Ernie Tedeschi

The US Employment Situation, December 2025

Unemployment Rate 4.4% (Nov 4.6%)

Payroll Employment +50K (Nov +56K)
3MMA -22K

2M Revisions: -76K

The US Employment Situation, September 2025
NFP: +119K (62K 3MMA, -33K 2M revisions)
U3: 4.4%

Some professional news.

Excited to start today as chief economist at
Stripe. Looking forward to working with & learning from the brilliant people there to produce data-centered insights and research.

I'm open to the possibility that AI is having a nonzero effect on the labor market. But the varied mix of firms announcing layoffs strikes me as more consistent with the main driver here being a correction from over-hiring in the wake of the pandemic. www.wsj.com/economy/jobs...

3 final things:
1. I will still be affiliated with TBL as a nonresident fellow.
2. More news on next steps in a couple weeks.
3. @riccoja will be taking over TBL's tariff work for the time being! Follow him and read TBL's new tariff update, posted today:
x.com/riccoja/status...
3/3

Major thanks to Danny Yagan, Natasha Sarin, Martha Gimbel, Patrick Oakford, Suzanne Pinto, Kelly Friendly, Sylva Kroeber, Rich Prisinzano, Ken Matheny, John Ricco, Harris Eppsteiner, Josh Kendall, Dylan Saez, Maddie Lee, Sophia Graham, Juan Carlos Gonzalez, Annabelle Xing, & Thomas Triedman.
2/3

Some professional news:
Today is my last day full-time at @budgetlab.bsky.social
It was an honor & a privilege to call the TBL team "coworkers" over the last 18 months. Intelligent, curious, & utterly collegial. What they've built & accomplished in so short a time is just stunning.
1/3

AI’s Effect on the US Economy Is Exaggerated Sometimes there are economic narratives that don’t quite deserve a debunking — they have more than a kernel of truth to them — but rather demand an appropriate level of skepticism. Three such stories are widespread today.

Full column here: www.bloomberg.com/op...
9/9

There's still a lot of counter evidence. The NY Fed's Survey of Consumer Expectations shows similar spending growth at the bottom, middle, & top. Meanwhile, the bottom's share of aggregate wages has actually risen over the past 2 years. www.newyorkfed.org/m...
8/9

Partial Truth #3: The K-Shaped Expansion
If the labor market is weakening, this is a valid fear: the bottom typically get pinched more in downturns.
But we need to be extremely cautious about real-time estimates of spending distribution from private data (not a knock on them)
7/9

Moreover, I find that the rise in the unemployment rate over the last 2 years has been most acute for jobs most *& least* exposed to AI. So even if AI is *a* story, it's clearly not the *only* story, & we should be open to the possibility that the story is just broad weakness
6/9

But the evidence is not uniform. E.g. my colleague @marthagimbel.bsky.social & coauthors find that the recent change in the occupational mix is comparable to past technological shocks like the internet & the rise of personal computers.
budgetlab.yale.edu/r...
5/9

Partial Truth #2: AI is weighing on the labor market.
Could be. There's been thoughtful work on this lately, e.g. from @erikbryn.bsky.social & coauthors, who find young workers in AI-exposed fields have seen more job declines than older workers in the same fields. digitaleconomy.stanf...
4/9

If you just looked at the gross effects of software, information equipment, & data centers on GDP, you'd conclude they added 1.3 points to 2025 H1's 1.6% SAAR growth!
Net out imports though, & the contribution falls to ~0.5pp. Still big! But just enough to offset tariffs.
3/9

Partial Truth #1: AI is driving a boom in GDP growth.
There's no question business investment in AI has surged. But on the question of **GDP** effects specifically, it's important to note that a lot of the investment has been imported, which needs to be netted out.
2/9

AI’s Effect on the US Economy Is Exaggerated Sometimes there are economic narratives that don’t quite deserve a debunking — they have more than a kernel of truth to them — but rather demand an appropriate level of skepticism. Three such stories are widespread today.

I'm in @opinion.bloomberg.com today talking about three "partial truths" in the US economic narrative. "Partial truths" are not myths--they have more than a kernel of fact behind them--but they demand caution, asterisks, and grains of salt.
www.bloomberg.com/op...
1/9

Full report here: budgetlab.yale.edu/r...
7/7

And of course our approach is symmetric: policies that *reduce* the deficit have *higher* aggregate net benefits under our methodology than under conventional distributional analysis.
6/7

One can think of our "existing fiscal distribution" as basically being the equivalent of assuming proportional spending cuts & tax hikes in the future to pay for a policy. The result is that a policy's aggregate benefit falls & its distributional impact looks quite different.
5/7

There’s no consensus or single way to incorporate deficit-financing into distributional analysis, especially for public goods like defense. We choose an “existing fiscal distribution”—stacking taxes & mandatory spending, & divvying discretionary spending equally per tax unit.
4/7

But of course, this is an illusion. Higher deficits present a host of trade-offs, including interest costs & the fact that higher debt eventually needs to be paid off. This can skew how policymakers weigh the costs & benefits of different financing options.
3/7

The problem in a nutshell: imagine two versions of a $1,000-per-family tax credit. One finances the policy with higher deficits (i.e. no payfors). The other fully pays for the policy with an offsetting tax hike. Version 1 will look like it *clearly* has a greater net benefit.
2/7

New report this morning from @budgetlab.bsky.social thinking through the challenges of distributional fiscal analysis when a policy is deficit-financed. We talk about the issues and present our preferred methodology.
1/7

Phenomenal opportunity for macroeconomists of all levels. Truly cannot recommend the Yale Budget Lab team enough. I've worked extremely closely with most of the people there, and their simultaneous dedication to accuracy and usefulness while ensuring the work environment is enjoyable is unmatched.

Hi all! We're still waiting on the official posting - but @budgetlab.bsky.social is looking for a new macro hire to add to our team! We're agnostic on level (Recent PhD, decades of experience, MA+ research experience, who knows?) - we care more about flexible thinking and curiosity

Full report here: budgetlab.yale.edu/r...
10/10

FISCAL EFFECTS: New 2025 tariffs raise $2.5 trillion over 2026-35 conventionally-scored and $2.0 trillion dynamically-scored.
9/10

COMMODITY PRICE EFFECTS: Consumers face particularly high increases in leather and clothing in the short-run: prices increase 36% for leather products (shoes and hand bags), 34% for apparel, and 21% for textiles.
8/10

DISTRIBUTIONAL EFFECTS: Tariffs are a regressive tax, especially in the short-run. The average annual cost to households in the first and top income deciles from all 2025 tariffs are $1,350 and $5,350 respectively in 2025$. The median cost is $2,000 per household.
7/10

GLOBAL EFFECTS: In the long-run, China real GDP is -0.3% smaller, about 3/4 of the effect to the US. The economies of Mexico, Canada, the EU, and the UK are all larger.
6/10