Jobs Report Fallout: Where Investors Might Find Shelter

At Thursday’s White House meeting with top tech CEOs, excluding Elon Musk, President Trump foreshadowed Friday’s jobs report. He noted that “the real numbers that I’m talking about are going to be, whatever it is, will be in a year from now.”

A month prior, President Trump fired the head of the Bureau of Labor Statistics (BLS), Erika McEntarfer, purportedly for manipulating data for political reasons, shortly after July’s jobs report. For July, the labor market performed under expectations, having added only 73,000 jobs.

Moreover, BLS revised downward jobs figures in the prior two months, May and June, by cutting previously reported 250,000 jobs. Despite the firing of McEntarfer, under the current acting BLS commissioner William Watrowski, the non-farm payroll (NFP) data is abysmal.

The question is, what does that mean for investors?

The US Economy Is Not Looking Good

For August, the US labor market added only 22,000 jobs against the expected forecast of 75,000. The number of people looking for a job is now 6.4 million, having increased by 722,000 year-over-year. However, they were not counted as unemployed owing to the BLS methodology.

The number of officially unemployed is 7.4 million, raising the unemployment rate from July’s 4.2% to 4.3%. For comparison, just after the Great Recession in October 2009, the unemployment rate was 10%.

The goods-producing sector lost 25,000 jobs alongside 12,000 in manufacturing (down 78,000 YoY) and 7,000 in construction. The latter represents payroll cuts for three consecutive months. At the same time, transportation, retail, hospitality, health and education sectors added jobs.

Given that President Trump began global tariff realignment with domestic re-industrialization in mind, so far the results are the opposite of expected. This month, June’s data has also been revised downward from +14,000 to -13,000. As an aberration from typical downward revisions, July’s data has been revised upward from 73,000 to 79,000.

Overall, there are now more unemployed than there are job openings, at 7.2 million, which hasn’t been the case in over four years. An additional concern is that the labor market is structurally weak. Specifically, while part-time employment increased by 597,000 jobs from July to August, full-time employment dropped by 357,000 jobs in the same period.

This lopsided trend indicates that businesses are employing a low-risk strategy, unsure of their growth. Cutting full-time employment also suggests hiring freezes, likely now relying more on the AI option instead of committing to full-time employees.

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Investing In a Rapidly Cooling Economy

Just as domestic manufacturing and construction are waning, despite new tariffs, retail hiring is still up. This is not surprising as domestic spending makes up ~70% of the US gross domestic product GDP, at around $15 trillion. However, if the part-time employment trend continues, this doesn’t bode well for the primary driver of the US economy, given that part-time workers have less disposable income.

Additionally, the inflation rate, at 2.7%, appears to be reheating likely due to tariffs, which further degrade consumer spending. As of July, disposable personal income (DPI) increased by 0.4%, but this monthly growth is likely to turn negative if inflation continues to ramp up.

For the time being, if government figures are to be trusted, average hourly earnings increased 3.7% year-over-year. Yet, this superficial outpacing of official inflation data doesn’t seem to be translating to actual household balance sheets. Already in May, we saw retail sales decline by 0.9% on a monthly basis, the largest drop in four months.

In this macro, companies that provide necessity and bulk-driven shopping, such as Walmart and Costco, are likely to benefit. But as discount-focused giants are positioned to help, mid-market players like Target are likely to lose foot traffic.

Outside of retail, utility companies have inelastic demand, positioning them to outperform while consumers tighten spending. This is especially the case when it is unlikely that the energy sector will be affected by Big Tech’s long-term AI data center infrastructure commitment.

Lastly, luxury brands, in particular, after the US-EU trade deal, are unlikely to be affected as their customer base is far less sensitive to cyclical swings in disposable income.

Silver Lining to Poor Labor Market

It is now less surprising why President Trump framed jobs numbers ahead of Friday in terms of “in a year from now.” It is also less surprising why Fed Chair Jerome Powell hinted at rate cuts starting in September, given that inflation is still not under control.

A cooling economy needs cheap borrowing capital, which opens the liquidity floodgates. In this macro, Bitcoin is likely to reemerge as a speculative beneficiary of excess liquidity, now more institutionalized than ever.

While equities with strong balance sheets and defensiveness may hold steady, it is the liquidity-sensitive corners of the market – crypto, high-growth tech, and speculative small caps like Intuitive Machines – that stand to rally the most if borrowing costs fall.

President Trump also said that his administration may “declare a national housing emergency” this fall. With lower mortgage rates, such a declaration could translate into temporary relief for the housing sector by unlocking pent-up demand from sidelined buyers. Homebuilders, mortgage lenders, and construction supply companies might see a short-term boost if credit conditions ease and government support materializes.

In the end, the current economy may seem fragile, but it bears keeping in mind that Europe is in a deeply subjugated state. Although this was obvious in the absence of any reaction to Nord Stream pipeline bombings, Europe’s vassalship was firmly confirmed in the latest US-EU trade deal, greatly favoring the US.

This suggests that the American transition towards domestic manufacturing will be paid for in large part by EU taxpayers, in addition to boosting arms sales for the US proxy war against Russia. In that sense, the U.S. remains uniquely positioned even amid domestic fragility. In the end, President Trump’s “year from now” comment may very well materialize.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.