Revisions, Revisions, Revisions

PodcastInside EconomicsDante D’AntonioOct 2

Revised data showed stronger first-half GDP growth and private sales, even as payroll gains, hiring breadth, and wage growth pointed to a softer labor market. Speakers debated whether productivity and AI-related investment help explain the gap, while questioning how durable consumer spending can be amid flat real disposable income. Inflation estimates were revised lower but remained above the Fed’s target, and markets shifted toward a near-term pause as bond investors weighed inflation, fiscal concerns, and uncertainty about monetary policy.

Economic Growth Labor Market Inflation Monetary Policy Interest Rates Consumer Spending

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Key Takeaways

September’s 29,000 payroll gain was below the roughly 50,000 three-month average, and hiring breadth narrowed as the private employment diffusion index fell to 49; temporary-help employment also turned negative after rising in the first half. A one-to-one ratio of job openings to unemployed people and a weakening Conference Board labor-market differential added to signs that finding work was becoming harder, although the unrounded unemployment-rate increase was small, from 4.14% to 4.18%.

Wage growth cooled to 0.1% month over month and 3% year over year, while speakers pointed to labor-market slack and low job-switching as possible explanations: workers who stay put typically receive smaller raises than job changers. One speaker also suggested AI-related pressure could make workers less willing to move, while separately cautioning that AI’s role in job losses in finance and professional services was possible, not confirmed.

The September labor-force increase of about 485,000 lifted participation by 0.2 percentage points, while household employment rose by a little over 400,000; after adjustment, its gain was about 100,000. Speakers offered a range of estimates for monthly hiring needed to keep labor-market slack stable—roughly 50,000 to 75,000—underscoring uncertainty about how the employment figures compare with breakeven growth.

Data-center construction was cited as a connection between AI investment and both construction employment and GDP: one speaker linked roughly 10,000 construction job gains to data centers and AI, and the BEA identified data-center construction as a main driver of the upward revision to second-quarter investment. The possible AI link to manufacturing job gains was presented as less certain.

TECHNOLOGY

AI Job Displacement — One speaker suggests AI may be contributing to job losses in financial and professional services, where legal, accounting, and advertising work may be easier to substitute. The speaker presents this as a possibility, not a confirmed cause.

“And then on the negative side, why we're losing jobs in financial services and professional services…”—

ECONOMY

September Jobs — September added 29,000 jobs, while the three-month average was about 50,000—a pace one speaker viewed as roughly consistent with underlying job growth. July and August payrolls were revised down by about 60,000 combined, including a downward revision to August’s initial gain of 133,000. Health care added 23,000 jobs; construction and manufacturing remained positive but weakened, while information, finance, and professional and business services continued to lose jobs.

“The headline number, obviously, a little bit weak, 29,000 jobs added in September, but the three month average is now right about 50,000, which we've been talking about is, you…”—

AI-Linked Hiring — One speaker links roughly 10,000 construction job gains to data centers and AI. The speaker says manufacturing gains may also be AI-related, but considers that connection less certain.

“So on the construction job gain, it was around 10 k. I can't remember exactly what it was. That's data centers. Right? And data center related. That's AI…”—

Wage Deceleration — Average hourly earnings rose just 0.1% in September, and year-over-year wage growth was 3%—its weakest rate since the end of 2019 outside the post-pandemic period. Speakers cited labor-market slack as one explanation for slower wage growth; the Employment Cost Index and Atlanta Fed wage tracker were also described as showing deceleration. One speaker said real wage growth remains a concern.

“Wage growth, weak again, only up point 1% in September. Year-over-year, wage growth is now down to 3% even, which is the weakest…”—

MARKETS

Rate Odds Reversal — Federal funds futures had removed an October rate hike from consideration, while a December hike still carried a probability above two-thirds. The speaker said the shift in rate expectations helped explain the stock market’s turnaround.

“Looking at the federal funds futures, what investors think the Fed's gonna do, they've pretty much now taken off the table a another hike in the funds rate at the…”—

Inside Economics Conference

The hosts trade conference updates and introduce the discussion before turning to a busy week of economic releases.

September Payroll Slowdown

September added only 29,000 jobs, while revisions and longer averages put underlying payroll growth near 50,000 and reveal narrow, uneven job creation.

Healthcare And AI Jobs

Healthcare has driven job growth as other sectors largely offset one another; panelists see AI-related hiring effects as small and roughly balanced so far.

Wages And Labor Slack

Slowing wage growth, low quits, and weak hiring suggest labor-market slack, while workers may be reluctant to change jobs amid limited opportunities and AI uncertainty.

Household Survey Rebounds

Labor-force participation and household employment rebounded, narrowing the gap with payroll data, while estimates of breakeven job growth remain uncertain.

GDP Revisions Lift Growth

Benchmark revisions raised first-half GDP growth and private sales, with stronger consumer spending and investment; panelists weigh productivity, AI investment, and the durability of demand.

PCE Inflation Revised Lower

Revisions and methodological changes lowered headline and core PCE inflation estimates, though both measures remained above the Fed’s 2% target.

Labor Market Indicators

The panel discusses job-market diffusion, temporary-help losses, job openings per unemployed worker, and weaker consumer views of current economic conditions.

Fed Pause And Bond Yields

Markets shifted toward a near-term Fed pause after weak payrolls and contained inflation, while Treasury yields remained volatile amid investors’ inflation and policy concerns.

Why Long Yields Rose

The hosts judge war-related inflation risks, debt sustainability, and monetary-policy uncertainty more influential in the rise in long-term yields than AI-driven growth expectations.