AI's Great Job Market Reset | ITK With Cathie Wood

Economic Outlook - The analysis suggests the economy has been experiencing a rolling recession for the past three years, with softening indicators particularly in the consumer and housing sectors [1] - The report anticipates a transition from a rolling recession to a rolling recovery, expected to gain momentum from the end of the current year into the next, driven by productivity gains and real GDP growth [1] - Productivity is expected to be a significant surprise and a potent anti-inflationary force, potentially leading to lower-than-expected inflation due to deflationary pressures from new technologies, especially AI [1] Fiscal Policy - The expectation is that tax rates will remain stable, which is considered a crucial factor [1] - While government spending and deficits are acknowledged as concerns, the analysis suggests that spurring growth through innovation is key to lowering the deficit [1] - The corporate tax rate could effectively decrease to the 14-15% range due to full expensing of capital equipment, potentially attracting increased foreign direct investment [2] Monetary Policy - Although M2 money supply growth has accelerated to approximately 45%, it is still considered low historically [1] - There are signs that monetary policy might be too tight, as indicated by the inverted yield curve, specifically the 90-day T-bill rate versus the 2-year yield [1][2] - Recent economic data, such as CPI, PPI, and PCE deflator, indicate that tariff increases have had minimal impact on the overall pricing structure of the economy [1] Employment and Labor Market - The employment report is viewed as weak upon deeper analysis, with government employment accounting for a significant portion of the non-farm payroll increase [2] - Average hourly earnings are up 37% year-over-year, but with expected productivity increases, underlying inflation related to labor could fall below 2% [2] - There are indications of stress in the labor market, with rising continuing unemployment claims and difficulties for college graduates in finding jobs, potentially due to AI impacting entry-level positions [3] Housing Market - The housing market is described as weak, with new and existing home sales at low levels by historical standards [3] - New home prices have been slipping for a couple of years, and existing home prices are also starting to decline [5] - A recent directive allows cryptocurrency to be considered in mortgage qualifications, potentially opening up the housing market to younger buyers [4]