00:00 chris
We got this new report from Challenger Gray and Christmas Brian. It showed there were 97,000 planned layoffs in May. This is the highest number since May 2020, of which AI is thought to have actually led to around 38,000 job cuts. They said it is still going on. This is the third month in a row that AI is the leading reason for these layoffs. And I think this will continue to have a ripple effect across the job market. It’s difficult because it’s a question of where exactly does this appear in a report from the BLS?
00:54 chris
Brent, how important is Friday’s jobs report to you? And yes, it’s always like an important report, you want to know about the economy, but in this context where AI is clearly driving the market, how much weight does this jobs report have in your view?
01:14 brent
The reason this is so large is because consumers have slowed considerably over the past few quarters, and AI has been doing all the heavy lifting in the economy. Looking at economic growth over the past two quarters, it was quite sluggish at 0.6% in the fourth quarter and 1.6% in the first quarter. Consumers have slowed down dramatically. All of the country’s economic growth is based on two segments called information processing equipment and intellectual property products. They were 0.96% of the growth rate in the first or fourth quarter of 2025. Well, this is all .6. And they were 1.5 out of 1.6 in the second or first quarter of 2026. Well, these are two segments related to AI. They reflect about 10% of total economic output.
02:08 brent
What’s really slowing down is the consumer. My year got mixed up this morning, but the consumer growth rate for the fourth or first quarter of 2026 was about 1.4%. This is the lowest level since Q4 2022, excluding Q1 2025. And in reality, real wage growth is negative. The average hourly wage in this report is expected to grow by 3.4%. The PCE inflation rate remains at 3.8%. In other words, real wage growth is negative. Looking at personal disposable income, it has been negative for three consecutive months, and is down 1.1% compared to the previous year. There’s good news here. People are still employed. The bad news is that their wages aren’t rising even though inflation is rising. Labor market reports have become extremely important as consumers, who make up around 66% of the economy, are starting to become even weaker than in the past. It’s becoming more widespread. Well, consumers are spending out of their savings and perhaps even using up stock market profits. That will only increase the risk going forward, and I will be paying close attention to that.
