First Friday: Jobs Fell by 92,000. But the Economy Is Still Growing?

0:00The jobs report came out today and it is wild. The U.S. lost 92 ,000 jobs in February, according to BLS data. That is a huge shock after looking at the ADP report, which came out on Wednesday, which told a totally different story. It told a story of the U.S. gaining 63 ,000 jobs. So how do we square the circle? How do we make sense of a world in which the data is telling us such different things? Well, we're going to talk about that on today's episode. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five pillars, financial psychology, increasing your income, investing, real estate, and entrepreneurship.

0:40It's double-eye fire. I'm your host, Paula Pant. I hold a master's in economic journalism from Columbia. And once a month on the first Friday of every month, we host an episode in which we take a look at the broad macro economic trends that are affecting us? What's affecting your wallet, your mortgage rates, your gas prices, your ability to get a job or ask for a raise at work? What are the things that are affecting that at the big picture level? We answer that question on the first Friday of every month.

1:10Paula Pant:So in today's episode, I'm going to walk through several big economic stories, but I'm going to organize them into three layers of the economy so that you've got a framework for thinking about them. Layer number one, we're going to talk about the household economy, jobs, wages, housing costs, gas prices, 401ks. Layer number two is markets and policy, things like tariffs, stock markets, how investors are reacting to big geopolitical shocks. And then layer number three is the long term forces that are reshaping the economy, most predominantly AI. How is that layer affecting everything? We're also going to talk to Reveglio Labs CEO, Dr.

1:54Ben Zweig. He will join us at the end of the episode to shed some light on today's BLS jobs report. Let's kick off. Data from the BLS shows that the US lost 92 ,000 jobs in February and that the unemployment rate ticked up to 4.4%. That's just slightly higher than where it's been. Previously, it was at 4.3%. 4.4 is still a number that's considered healthy, but it's getting towards the top end of healthy. You don't want it to go too far beyond that. Fed doesn't set an official target unemployment number, but many economists talk about unemployment as though they want it to be somewhere within that 4 % to 5 % range.

2:36There is no official target number as opposed to with inflation, officially, the target is 2%. In any event, the BLS report came as a bit of a shock because economists were expecting a gain. People were expecting a gain of around 60 ,000 jobs. And that was largely because of the ADP report, which came out two days prior, came out on Wednesday. The ADP report, which only uses private sector data shows that private employers added 63 ,000 jobs in February, and that is the best monthly gain since November of 2025. What it also found, though, is that hiring is not broad-based. It was concentrated in just a couple of sectors.

3:18According to the ADP report, education and health services added 58 ,000 jobs. Construction added 19 ,000 jobs. Meanwhile, in a couple of other sectors that weren't doing quite as well, professional and business services, lost 30 ,000 jobs and manufacturing lost about 5 ,000 jobs. So hiring was concentrated in just a few sectors. According to the ADP report, it found that pay for workers who stayed in their current roles grew 4.5 % year over year and pay for workers who changed jobs grew 6.3%. And that means that the pay advantage for switching jobs, according to the ADP report, has hit a record low, which means job hopping is not producing the same salary gains that it did earlier in the recovery.

4:06Meanwhile, there is a different survey. It's called JOLTS, Job Openings and Labor Turnover Survey. It is conceptually different from the BLS report and the ADP report because the JOLTS data is about job openings. It's not about employment. So conceptually, they're measuring different things. But it's interesting to look at both of them together because it paints a fuller picture. And data from the JOLTS survey, which is two months older, it's data from December, which means it's tracking data that's two months older than the BLS and ADP reports, which is tracking February data. JOLTS data lags quite a bit, but JOLTS data found 6.54 million job openings.

4:51That's the lowest level since the pandemic began. So it does not paint a particularly pretty picture. And the JOLTS data shows that job openings dropped, particularly in professional and business services, retail, and finance and insurance. It also found that the quits rate is holding around 2%, meaning that fewer people feel confident about voluntarily leaving their jobs. Again, the JOLTS data reflects numbers as of December, which is the most recent set of numbers that are available. The numbers that will reflect January are expected to be made available on March 13. JOLTS data always lags BLS data, which is a little bit annoying because you can,

5:33Paula Pant:in real time, never quite compare apples to apples. There's also data from Challenger Gray and Christmas. They track layoffs. And the Challenger report found that employers announced 48 ,000 job cuts in February. The good news is that's actually 55 % lower than January. But they did find that layoffs in some industries are rising. Those industries include tech, education, industrial manufacturing, and transportation. Of course, the big story that was on people's radar was the Jack Dorsey layoffs. Jack Dorsey is the CEO of Block, and he cut about 40 % of the workforce in one big swoop. He made that announcement about a week ago and cited AI as his reason for doing so.

6:17In fact, according to the Challenger report, AI was cited in 4 ,600 job cuts, 4680 if you want the precise number, job cuts in February. and that's about 10 % of total layoffs that month. The Challenger report also stated that hiring plans are down 56 % year to date as compared with last year.

6:37Paula Pant:We put all these reports together. What do we see? We see that the labor market is still growing, but there are signs of cooling. It's growing a little bit, but more slowly. It's a low hire, low fire environment. That growth is becoming more uneven. It's more sector specific. At the end of today's episode, we're going to discuss all of these reports, this aggregation of reports with Dr. Ben Swag, who leads a workforce intelligence company, Revalio Labs, which also gather their own report. So that is coming up at the end of today's episode. The average 30-year fixed mortgage rate rose to about 6 % this week.

7:15That is slightly higher than 5.98 % last week, but it's still lower than the 6.6 % that it was at a year ago. So this two hundredths of a percentage point increase is not enough to change affordability mathematically, but psychologically crossing the 6 % threshold can feel significant to buyers. Now, mortgage rates tend to track the 10-year treasury and mortgage rates are up because the 10-year treasury is up. It rose from 3.96 % up to 4.14 % after military operations began against Iran. yields rose in part because oil prices increased and investors are worried that higher energy prices could trigger or reignite inflation.

8:03And if inflation goes up, the Fed might be less likely to cut interest rates, which pushes bond yields up. So mortgage interest rates are sensitive, not just to Fed policy and not just to housing demand, but to global events that influence inflation expectations. Speaking of oil prices increasing, gas prices are up. Gas prices have jumped by 26 cents a gallon in the past week. The national average is now around$3.25 a gallon. Diesel prices also rose by about 40 cents. The main driver of that is the war involving Iran and disruptions to oil transport. Tanker traffic through the Strait of Hormuz has slowed, and that straight normally carries about one-fifth of the world's oil supply.

8:52The estimates right now suggest that the world may be losing access to around 20 million barrels per day due to shipping disruptions. I should note, though, that beyond these geopolitical events, gas prices also tend to rise in the springtime because generally in the spring, driving demand increases. So we've got two things that are happening at the same time. There's the seasonal trend of this is the time of year when gas prices tend to go up anyway. And then we've also got these geopolitical shocks. I should also add, as we've discussed on previous First Friday episodes, that going into this, gas prices have been at record lows.

9:34In fact, on I think the most recent First Friday episode, we announced that gas prices had hit. It was either the last First Friday episode or the one before that, it was one of the two most recent First Friday episodes, we announced that gas prices hit a four-year low. So the good news, the silver lining, is that yes, gas prices are up, but they are up from a four-year low. All of this put together, higher gas prices, inflationary worries, a weakening labor market, all of this put together has caused the stock market to react with jitters. All of the major stock indices, the Dow Jones, the S &P 500, the Nasdaq are all down.

10:17At the sector specific level, airlines dropped because fuel is a huge cost. So airline stocks are down. Retail stocks also fell because higher gas prices leave consumers with less money for discretionary spending. Small cap stocks fell because generally when investors are worried about economic growth. Small cap tends to be the first to get hit. But we should note that markets tend to recover pretty quickly from shocks associated with geopolitical conflicts. As of the time of this recording, we've seen a bit of market decline. The overall trend for the stock market, when we zoom out and we take a look at the view as measured in years, certainly we've seen over the past several years, the stock market has had double digit growth every year for the past three consecutive years.

11:06And particularly given productivity advancements, there's a strong case that the markets may continue to grow. That said, if you look through the jobs data, there is something in there that points to a recession indicator. And this is something that Dr. Zweig notes. We're going to discuss that at the end of today's episode.

11:27Paula Pant:First, we're going to take a moment here to hear from the sponsors who make this show possible. And when we return, we are going to dive into 401k withdrawals. We'll discuss the Supreme Court decision about tariffs, and we will talk about the impact of AI on the workplace. All of that is coming up next. I live in an apartment in Manhattan, 600 square feet, which means my design style is highly functional. I got a bunch of shelving from Wayfair so that I would have more storage space. I got a daybed from Wayfair. It kind of serves as a couch, but also a guest bed, but also it's got drawers underneath and has a built in bookshelf.

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15:53Welcome back. We're seeing a record number of 401k hardship withdrawals. Six percent of workers who are enrolled in Vanguard plans took hardship withdrawals in 2025. That is up by one full percentage point from the previous year. It's up from five percent of workers taking hardship withdrawals in the prior year. One percentage point is a lot, particularly when you're talking about moving from 5 % to 6%, right? That is proportionately a very significant jump. Now, if you're wondering, wait a second, what is a hardship withdrawal? A hardship withdrawal from a 401k is a withdrawal that is allowed for a specific financial emergency, such as major medical expenses or avoiding foreclosure or avoiding eviction.

16:43And so what we're seeing through this big increase in hardship withdrawals, we're seeing a couple of stories coalesce together. One is that, yes, many households are facing big financial shocks, but the other is that more people are participating in retirement accounts. The big structural change underlying this is that more and more workers now have automatic enrollment in retirement plans. That did not used to be the case. It used to be that workers had to opt into 401k plans, and now it's becoming more common that workers are default enrolled and need to opt out rather than opt in. So we're seeing higher savings rates.

17:23This is the good news piece of this. We're seeing higher savings rates in 401ks, higher 401k participation. That's the good news. But then the flip side of that is that many households are treating retirement accounts as something of an emergency safety net. So it isn't all bad. The silver lining to the story is that 45 % of participants increased their savings rates in their 401ks last year. So that same Vanguard data is showing both a positive and a negative. We're seeing higher savings rates and higher participation in 401ks. and we're also seeing a higher rate of hardship withdrawals. And then at the broader societal level, we're seeing retirement systems that are really designed to not be touched until you're in your 60s are becoming short-term financial buffers.

18:16And so the role that 401ks play in the lives of some households is starting to become more integrated. I think a part of what is also happening is that we have, I talked about this on the last episode, we have an economy in which the stock market had double-digit growth for the last three consecutive years. And so many people, especially people who enrolled in 401ks prior to the pandemic, many people have seen their 401k balances grow substantially over the past five or six years because we've seen such incredible economic growth between the pandemic and today. By that same token, people have not seen their wages necessarily keep up with inflation.

19:06And of course, there's a difference between the macro data and the lived experience. And many people certainly have felt as though their wages have not kept up with the rising cost of groceries, of housing, of some of these core staples that are necessities in living. And so you have a situation where many people are at a day-to-day level are feeling cash strapped, but on paper they have a high net worth. And so when you have that kind of situation, you know, we talked about this in the last First Friday episode, there's definitely a big difference between people who own assets and people who don't.

19:44And there's this bifurcation where people who own assets feel more secure, you know, that their home prices have gone up. Their 401k balances have gone up. Sure, their wages feel a little flat and prices at the grocery store certainly feel a bit high. But at a minimum, they have the reassurance that comes from knowing that on paper, their net worth is doing well. So that's been the economic story for people who own assets. And meanwhile, people who don't, all they've seen is that prices are higher. They don't own real estate. They don't own index funds. They haven't seen paper gains because they don't have assets on paper.

20:26I talked about in the last First Friday episode how that can create this disconnect and might be part of the explanation as to why consumer sentiment is so bad in spite of strong economic data and strong stock market performance. And so that is part of the story that's happening here. But I think what we're seeing with the 401k hardship withdrawals is a separate part of the story, which is that even among people who have paper assets, because prices have risen and that means cash is tighter, people with paper assets are now put in a position where they have to tap those assets in order to be able to pay their bills.

21:07As you've no doubt heard by now, the Supreme Court struck down the tariffs that President Trump imposed in a series of executive orders. The vote was 63. The justices ruled that the tariffs exceeded the powers given to the president under a 1977 law, which provides the president with the authority to regulate commerce during national emergencies that are created by foreign threats. The court did not weigh in on whether or not the federal government should provide refunds to importers who have paid the tariffs? And if so, how? The Supreme Court did not weigh in on that. That amount is estimated to be around$200 billion.

21:46While the Supreme Court has not ruled on that, a lower court has. In a follow-up ruling, a federal judge in the U.S. Court of International Trade ruled that companies who paid those tariffs are indeed entitled to refunds. The ruling was made in a case that was brought forth by a Tennessee-based filtration company called Atmos Filtration, and the judge stated that his court will hear cases related to refunds for these tariffs. It should be noted that in his dissenting opinion, Justice Brett Kavanaugh mentioned that the federal government, quote, may be required to refund billions of dollars to importers who pay to the IEEPA tariffs, even though some importers may have already passed on costs to consumers or others, end quote.

22:33He also noted, quote, IE EPA tariffs have helped facilitate trade deals worth trillions of dollars, including with foreign nations from China to the United Kingdom to Japan. The court's decision could generate uncertainty regarding various trade agreements, end quote. When he talks about the IE EPA, that is the International Emergency Economic Powers Act. That is the act that authorizes the president to use the law to deal with, quote, unusual and extraordinary threats, end quote. The president had cited large trade deficits as constituting an unusual and extraordinary threat to the national security and economy of the United States.

23:15The court's decision is in line with previous decisions. So previously, the Supreme Court had also rejected a similar argument about the use of emergency powers in a student loan forgiveness case. AI costs are falling dramatically. One study estimates that the cost of GPT-4 output has declined by roughly 98 % in about two years, dropping from about$60 per million tokens to under$1 per million tokens. Despite those falling prices, AI revenue has surged. So OpenAI reportedly grew from about$1 billion in annual recurring revenue to$12 billion in ARR over the span of those same two years. And this perfectly fits an economic explanation that's known as Jevons Paradox.

24:03Jevons Paradox states that when the cost of a resource dramatically drops, usage doesn't fall. Rather, the total consumption of that thing increases dramatically. For example, in the 1800s, coal became significantly cheaper. And as a result, Britain used more coal, not less, which meant that even though coal became dramatically cheaper, the coal industry grew and produced more revenue. And so we're seeing the same thing, Jevons paradox, happen with AI costs. AI costs have fallen substantially in the last two years, but although costs have dropped dramatically, usage has risen. And so the implications for this is that AI doesn't just replace human work.

24:51It goes beyond that. It begins doing and performing categories of work that previously were too expensive to attempt. So more work gets done because more work can get done because the type of work that no one even bothered doing because it was just too expensive to even try to do it can now be attempted, which is actually a great news for workers because it means that orchestration is needed for this new set of tasks that didn't previously exist. It means that new companies and, in fact, entire new industries could emerge that were previously just too expensive to even try. And so as intelligence becomes cheaper and cheaper, the scarce skill that only humans uniquely can do is having judgment, having vision, having taste, knowing what questions to ask, setting the course, deciding what agentic AI should be built and what it should be used for, like that vision setting, and then building the human-to-human relationships that enable all of this to happen.

26:02So relationships and orchestration, relationships and vision, those become the roles that humans fit into. And the potential good news is that entire categories of work that we can't even imagine might begin to pop up. New industries that don't exist today, industries that no one would have ever dreamed about because it would have just been far too cost prohibitive if you had to use human labor for everything. those industries may start to emerge. So the question as we move forward is how efficiently can energy be converted into computation? Because that is the constraint around AI progress. AI systems depend on electricity and data center infrastructure.

26:49And so the long-term expansion of AI is going to be shaped by the availability of energy. Okay, in the time between when I started recording and now, some new commentary has come in about this morning's jobs report. Kevin Hassett, the director of the White House National Economic Council, attributes the major snowstorms of February to the job weakness. Meanwhile, the president of the Federal Reserve Bank of San Francisco, Mary Daly, says that the jobs report undermines the idea that the U.S. labor market is stabilizing. She did emphasize that people should not put too much weight on one month of data, and she made a note that there are details within the report that make it difficult to interpret and also that the results do partially reflect disruptive winter weather.