Allison Schrager, of The Manhattan Institute, and Wendy Edelberg, from The Brookings Institution, joins 'Squawk Box' to discuss the latest jobs report.

Economists Allison Schrager of the Manhattan Institute and Wendy Edelberg of the Brookings Institution discussed the latest jobs report, highlighting the complexities in interpreting current employment data. Edelberg noted that recent surges in immigration are still affecting labor supply, making it difficult to determine what a 'good' jobs number should be, especially as the impact of immigration fluctuates.

Schrager emphasized that despite ongoing uncertainty, the economy continues to show strength, with no clear signs of significant weakness that would justify the Federal Reserve cutting interest rates. Both experts agreed that lower job creation rates may reflect changes in immigration rather than underlying economic weakness, and that the threshold for what is considered a weak report may need to be adjusted accordingly.

Fed can't justify cutting rates right now, says Allison Schrager

Let's bring in the rest of our jobs panel. The Brookings Institution's Wendy Edelberg. The Manhattan Institute's Allison Schrager in our own Mike Santoli. Great to have you all with us. Wendy let's start off with you. What's your take on the report. What's your take on that asterisk that Steve brings up in terms of the growth from the federal government in terms of job ads. It makes a great point to focus on on on the private sector. The main challenge here and I think the main challenge for Jay Powell is what's a good number. And right now it is completely perplexing to be able to answer that question. And the reason is immigration. It looks like the recent surges in immigration in twenty twenty three twenty twenty four are actually still putting upward pressure on labor supply. All these months later even after it slowed in the second half of twenty four and then immigration clearly slowed in the first months of the Trump administration. And yet we have a lot of information that shows us that immigrants who came since let's say twenty twenty two are just now working to enter the labor force. And to the degree that they're doing that at speed it could be that a good number in the first half of this year should have been more like 200 that 200000 which is to say the numbers we're seeing now may actually suggest some softness. This is all about what's the break even. And we are just in the grip of when those break even employment report numbers are going to are going to massively shift. It could be that we shift from a world where actually a good payroll employment number in a given month was 200000 in the first month of this year. That could be as low as 10 to 40000 in the second half of this year. We are just in the grip of this change because of the wild swings and immigration. Allison do you also believe that we are on the precipice of a major change here in the labor market. Could be. But I think just still I feel like we keep looking for the shoe to drop. But we keep getting good reports. It's not just this employment report. It was also jolts. It's also inflation. And for right now the economy looks pretty strong. It's still keeping on keeping on despite all this uncertainty despite all this tariffs. I guess we can't explain it. But at the very least I don't see how the Fed could justify cutting rates right now. I mean not only that it doesn't even seem the high rates where we are we're supposed to be still in a high rate environment to finish off inflation. It doesn't seem to be having a contrary contractionary effect on the economy. So it even is sort of suggesting that the neutral rate is much higher than it was pre pandemic. And it's really hard to justify cutting rates until we actually see evidence of significant weakness. I feel like we keep squinting for third or fourth order derivatives to justify a weakening labor market. And it might be weakening some. But it's hard to call this economy truly unhealthy. What would be the number that would be truly weak to you. I mean what's that what's a cut off point. Because you're right. People are squinting. They're looking. They've been thinking this is going to happen for so long and they're trying to find any sign of it. Well I mean as Wendy points out we might end up with much lower job creation rates but that might also reflect lower immigration. But that would also mean we still have relatively low unemployment. So if that's the Fed's goal you know is keeping unemployment low even if we do end up with lower employment reports that doesn't necessarily justify cutting rates. So I mean I agree with her that as we add the impact of lower immigration we're going to see lower low reports and we might have to also adjust our bar for what's a low bad report.

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Kyiv

Ukraine Invasion

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Washington

Global Tariffs

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Gilimanuk

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Manhattan

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Tehran

Iran Strikes

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Lhasa

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New York

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Boise

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Everglades

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