January’s Jobs Picture & AI Disruption 2/11/26

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1:06On today's episode, it's Jobs Wednesday. The U.S. labor market added 130 ,000 jobs in January. What economists from different sides of the political spectrum are reading from this report, with Kitty Richards from Groundwork Collaborative. I think that this print still demonstrates continued weakness in the labor market. and Peter St. Ange from the Heritage Foundation. In terms of looking at where the job market is right now, it's far stronger than many of us suspected. Plus what it all means for the Federal Reserve. I think that's the sound of rate cut expectations dying. That big headline, plus the stories that got us squawking, like a major profit miss for Ford Motors and a new AI tool that's taking a bite out of a new sector, financial services.

1:54This is like the wildfire that sort of keeps spreading to different neighborhoods. It's Wednesday, February 11th, and Squawk Pod begins right now. Stand by in three, two, one, cue, please. Good morning and welcome to Squawk Box here on CNBC. We're live from the warm and toasty NASDAQ market site in Times Square. I'm Kelly Evans, along with Brian Sullivan and Robert Frank. We're in for Joe, Becky, and Andrew this morning. Treasury yields, shall we? This has been the action lately. The 10-year yield, which was just at 420, guys, about 24 hours ago before we got the weak retail sales report, fell to 415 yesterday.

2:33And take a quick look on your screens this morning. 4.135 percent. So that's a pretty significant move, one that's kind of breaking us out of that range we've been stuck in for quite some time. And that's despite, again, everything we talked about, Bri, recently with Japanese bond yields and the rest of it. Well, a tiny sliver of good news for potential homebuyers, I guess. Yes, if mortgage rates are tied to that 10-year, maybe mortgage rates will come down. Just a little bit, folks. I know it's not the big respite. Respite? Respite. Thank you. Respite's early. Respite that you wanted. You're not probably under sub-6%, but we're headed in the right direction.

3:06That housing market, spring selling season, they're looking for a little relief, Robert. A little relief. It was a big move in 2020. Like we are from the 82-degree studio here. It is not just warm. It is hot. It is hot. That's just because you're here. Is that because it had been cold? I was here like last week again, a full new lineup, and it was about 50 degrees in the studio. Now, you know, it's like the market. It just vacillates from one side to the other. I like it. It's a good weight loss technique. But we did. Did I tell you that bespoke stat? I think we talked about this, how we went from the most overbought market to the most oversold, back to the most overbought for the first time in history.

3:46That was very apt. I had no idea, but I'll take it. Thank you. And speaking of cooling, shares of financial services firms, the latest to get it on AI fears. This follows tech platform Altruist announcing an AI tax planning tool yesterday that it says can help investors streamline tax planning strategies. So you've got Raymond James lost close to 9 percent. Charles Schwab down 7 percent. LPL Financial was more than 8 percent lower. Wealth management is the latest industry to get hit over AI fears. Earlier this week, it was the shares of insurance brokerages. Last week, it was software stocks and private credit firms.

4:24This is like the fire, the wildfire that sort of keeps spreading to different neighborhoods. It's fascinating. And there's that overreaction in the beginning, probably. And then to step back where that industry sort of says, no, actually, we're all AI firms or AI will help. And then it will probably end up in the middle where there will be some firms that will be disintermediated by this because I've covered wealth management for a long time. There is so much of this high-fee work that can be done by an outgoing or AI. So let me, because I know, Kelly, you hit this on the exchange yesterday. We talked about it a bit on Power Lunch.

4:59It has to do with a firm rolling out this AI tax planning thing, okay? The firm's called Altruist, and this tax planner, they call it Hazel. Let me ask you this, because you do Inside Wealth. By the way, sign up today. It's fantastic. Thank you. You're welcome. How nice it is. Is anybody going to leave their wealth manager because another firm has an AI tax planner? No, but they will if it's a lot cheaper. And if that other tax planner has AI, which is doing things instead of a whole army of accountants who are very expensive, then yes, it's going to dramatically cut fees. And people who invest, whether you're super rich or not, they're very fee sensitive when it comes to tax planning, when it comes to wealth management.

5:45And so it's the fee. And we've already seen a lot of fee compression in the wealth management space, which is why margins are down. You're seeing a lot of consolidation in that space with REAs wrapping up other REAs. And so this is going to accelerate that consolidation. It's going to bring down fees. And the competitors that have the lowest fees that are the highest adopters of AI are going to win clients. And that's the biggest fear. If you talk to anyone in wealth management, they're like, look, we're all going to be replaced by AI in three or five years anyway. I mean, they'll all openly say this.

6:15So I was interested in why this didn't happen earlier to some of these stocks. We're seeing now I do think it's an overreaction. Eight, nine percent down in one day is way too much. But, you know, and there will be some firms that really do well, that integrate it, that are able to adapt to that new cost structure. But there's a lot of fat in this industry. I just you remember robo advisors. Yes. Yes. Does this do you not get a little bit of robo advisor vibes? Absolutely. And like everything that you're saying is true, that it resulted in fee compression and consolidation and the rest of it. But it didn't make the industry go away.

6:48And I find it hard to believe that AI, especially for something as important as taxes, like you might be able to ask it some questions. It might be able to, you know, optimize some processes. But I don't know if it's going to be a game changer. It's it's not a replacement, but it is a reduction. And so there's a lot of busy work that comes in terms of filings and processing forms and putting those forms with other forms. You're saying that brings the fees down. So what these RIAs, registered investment advisors, what they can charge our viewers, our listeners, right? And many of these RIAs are watching right now.

7:23Those fees will come down. But what I would argue is that while the computer can do those things, you know better than anybody, Robert, that you don't replace the human because the human is still she or he is what brings in the client, brings in the money. That's right. Picks up the phone when the market's down 20 percent and says, stay calm and carry on. And where that becomes most valuable is at the high end. And that is why all these RIAs, and I know this because I talk to them all, are all trying to move up the wealth ladder. Because where that personal human involvement and judgment is going to matter most and be valued most is at those high net worth clients.

8:05You know, most everyday investors, retirees, a lot of that can be automated. But it's that high touch, high end. And that's why all these RIAs and wealth management firms are targeting the high end. Could we just get someone to make it just easier to file taxes for everybody? I mean, I don't know. That's a whole separate thing. That's the tax code. That's the tax code. I'm just saying it's only gotten more complicated this year. Yes, absolutely. So I'm just not persuaded by this narrative, but whatever. No one, I love this technology. It's wonderful. It's wonderful. It's making life so much better and easier in every city.

8:37There's a but there. What's the but, Kelly? I don't know if there is a but. You're too nice, but there's a but. I mean, because I just think back on, you know, think about the Internet, right? Remember when they said Excel was going to put all the bookkeepers out of work? I mean, it's just like, we should be thankful. This is going to create so many new jobs and opportunities. I just, I'm not, I don't know if I believe in the doomsday narratives. No, I'll change my mind. Somebody get her an eagle and put it on her shoulder right now. Ford reporting its biggest quarterly earnings miss in four years.

9:08The good news, though, is that Ford is guiding to a rebound this year. Fourth quarter automotive revenue did beat expectations, but profit missed. The company absorbing higher than expected costs from a fire at an aluminum supplier. That impacted the construction of its very profitable and popular F-150 pickup. They see about$900 million in extra tariff-related costs as well. Ford's fourth quarter net loss, about$11.1 billion. because remember, back in December, the company announced it would take a nearly$20 billion charge from EV-related write-downs for the year. Ford expects to earn between$8 and$10 billion, the midpoint of that range, above analysts' estimates.

9:50Again, I've been talking about this for years. I've owned an EV. I've driven almost all of them. They're great for around town. If you live in northern Michigan in the UP, if you live in rural Indiana, where Elise is from, You're not. It's not good. And I think there was a wild miss on consumer demand. Well, absolutely. But it's also OK. So they're 45 percent kind of since that announcement. The question is now go back to race, go back to Ferrari. Right. I mean, incredible performer there, even with some recent headwinds looking at an EV piece of the market that they can actually maybe do something with.

10:22Unlike, you know, talk about Ford versus Ferrari. This will be really interesting because Ferrari yesterday announced that the it showed the interior of the new EV. that's going to launch in May, which they changed the name. It's now going to be called the Luce, which is Italian. Is that how you pronounce it? Luce, yes. It's Italian for life. You're doing your Spanish. I'm doing my Italian this morning. We're multilingual here at Squawk Box. But it'll be interesting to me to see how many people want an electric Ferrari. This is a brand that's known for that emotional roaring engine. The good thing about Ferraris, they only make 13 ,000 cars a year.

10:57They have a new factory that's very flexible that can make EVs. It can make hybrids. It can make ice engines. So I think they can quickly pivot, unlike Ford, which really had to scale EVs and then descale Ferrari. So years ago, I drove a car called the BMW i8. I did not own the car. I want to make that clear. Ugliest car ever. It's not an attractive car. Was that the electric one or that was the... Yes, but what they did and what I think Ferrari will do, maybe you know this. I don't know. Yeah. You put a little, they had a little fake engine in there that made the sound of the engine. Oh, funny.

11:32So you wouldn't, because if you drive an electric car, as I have, again, own one, and also you hear the, mostly what you hear is tire noise, because tires tend to be heavy and a little denser. So you just hear a lot of tire noise inside. But people want that roar. They can make a digital engine sound to appease those buyers. It's going to, the Ferrari EV will have a sound. it's not going to be sort of totally created by speakers. It's going to be, as they've told me, they've hinted, that electric motors do make a sound. They do. It's like a zzzz. Yeah, and you can actually, through engineering, amplify that sound, not through speakers, but you can make that sound sound original and like an electric engine.

12:13So that's going to be the big question. But there will be a big sound for this electric Ferrari. We'll just have to see how it sounds. I think it's going to be, listen, for those buyers, it's like their seventh car. Yeah, exactly. And it's a collector's item, and they'll keep it in the garage, and then 20 years from now they'll sell it. But don't you have to wait, like, years sometimes to get one? Yes. Ferrari is sold out through the end of next year. It's crazy. I know because I was trying. No, never mind. Yeah, exactly. Grazie. Mille grazie. Cheese will be next. Coming up on Squawk Pod, unpacking the January jobs report and the revisions for last year with CNBC's Steve Leisman and Rick Santelli.

12:49I say all the investment gurus out there jump in the markets in the U.S. because global GDP is going to take a big ramp up and the U.S. is leading the way. What the numbers mean for the Federal Reserve and how each side of the political aisle will interpret the report right after this. Bitcoin is often talked about as an investment, but it was built to be used. With Cash App, you can actually do that. Send Bitcoin instantly, pay at local square businesses that accept it, or move it to your own wallet whenever you want. It works more like real money and less like something locked in an account.

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15:06Welcome back to Squawk Pod. Due to the government's brief shutdown earlier this month, the Department of Labor Statistics delayed its monthly jobs data by five days, pushing jobs Friday to jobs Wednesday. It's job, job, jobs Wednesday. Not necessarily a Friday, but every bit as important. CNBC's Rick Santelli delivered the numbers this morning. And here's how they came in. Non-farm payrolls increased by 130 ,000 for January, above the consensus estimate of 55 ,000. 130K is also better than December, which saw a gain of 48 ,000 jobs. The unemployment rate ticked down to 4.3%. In addition to the monthly numbers, the BLS also released revisions for April of 2024 to March of 2025.

15:56Turns out the initial jobs count for last year was revised down by 898 ,000. That's almost 900 ,000 fewer jobs added in the year prior than originally reported. The expectation was that last year would be revised down by well over 900 ,000. I think I hear something. You know what that is? Steve, you hear that? Steve Leesman? I think that's the sound of rate cut expectations dying. Brian Sullivan, Kelly Evans, Robert Frank, Rick Santelli, Steve Leesman, and some other special guests broke down the report on Squawk Box this morning. Here's Steve Leisman. One good piece of news, you did have a turnaround in manufacturing.

16:37That was up 5 ,000. It has been a perennial. That actually, Steve, is an important one. Since the tariff last April, haven't we been shedding manufacturing jobs every month? To see some hiring there. It's been up and down. It's not a big number. I was trying to think of construction, I think, was also higher as well. Where's that construction number? That's up 33 ,000. So that's a good number. in that specialty trade contractors, which could be government work. And I don't know if that also picks up the data center construction that's been out there. So, again, just be clear, I would take this with a bit of a grain of salt.

17:12Rick is right. There was some hope that this 911 ,000 estimate of big downward revisions was going to be more in the sevens. It ended up being in the mid eights. That's a big downward adjustment. I haven't done the calculation. But certainly what you would do is you would take all of that period of time and you would adjust downward the average month. I need to look at how they apportioned out over months. So was the weakness towards the end of the period or back of the middle? And also there will be downward adjustments. And I'll get some analysis on this shortly. All right. On whether on the revisions to the subsequent nine months of 25 and 26.

17:50While you work on it, stay right there. Also, let's bring in a few more voices to react here to what we just learned. Again, a big jobs report with a lot to unpack. Kitty Richards is senior strategic advisor at Groundwork Collaborative and a former Treasury official in the Biden administration. Peter St. Ange is senior economist at the Heritage Foundation. And of course, Steve and Rick are both here with us as well. Peter, go ahead. What are your thoughts? It was a blockbuster report. I was surprised. Sort of the meta story here has been that we've already gotten the pain on jobs, meaning two and a half million deportations, federal layoffs, slower federal spending.

18:26The problem was that the drivers of jobs, so Fed cuts and reshoring, you know, Trump's talking about four trillion plus of incremental factory investment. Those all take a long time. They can take years. In fact, Taiwan Semiconductor is taking 40 years on their factory out in Arizona. So I expected continuing sort of paper weakness. This was Blockbuster. Katie? I think that's a somewhat odd take given the large revisions that we saw. It's great that revisions came in at 860-something thousand jobs, fewer than we thought, rather than 900 ,000 jobs. But that's still a huge downward revision to last year.

19:07And it really changes the picture of near net zero job growth over the course of 2025, which is not what we thought we were looking at last year. I'm glad to see payroll employment came in stronger than anticipated. But a lot of that is because of really low expectations. $60 ,000 would have been a very bad print. And so I think that this print still demonstrates continued weakness in the labor market. it's nice to see that manufacturing employment is ticking up for the first time in nine months. It had been falling month after month after month. That is not something that you would expect if you see strong investment in manufacturing.

19:48Instead, what we've seen is cutting back on some of the investments made in the Biden administration and that really putting a drag on manufacturing employment. So I think that this is going to put the Fed in a continued tough position. We're still seeing consumer sentiment weak. We're seeing inflation stubbornly elevated. And we're seeing this continued kind of anemic, low-hire job market that's holding back wage growth and making life less affordable for the American people. Peter, you want to respond to that? Yeah, well, the revisions were absolutely massive, but that has to do with the incompetence of the BLS's models, the birth death specifically, which got boosted during covid by all these fake businesses like Somali leering centers.

20:37So, yes, that's a deeper problem with the BLS. But in terms of looking at where the job market is right now, it's I think it's far stronger than many of us suspected. Now, as for the pain in manufacturing, so Biden is definitely contributing because a lot of his crony investments in the Inflation Reduction Act, those are now going bust. That's taken about 40 ,000 jobs out. Meanwhile, with deportations, you've got a lot of low end manufacturing that can't pay more than seven bucks an hour. Now, I'm not sure that those are the jobs we necessarily want to be here. But, you know, again, manufacturing that should be turning around now.

21:14We've got four plus trillion of investment. Rule of thumb is every trillion of investment is worth about a million jobs. But those take time. Inflation Reduction Act investments are being pulled back because of Republicans in Congress and the Trump administration rolling back those investments. And that's driving up utility prices, especially electricity across the country for American families. So I think it's a little bit bizarre to lay that at the feet of the past administration. Go ahead, Steve. What were you going to say? Just looking at the trend of things, 41, 48, and 130, and it's a little hard to discern what that trend is.

21:51And I would try to take a middle ground on the political here, which is the sense that there's a lot of balls in the air. And some of that, I think, has created some uncertainty. And it's not quite time to say things are settled and I know what to do here. We saw a big decline in small business employment from the ADP numbers. I think that's a big driver of what's going on. And again, I would just take a little bit of grain of salt. January, they adjust these numbers by almost 2 million. Okay? The difference between the seasonally adjusted and the not seasonally adjusted is almost 2 million. And the idea that you're going to either this is different from the trend, all of a sudden everything is okay.

22:31Remember, I showed you that chart of retail hiring in October, November, December. It was all negative. So just take it with a grain of salt. Rickster, what were you going to say? I'm going to say that nobody's going to rain on my parade. And these numbers are what they are. And 50K, I made this hat two months ago. And the reason I made it is for exactly a day like today. All these naysayers steeped in politics continue to be negative. That's OK, because 50K says you've all been wrong. You keep from going in the water, even though it's very hot outside. I say all the investment gurus out there jump in the markets in the U.S.

23:11because global GDP is going to take a big ramp up and the U.S. is leading the way. Kitty, you want a hat? I love that hat. And we have seen stock prices going through the roof. It's just not really helping American workers and families. I think. Well, it's getting better. Well, and let's let's go back to the Fed, Steve. Do your taxes and just bolts, because everybody's going in their political... You're the way, Brian. What's the question? I'm Fleetwood Mac here. I'm just going to go my own way. The Federal Reserve, does this change the odds of a Fed rate cut? Because inflation rates have come down a little bit, and then we hear some of the people you interview so well say, I'm focused on the job market.

23:54Well, if this number is to be believed, absent the revisions that you just talked about, the job market seems to be pretty good. So does this change the odds of a Fed rate cut? Let me tell you how I think the Fed will think about the unemployment market. And I think they think about it the way I do. And maybe it's reflexive in that I only think that way because I think they think that way. But anyway, I think they create a narrative of what they think is going on. And I think they believe. I thought Rick's 50K was going to be for the new run rate of employment. That 50 is the number. I didn't know he went down 50K.

24:28Because I would have had a hat that said 50K. That's the number that I need to keep the unemployment rate unchanged. I think that's what they believe. I read all of the economists and their explanation of what's happening. Let me just finish, Ricky, here. And look at demographics, and you're in that 20 to 70 range here. And I think a number comes along, Brian, that's out of sample of what they think. I think they're going to judge it and say, what else do I know? I know ADP is weak. I know that Jolts is weak. And what I would say, Brian, is the Fed has time. They're going to take the time to look at another employment report, look at the other data that's out there and say, you know what, is this 130 in sample or out of sample?