The job market

The job market in the U.S. is not as good as it seems. First of all, government jobs were increased substantially during the Biden era, and it’s not clear wether those jobs will be kept by the Trump administration. Second, AI is starting to affect unemployment, particularly the youth labor market, where some jobs are easily being substituted by AI agents. Third, robotics is on the verge of being mainstream, and will also affect some manufacturing jobs. And fourth, most of the gains in employment that we have seen lately are temporary ones, not permanent. The U.S. has barely added any jobs since the beggining of the year, as you can see in the chart below. Whoever comes in May as Fed Chairman, will have a difficult job market to deal with combined with sticky inflation. Despite that, rates will likely go down, at least to 3% and probably lower, to allow small businesses to stay afloat and keep the active polulation employed. The job market will dictate monetary policy in 2026 and consequently how the long end of the Treasury yield curve will behave in the following months.

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