2025-12-25 10:26:11

The US economy is playing out an interesting "unequal growth"—efficiency is rising, but employment growth is lagging. The recent signals from Morgan Stanley are worth noting: this phenomenon might provide the Federal Reserve with more reasons to cut interest rates.

On the data front, the picture is quite straightforward. The latest figures from the US Department of Labor show that in the second quarter, non-farm business workers' hourly output increased by 3.3% year-over-year, a significant rebound from the 1.8% decline in the previous quarter. What does this rapid productivity rebound imply? It suggests that the economy is doing more with fewer people, which can effectively lower inflation expectations.

Interestingly, there is a clear divergence between market expectations and Federal Reserve officials' views. Internally, the Fed is quite conservative about rate cuts in 2026—officials generally believe at most one cut. But investors' attitudes are completely different. According to CME Group data, the market assigns a 72% probability of rate cuts before the end of the year, highlighting how strong market expectations are for a rate cut pace.

The rise in productivity not only helps suppress inflation but also alters policymakers' cost-benefit calculations. If the economy can sustain output with lower employment growth, the inflationary pressures faced by the Fed would indeed ease. Morgan Stanley's analysis further reinforces this outlook, with market expectations for rate cuts already being quite high.

But there is a key question behind this: Is this "jobless prosperity" a short-term phenomenon driven by technological progress, or a long-term signal of structural economic adjustment? If it's the former, the room for rate cuts might be limited; if it's the latter, the Fed may need to start considering more aggressive policy adjustments. What do you think about this logical chain?

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.

22 Likes

Reward
22
10
Repost
Share

Comment

0/400

ServantOfSatoshi

· 2025-12-28 09:32

Productivity soars but employment stalls, I've seen this trick before... Is the AI substitution effect coming? --- 72% chance of rate cuts vs. the Fed's expectation of a single rate cut, is the market really just throwing a tantrum? --- Unemployment prosperity sounds absurd, who can tell me what unemployed people are eating? --- The idea that technological progress lowers inflation sounds good, but what about the wallets of the underlying people? --- Morgan Stanley's call for rate cuts is nothing more than for their own positions, don't get caught off guard. --- Efficiency improvement = layoffs plus overtime, just a different way of saying it. Is the US economy really that strong? --- The key still depends on wage growth. Output growth is useless; I care whether wages can increase. --- "Unemployment prosperity" is a brilliantly crafted term, the ceiling of irony. --- With such high expectations for rate cuts, is this paving the way for a crash in a certain asset class?

View OriginalReply0

MechanicalMartel

· 2025-12-28 05:28

Productivity increases but employment can't keep up, isn't this just a microcosm of the AI era... Doing more with fewer people, sounds good in theory, but what about those who lose their jobs? --- 72% probability of rate cuts vs. the Federal Reserve's cautious stance... The market is throwing a tantrum again, this kind of divergence will eventually come to an end. --- "Unemployment-driven prosperity"? I think that's quite ironic as a name, prosperity for what? --- The key still depends on whether this wave of productivity improvement can be sustained... If it's just AI replacing human workers, then even rate cuts by the Federal Reserve won't save the unemployment wave. --- Morgan Stanley's statements are half-believable, but these data are really sobering — the economy is improving, but people are being pushed out of the job market. --- It feels like the Federal Reserve is now caught in the middle, on one side is market greed, on the other side is the complexity of reality... It's uncomfortable.

View OriginalReply0

ProofOfNothing

· 2025-12-27 16:18

Productivity increases but employment hasn't kept up. Isn't this just the prelude to AI doing all the work and humans having no food to eat... A 72% chance of rate cuts sounds great, but if it really happens, what can ordinary people actually feel?

View OriginalReply0

GateUser-6bc33122

· 2025-12-27 16:00

72% chance of rate cut vs the Fed only wants to cut once, the gap is really huge, the market is just betting that the Federal Reserve will concede

View OriginalReply0

JustAnotherWallet

· 2025-12-25 10:56

Productivity increases, but employment can't keep up... Isn't this a microcosm of the AI era, with robots stealing jobs? Fewer people working more, sounds great but what about the unemployment rate? A 72% expectation of rate cuts, this time the market is really "overly optimistic" Is it a technological dividend or a structural crisis? Good question, but the answer might be quite painful The Federal Reserve dancing on a wire, a slight misstep and it's all over An unemployment-driven prosperity sounds so ironic, are they joking with me? The market and the Federal Reserve are singing off-key, this is the most interesting show of the year Will efficiency improvements suppress inflation? Then who bears the anxiety of the unemployed?

View OriginalReply0

GasFeeTherapist

· 2025-12-25 10:55

72% chance of rate cut vs. the Federal Reserve not wanting to cut at all. How big is this gap... The market is gambling with itself again.

View OriginalReply0

0xDreamChaser

· 2025-12-25 10:52

Has productivity increased but unemployment hasn't kept up? Isn't this exactly the kind of work AI is supposed to do? When everyone becomes unemployed, inflation will naturally come down, haha.

View OriginalReply0

SelfMadeRuggee

· 2025-12-25 10:49

It's the same old trick of "fewer people, higher productivity." In plain terms, it's just layoffs. No matter how nicely it's packaged, the essence doesn't change. A 72% chance of rate cuts? That's hilarious. The Fed folks have long been hostage to the market.

View OriginalReply0

FancyResearchLab

· 2025-12-25 10:43

It's the same old "do more with fewer people" approach—sounds like writing smart contracts—should be feasible in theory, but in practice, it's just digging a hole for yourself to jump into. Market's 72% chance of rate cuts versus the Fed's one, at most—this gap... Lu Ban No. 7 is back at work. The Fed is really conservative this time, or perhaps waiting for the tech boom bubble to burst on its own? The key question remains: how long can the prosperity without employment last? I bet on ETH as a phased result of the AI wave. We'll know once the data starts to backlash. The rate cut expectations have been driven so high; if they really don't cut when the time comes, the market will collectively fall into that despair of "being trapped again."

View OriginalReply0

RegenRestorer

· 2025-12-25 10:42

Productivity soars while employment lags; I've seen this pattern too many times. Basically, AI + automation are eating away at jobs. The Federal Reserve's rate cut is definitely coming, and the market is betting on it anyway. --- No employment prosperity? Sounds impressive, but in reality, it's just unemployment pressure building up behind the scenes. --- A 72% probability of rate cuts aligns with the Fed's conservative stance. This gap tells me the market is gambling wildly, and I choose to believe the market. --- The key question is how long this round of productivity gains can last. If it's just a temporary technical dividend, then what awaits could be a recession. --- Doing more with fewer people sounds highly efficient, but for ordinary workers, it's just one word: layoffs. --- Morgan Stanley's bullish stance on rate cuts indicates that big capital is already paving the way for a recession. I don't believe in the so-called "employment prosperity without employment."

View OriginalReply0