Kevin Hassett Says Jobs Report ‘Way Better’ Than Expected — Favorable CPI Could Make ‘Strong’ Argument To Hold Rates Steady

In an interview with CNBC, Hassett compared the current AI investment cycle with the internet boom and said AI could eventually support “high growth and low inflation.”

• The U.S. economy added 162,000 jobs in August, above the 56,000 increase economists had expected.
• According to Hassett’s calculations, annualized CPI over the past three months is running at 1.6%. 
• He said that another favorable reading could make the argument for holding rates steady “pretty strong.”

The U.S. jobs report came in “way, way better” than expected, according to White House National Economic Council Director Kevin Hassett, who said on Friday the data pointed to a broader investment boom fueled by reshoring, factory construction and artificial intelligence infrastructure.

In an interview with CNBC, Hassett said the next major test will be the consumer price index due next week. “If the CPI continues to be that favorable in the next report, the argument for holding steady would be pretty strong,” he stated.

The U.S. economy added 162,000 jobs in August, according to data released Friday, sharply exceeding the roughly 56,000 gain economists had expected. July payrolls were also revised to show a gain of 21,000 jobs, reversing an earlier estimate of a 23,000 decline. The unemployment rate held steady at 4.1%.

CPI Could Shape Fed Rate Outlook

After the strong labor market report, Hassett said inflation remains the key factor in the Fed's rate decision.

“We're all going to be looking really closely at the CPI next week,” he said. Rather than relying solely on the 12-month change, Hassett said he prefers to look at the recent price trend by taking the three-month average and annualizing it.

“Right now, annualized CPI over the last three months is running at 1.6 percent,” he said. “If the CPI continues to be that favorable in the next report, then you know, the Fed will do what it wants to do. We respect their independence, but I think the argument for holding steady would be pretty strong.”

U.S. Stocks Open Mixed

U.S. equities were mixed in morning trade on Friday following the jobs report. The SPDR S&P 500 ETF (SPY) dipped 0.09%, the SPDR Dow Jones Industrial Average ETF (DIA) fell 0.13%, while the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) moved 0.26% higher. 

SPY and QQQ were among the top trending tickers on Stocktwits at the time of writing. Retail sentiment around SPY trended in ‘bearish’ territory over the past day, while sentiment around QQQ improved to ‘bullish’ from ‘neutral’ territory.

Hassett Compares AI Boom With Internet Era

According to Hassett, AI infrastructure investment is having an increasing impact on the labor market, particularly in factory construction, manufacturing, and utilities.

He said employment among workers “who are building factories has gone up by 90,000,” adding that the increase could create additional jobs when those facilities begin operating.

“One of the things that should be reassuring today in this report is like the really massive explosion in employment in utilities,” Hassett said. He noted that the sector has historically seen relatively limited expansion. “Since 1970, I think power generation only went up about 20%,” he said. “So having a big explosion in utility construction, utility employment, that's really something new.”

Hassett forecast that the economic impact of AI could eventually extend beyond the industries directly involved in building data centers. He compared the current investment cycle with the productivity gains that emerged during the internet boom, when technological improvements were not immediately reflected in economic data.

“And I think right now the AI effect is somewhat analogous, or perhaps very analogous,” he said. Hassett added that he is “quite hopeful that we could go through a period where we have high growth and we don't, in a knee-jerk way, try to squash it.”

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