US jobs data: "The market has been so complacent about everything"

CGTN Europe

CGTN Europe interviewed Matt Maley, Chief Market Strategist, Miller Tabak + Co., LLC

Transcript

00:00The U.S. economy added 147,000 jobs last month.

00:05The June data was much higher than expected in a sign of resilience in the labour market, despite concerns over tariffs.

00:11A solid jobs report likely means that a July interest rate cut by the Federal Reserve is now off the table.

00:18Let's talk to Matt Maley, who's Chief Market Strategist at Miller Tabak.

00:22Good to see you again, Matt. Welcome back.

00:24So, these are pretty strong job numbers, aren't they? What's behind them?

00:27Well, yeah, there were definitely strong numbers.

00:32However, it was kind of interesting to see that the private payroll numbers were actually weaker than expected.

00:38So, we'll see what happens there, because, you know, with this whole stuff with Doge and the layoffs that have already taken place

00:45and will start to trickle into the system, how things will play out after we see that.

00:51But there's no question that the overall outlook for the economy, which has been slowing for quite some time, but very gradually,

01:00that this number tells you that those who have been worried about it falling out of bed have been wrong.

01:06So, we said in the introduction there that this means an interest rate cut is now off the table.

01:11Do you agree with that? What do these numbers mean for the Fed?

01:15Yeah, definitely. I think the Fed has, you know, they have been already, you know,

01:20there have been a few Fed members saying that maybe it would, you know, July might still be on the table.

01:24But Chairman Powell had been quite emphatic that it would be very data dependent, that it was,

01:29although he wouldn't take it completely off the table, it seemed like it was, you know, very unlikely.

01:34And then, of course, this data is going to tell us that it's not likely at all.

01:38So, those people who have been looking for the Fed to, you know, cut rates in a more aggressive fashion

01:44and help spur the economy to do better in the second half of the year are going to have to wait a little bit longer.

01:50And one of those people who does want that, of course, President Trump,

01:53he's already called for Jerome Powell to quit early.

01:56Do you think this increases the pressure on his position?

02:00Well, it'll increase the pressure that the president tries to put on Chairman Powell,

02:05but I don't think it'll increase the actual pressure that takes place.

02:09I think Chairman Powell is very committed to finishing his term,

02:13and I think he will continue to not talk about this issue and say that he's concentrated on what's going on in the economy

02:19and what the Fed will be doing going forward.

02:22One thing affecting the labor market, as well as everything, really, in the U.S., are these tariffs.

02:27How has the labor market reacted so far to the uncertainty around those?

02:32Well, it hasn't reacted much at all, as we can see from these numbers.

02:36And that does raise some concerns.

02:38I mean, one of the biggest things is that the market has been so complacent about everything.

02:43I mean, obviously, the things in the Middle East turned out better than we thought, at least for now.

02:47But we have all these other issues, whether it be the U.K. fiscal situation

02:52and, of course, the tariff issue that you're talking about,

02:57and then also the fact that earnings estimates in the U.S. have been going down for most of this year.

03:02So I worry that things are a little bit too complacent out there, and the market's priced for perfection.

03:09One thing that has responded well to the jobs numbers, though, are bond yields.

03:13But they are worried about Trump's big tax and spending bill, aren't they?

03:17Yeah, I mean, it's interesting because for, you know, I've been hearing for my whole life basically

03:24about how the budget deficit is going to be a big problem in the U.S.

03:27and that it never comes to anything.

03:28The markets never really react to it.

03:30But this year they are starting to react to it.

03:32So, yes, this could create some problems because it does expand the deficit.

03:36And that's why passing the big, beautiful bill is so important to the administration

03:41because they want to be able to make sure that they can offset some of these tariffs.

03:47So positive job numbers on one hand.

03:50The market's doing very well.

03:52But you sounded a little bit skeptical about the U.S. economic outlook.

03:55What's your verdict?

03:58Well, again, I just think that we have a situation where we still know that the economy is growing.

04:03The economy is solid, but it's still, the estimates are still below 2% growth for the second half of the year.

04:09And that's very hard to justify further increase in earnings.

04:14I mean, we're looking for 7% earnings growth this year, 12% next year.

04:17That sounds really good in and by itself.

04:19And it would be good if the market was trading at 17 times earnings.

04:23It's trading at almost 23 times 12-month forward earnings.

04:26It just makes it tough for the market to go a lot higher from here.

04:30I'm not saying the market's going to fall out of bed

04:32and we'll see a big correction like we did in April.

04:35But I just think that the downside risks are higher than a lot of people are pricing in right now.

04:39So I do think keeping a little bit of cash on the sidelines is still a good idea.

04:44Matt, great to talk to you as always.

04:45Thank you for coming back on the program.

04:47Matt Maley there from Minister Back.

Category

Transcript

Recommended