The Untold Story of Overstated Job Growth | 1-Minute Market Update w/ Martin

Could the US labor market be hiding a massive secret? Recent revisions suggest job growth might have been overstated by up to one million positions, casting serious doubt on the health of the economy. We'll scrutinize these alarming discrepancies and question the Bureau of Labor Statistics' reliability. This revelation could force the Federal Reserve to reconsider its approach to interest rates, potentially affecting everything from your mortgage to your job security. We'll also preview Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole Symposium and its potential ramifications for monetary policy.

Shifting gears, we turn our focus to a seismic shake-up in the oil and gas industry. With mergers and acquisitions soaring by 57% this year, major players like Chevron and ExxonMobil are driving a wave of consolidation and exploration investment. We'll dissect the strategic motivations behind these multibillion-dollar deals and explore the broader economic impacts. Additionally, we'll discuss Vice President Kamala Harris's proposal to raise corporate taxes and what it means for businesses and consumers alike. Don't miss our comprehensive analysis of these critical developments and their far-reaching implications.

Transcript

Speaker 1: 0:01

It's Wednesday, august 21st 2024, and it's time to get down to business and dive into the top three business news heating up in this week's weekly business brief. First up alarming revisions to the US job growth could trigger rate cuts. This is very concerning. Recent analysis indicate that US job growth over the past year may have been significantly weaker than initially reported, with estimates suggesting a reduction of between 600,000 and a million jobs. This means the labor market has been cooling for longer and more intensely than previously thought Originally. The Bureau of Labor Statistics, the BLS, reported that the economy added 2.9 million jobs in 12 months through March 2024, averaging 242,000 jobs per month. However, if the revision is as high as anticipated, that average could drop to around 158,000 jobs per month, signaling a more pronounced slowdown. These potential revisions could lead the Federal Reserve to rethink its approach to interest rates. As the job market appears less robust than once believed, the Fed might be more inclined to lower rates sooner than expected to support the economy. A significant downward adjustment in job numbers would also likely influence Fed Chair Jerome Powell's upcoming speech at the Jackson Hole Symposium. As the central bank grapples with balancing its goals of stable prices and full employment in a cooling labor market.

Speaker 1: 1:39

This is very alarming that the question I ask is was this intentionally done by the BLS? This is their job, the Bureau of Labor, and what statistics? This is what they're supposed to be doing Now. If you say to me, hey, they were off by 50,000 for the whole year, okay, I can live with that. But six hundred thousand to one million jobs difference, that's a significant number. But they haven't been emotional, they've been very logical. But it impacts the way they make their decisions, and I mean the Federal Reserve, right as it pertains to interest rates. This means that someone it could be that someone or something behind the scenes was manipulating these numbers to maybe make this administration look good. I don't know. Call me a conspiracy theorist. Something's not right here. 600,000 to a million job revision why? So? I wonder who's going to be held responsible to this. A lot of people were affected. A lot of businesses were affected because of this data being incomplete and incorrect on the bad side, not on the good side. On the bad side, we kept hearing Fed Chair Jerome Powell saying that job market is still hot and we got to keep the interest rates higher for longer. And how many businesses have suffered through higher interest rates? How many families were unable to buy houses? What's up with that? What's the real reason behind that? That's the kind of questions that I like to ask. Why? Why such a big mistake like that? You know these people that are hired for these jobs at the BLS. This is their job. These are supposed to be intelligent people. And you make one mistake million jobs. You were off by 1 million jobs. That's unacceptable, man.

Speaker 1: 3:36

Next up oil giants are splashing cash on mergers and exploration. Dealmaking in the oil and gas industry surged 57% in 23, with top energy companies spending $49.2 billion on mergers and acquisitions, a significant jump from $31.4 billion in 2022. This increase was fueled by higher cash flows from previous years, profits and strategic shifts toward growth and consolidation, moving away from a focus on shareholders' returns. Major players like Chevron and ExxonMobil led the charge with significant acquisitions, including Chevron's $6.3 billion purchase of PDC Energy and Exxon's $60 billion deal for Pioneer Natural Resources. Overall, the sector saw a 36% increase in total expenditures, reaching $142.3 billion, as companies also boosted exploration and development spending by 28% to $93.1 billion. This shift makes a move to strengthen core operations and drive efficiency through scale, despite a 55% drop in profits to $83.9 billion due to lower crude oil prices. The trend of consolidation and investment is expected to continue into 2025.

Speaker 1: 4:58

With more mega deals on the horizon and this week on Election Watch 2024, looks like Kamala Harris wants to raise corporate taxes. But what does this mean for you and your wallet? Us Vice President Kamala Harris plans to raise the corporate tax rate from 21 to 28. Well, that's not new. Our current president tried that too. If she wins the upcoming election against Donald Trump, her campaign argues that this increase would be a fiscal responsible way to ensure that billionaires and large corporations pay their fair share, while also putting money back into the hands of the working class Folks. This proposal is estimated to reduce the US deficit by $1 trillion over a decade, according to the Committee for Responsible Federal Budget. Harris has also pledged to not raise taxes on individuals earning $400,000 or less. Again, this is not new. Aligning with President Joe Biden's promise In a recent speech, she outlined additional economic proposals, including tax cuts for most Americans, measures to prevent price gouging by grocers and plans to build more affordable housing as part of her vision for an opportunity economy.

Speaker 1: 6:18

However, any changes to the tax code would require congressional approval, and both parties are vying for control of the Senate and the House in the upcoming election. So not new. Nothing she's saying is new. Okay, this individual's earning $400,000 or less, that she's not going to raise taxes. Biden said this. Biden also said he wanted to increase the corporate tax from 21 to 28. Hasn't happened? Doubted that she's going to do it. Biden couldn't do it, so I doubt she's going to do it. By the way, this is not me fidgeting, holding her. I'm just calling out what I'm seeing here.

Speaker 1: 6:49

One thing, though, that is interesting plan here is she plans to build more affordable housing as part of her vision for an opportunity economy. So she plans on building 3 million new affordable units. I want to know how she plans on doing that. So she plans on giving guys like me, developers and redevelopers. She plans on giving us more tax breaks and more tax incentives. Here's the challenge we still have to build these properties, and it is very expensive to build these properties. You know when it's costing $250,000, $300,000, depending on what class you're building per door, $250,000 to $300,000 per door to build these properties, to build these units.

Speaker 1: 7:32

The numbers just don't make sense, especially with what's happening in the workforce right now as it pertains to the labor. We just don't make sense, especially with what's happening in the workforce right now as it pertains to the labor we just heard a moment ago they were off by a million jobs BLS of new jobs created over the last 12 months and they were wrong. We've known this. Those of us that are boots on the street known that something fundamentally wasn't right in the economy, but yet they want to tell us it is. So I want to know how that. Maybe I'm missing something. I'd love for you to tell me how you're processing it. If she's going to build 3 million new units and, by the way, she also says she wants to give in this economic plan, she wants to give 25,000. I don't know how she's going to do that If it's tax credits 25,000 for new homeowners, for tax credits and she wants to build 3 million new affordable housing and then she wants to give tax credits this is how it was quoted Tax credits for developers that develop starter homes Cool Developers that develop starter homes. So how do we make sense of those numbers when I still have to put the money out? It's going to cost more to build than what I can get in a return, or is going to cost me more to build. At times it's going to cost me more to redevelop than what I can get in rents.

Speaker 1: 8:42

The thing that fixes the housing market is the free markets right, the free markets. We are the ones. It's capitalism, the free markets are the ones that go out there and we find out. We find efficient ways, creative ways to get things done. I think it's a good idea. I just don't know. I'm trying to wrap my brain around how this would benefit us. I like tax cuts, don't get me wrong. I like tax breaks. I like paying less taxes. I like that idea. But the math is the math. And this has been your weekly business brief. I'll see you guys next week. Peace out.