb on the political scale. Traditionally, the Fed tries to avoid major policy moves in the months before an election. Politically, it seems the Trump campaign sees an opportunity to go after Vice President Harris on the economy, trying to make her the face of what they call "bidenomics." A recent poll did find Trump with a 12-point lead over Biden on who voters trust more to handle the economy. The economy is almost always the top issue for voters, and with inflation still high in the job market weakening, it's clearly a vulnerability for the Biden administration heading into 2024. The Trump campaign clearly senses an opening to paint the Biden-Harris ticket as were small for Americans' economic pain, higher costs of living, less job security, how effectively they prosecute that case, and how the economy actually performs over the next year could go a long way in determining the outcome of the election. There's certainly a lot of economic uncertainty on the horizon with major political implications. Thanks for helping us break it down. We'll continue following this closely as the election approaches. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] You