A weakening economy isn’t behind the rise in the unemployment rate, says Brean Capital’s John Ryding

Joe Kernen (Co-anchor of Squawk Box) 00:00.000

Let's bring in John Riding, Green Capital Chief Economic Advisor. Uh, you've been listening, uh, John. What How would you summarize what what we're trying to figure out and everything else?

John Ryding (Chief Economic Advisor) 00:12.400

Well, I I think both Rick and Steve made some very good points there. Um, I've been flagging this issue, and I think we talked about it the last time I was on CNBC. That the rise in the unemployment rate has not been really due to a weakening economy. I mean, the GDP data over

John Ryding (Chief Economic Advisor) 00:29.360

the last four quarters through the third quarter of last year's 2.3%. I don't think the economy is as strong as the third quarter 4.3% print suggested. If we look at the jobless claims data, they've been low throughout the year. So we're really not seeing a pickup in layoffs,

John Ryding (Chief Economic Advisor) 00:47.120

which I think is where the first blow of economic weakening hits. What we have seen is very, very limited gross hires, new hires. And that has fallen to a large degree on the youngest segment of the population. And I'm quite convinced by the thesis that what's happening here is

John Ryding (Chief Economic Advisor) 01:08.800

that AI is proving to be a cheaper way of hiring new labor as it were than actually hiring people. The A lot of entry-level jobs are being taken over by AI. We can debate how effective that is if we want. I've had my own negative experiences with some of the with some of the

John Ryding (Chief Economic Advisor) 01:30.960

calling platforms at various companies. But nevertheless, I think that's what's happening. And so if you cut interest rates in an attempt to stimulate hiring, it's a little misguided because the hiring cutting interest rates lowers the wrong price. What you need to do is to

John Ryding (Chief Economic Advisor) 01:48.160

effectively lower the price of labor to get new entrants into the labor force, which is what we need. But lowering interest rates lowers the cost of capital and potentially makes implementing these AI systems even cheaper. So, I don't think the rise in the unemployment rate that

John Ryding (Chief Economic Advisor) 02:04.760

we've seen is a particular sign of economic weakness. So, I do disagree a little bit with Steve's point that the some rule and we've used that rule for many, many, many, many years has worked regardless of the level of the unemployment rate. We mustn't confuse recessions occur

John Ryding (Chief Economic Advisor) 02:25.680

because of a downturn economic activity, which is about a change in activity. But, no, I I don't think we're in a recession, and and I do think that this lack of hiring is not addressable by cheaper money.