Job gains came to virtual standstill after first four months of 2025: KPMG's Swonk

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KPMG 3.0
Management Consulting
Diane Swonk 9.0

Job gains came to virtual standstill after first four months of 2025: KPMG's Swonk

yields

we think the first rate cut is now in June Argument is that structural labor weakness cannot be cured by rate cuts, and cuts could risk inflation, but Fed will likely cut in June after pausing to assess data. This implies a cautious downward path for yields, not an aggressive one.

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no reliable edge (random outcomes)

11/14/2025 9:03:18 PM	short term up	7 days later	-2.30%	-2.30%

Jobs report shows fewer than expected jobs in December, continuing a slowing labor market trend. Market prices rates unchanged in January, but asks if they should be lowered sooner given soft labor reports and strong productivity data.

speaker1
Diane Swonk

Strong productivity growth argues for higher rates, not lower. Growth remains robust. Labor market weakness is structural (tariffs, immigration uncertainty) not cyclical, so rate cuts alone cannot fix it. 84% of annual job gains occurred in first four months of 2024, with virtual stalling since May.

The Fed is pausing to get beyond government shutdown noise and loss of economic data. We think the first rate cut is now in June.
Notes agreement on correlation between April tariff announcement and flatlined employment, but questions how this reconciles with strong Q3 GDP and Atlanta Fed's Q4 tracker over 5%.

speaker1
Diane Swonk

Robust consumer spending (2/3 of GDP) is carrying growth, but 57% is done by top 20% of households—a record high—creating a 'jobless boom.' Productivity gains are from post-pandemic right-sizing, not AI. Structural hiring slowdown means Fed rate cuts risk stoking persistent inflation.

Inflation will be lower due to zeroing out of October data, but worried about lingering inflation early next year.

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