Perhaps the two largest drivers in today’s market are AI and jobs.
Addressing AI, who will be tomorrow’s Yellow Pages, Lucent or Northern Telecom? Lucent and Northern Telecom were formerly must own companies of 25 years ago that went into bankruptcy after the internet bubble popped. And then there are the Yellow Pages which have gone the same way as the Sears catalog, two catalogs that were the staple of every household 30 years ago.
Debt investors are becoming concerned about the companies that are at risk of becoming obsolete because of AI. The caution comes at a time when valuations are sky high, giving little room for error. Bond spreads are at their tightest in decades perhaps suggesting nothing other than a rosy future.
And then there are jobs. There is underlying current in the labor market that is perhaps concerning. The unemployment rate is creeping higher versus the typical spike, masking the dramatic increase in joblessness among certain demographics.
Yes the unemployment rate stands at 4.3%, up almost a full point since April 2023, it is still well below the historical average of 5.7%.
Youth unemployment (16-24), however, is much higher and more persistent. It is around 10.5%, up from 10% in July, an elevated rate in the face of a dropping labor participation rate (LPR). The BLS states that only 53.1% of young people were employed during the summer of 2025. A significant drop from years past.
In 2000 the LPR for this cohort was about 15% higher according to the BLS.
Why? Is the increase of minimum wage that has eviscerated low paying jobs via increased the adoption of technology and automation? The Berkly Research Group found that California has shed about 10,700 fast food jobs from June 2023-June 2024 when the state increased minimum wage for fast food workers to $20/hour, a level that hurts the already slim margins in the fast-food industry.
There is ample evidence that AI is beginning to impact white collar industries and the ability to find an introductory level job that has been replaced by technology.
The WSJ states another variable, a variable that is perhaps controversial. Suzy Welch, who is the wife of the late Jack Welch, the legendary CEO of GEO, has done some groundbreaking research about the values of people born between 1997-2012. These studies have been replicated thus offering considerable credence to their findings.
Welch reports that only about 2% of this demographic group prioritize the values most employers seek—achievement, learning and a strong drive to work.
This group places a higher value on selfcare, authenticity and helping others—all commendable but when they are the top priorities it may be hard to thrive at work.
This disconnect is not easy to bridge but doing so will be essential to both the economy and the economic well-being of a generation.
Periods of high youth unemployment historically correlate with increased social instability, drug use, crime, and political extremism.
The erosion of the typical traditional economic optimism (only 25% expect their standard of living to improve, down sharply from 75% at the turn of the century) is especially pronounced, impacting marriage rates and family formation that is compounding demographic and economic headwinds.
This group (age 16-24) are the largest advocates for a larger government (read socialism) but some believe the huge increase in the size of government over the last 25 years is a major reason for this feeling of despair. Self-esteem is earned not given, the inverse of what many in government espouse.
The US has always been a nation of change and occasional turmoil. As a result, the largest increase in church members are males aged 18-30, a growth rate some studies suggest is about 40% per annum. Approximately 28% of males in this cohort now attend church regularly, up from the “mid-single digits” of 5-7 years ago.
Our country was founded on the principles of a “higher power,” a loyalty to something bigger than self or government. It is our culture.
The country will overcome as it has in the past, emerging stronger and more cohesive. However, the path might at times could be ugly.
Commenting on yesterday’s markets, equites reversed a large portion of Friday’s decline as there appears that there is willingness between the China and the US to continue to negotiate over trade issues. The Treasury market was closed for the Columbus Day holiday.
Last night the foreign markets were down. London down 0.33%, Paris down 0.88% and Frankfurt down 1.17%. China was down 0.62%, Japan down 2.58% and Hang Seng down 1.73%.
Dow and NASDAQ futures are down 0.5% and 1.25%, respectively on trade angst. Both JPM and GS beat estimates. Shares of both companies are essentially unchanged. The 10-year is up 3/32 to yield 4.02%.
