White House does victory lap after strong jobs report

Yahoo Finance's Akiko Fujita and Brian Cheung discuss how the Biden administration and markets are responding to the July jobs report.

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MARTY WALSH: 526,000 jobs overestimation is great. And but more importantly, when you look at the whole picture as a whole, we're seeing all the-- most of-- all of the sectors have come back to pre-pandemic. The unemployment rate is actually a little lower today than it was the day before the pandemic hit in the United States, which we had a pretty strong economy back then.

We're seeing great gains in manufacturing. Manufacturing is not only back, but are exceeding where we were. And then when you think about the CHIPS Bill that the president is going to be signing hopefully next week, we're going to see more manufacturing happening in the United States of America on semiconductors. And long-term, that will help us in inflationary pressures being less dependent on foreign imports coming into the country.

AKIKO FUJITA: That was US Secretary of Labor Marty Walsh speaking with us earlier, and of course, responding to a huge beat in the July jobs numbers. You see the numbers on your screen there. 528,000 jobs added in the month of July, but more importantly, unemployment ticking down 3 and 1/2%. Average hourly wages up 5.2% year on year.

It's a bit of a tricky message for the administration to really put out today. I mean, on the hand, they want to be out there, saying, look, the jobs, the labor market is still very strong. And yet, you're looking at, well, how do we take this in terms of the inflation picture? It means that we still have a long way to go for that to come down.

BRIAN CHEUNG: I mean, I actually think it's an easier message from the administration to say this is a labor market that's still firing on all cylinders. What type of a recession would you see half a million jobs get added in one month with unemployment reaching 50-year lows, right?

On the other hand, wait until that CPI report next week because that could tell a different story if inflation doesn't show signs of letting up. Again, 9.1% year over year was the last metric we got in June. If that remains hot in the next month, that's going to be a very difficult conversation for the administration. But we heard from the White House earlier this morning, they were doing a victory lap about this, so.

AKIKO FUJITA: And also so let's-- you sort of put all the pieces together, right? They can go out and say, look, just like we told you, after the GDP print last week, we're not in a recessionary environment right now because if we were in a recession, the jobs numbers wouldn't be this strong.

If you look at what's making up for inflation, they've come out and said, look, energy prices are starting to come down. Gas prices are coming down. A lot of states now reporting under $4 a gallon. And yet, you're right. If we get the CPI print last week, and also more importantly, if American consumers aren't feeling it in their wallets, that's not really going to make a big difference.

BRIAN CHEUNG: Yeah, and this is the problem is that these reports are all lagging, right? Even the July report that we got here is for a survey period that could have been two to three weeks ago. And things are moving so fast in this economy that every single data point that we're looking at and trying to compare against anecdotally what we're experiencing in real life might be outdated.

Now, when it comes to the overall vibe, right, and there's been kind of chatter about this being maybe more of a vibe session, right, you are seeing high inflation eroding any wage gains that you're getting right now. And that can't be feeling good. However, what could be the worst outcome? What could be worse than what we're facing right now, is if in conjunction with high inflation, we also have high unemployment.

And that second part of the picture is not happening right now. And if that does happen-- which it could happen, right? I'm not going to rule that out. But if that does happen, that's worse than having high inflation erode your real wages because you would have zero wages if you were unemployed. But that's not part of the picture overall right now.

AKIKO FUJITA: Yeah, I thought it was interesting what our first guest said today when we were talking about how jobs are-- companies are calculating all this right now. We've heard a lot about hiring freezes, slowing hiring. Right now, if you think about the cuts that we're seeing, they've largely still been focused in the tech sector.

You could argue that a lot of these companies outstretched. They grew too quickly over the last two years. So the fact that they're cutting, is that really a sign of where the economy is right now? Or is that just a sign of doing a little too much of last year's? And is that specific to the sector?

BRIAN CHEUNG: Yeah, and I think that this is going to depend a lot on how things develop in the next few months, right? Because for right now, we've heard the anecdotes of a lot of these big tech companies kind of starting to actually jobs. So, again, in some sectors, you are starting to see job layoffs. But in the aggregate, based off the data we got this morning, not necessarily the case.

But look, you do see some signs of maybe concern. Like Amazon, for example, their workforce shrank. They're the second largest employer in America. The first largest employer is Walmart. They're going to report earnings next week. They don't really report quarter by quarter what their payrolls look like.

But I would love to hear commentary from them to see if the country's largest employer is approaching this a certain way. But again, what's happening in the macro isn't necessarily what's happening at Walmart and Amazon, but certainly a big part of that. But--

AKIKO FUJITA: It's a lot of puzzle pieces to put together, yeah.

BRIAN CHEUNG: A lot of puzzle pieces to put together. But let's take a look at markets before we say goodbye here in the 11:00 AM hour. We could see, again, actually a little bit of an acceleration of the losses since the beginning of the hour. We see the NASDAQ down 1.3%, the S&P 500 down 9/10 of a percent, and the Dow down 150 points on the backs of that jobs data.