# US Jobs Data, AI Disruption, and Japan's Fiscal Shift

**Podcast:** Bloomberg Daybreak: Asia Edition
**Published:** 2026-02-12

## Transcript

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I'm Doug Chrisner.
Financial markets are now being forced to reconsider the magnitude of Fed rate cuts later in the year.
This is after an unexpectedly strong U.S.
employment report.
The American economy added 130,000 jobs in the month of January.
That was double forecast.
And at the same time, the unemployment rate slid to four point three percent.
We got reaction from Pierre Yared.
He is a member of the White House National Economic Council.
We saw significant increases in construction over the past month, especially if you look at uh non-residential construction.
That's consistent with the president's economic policies.
So because of these economic policies that are there to drive investment and factories in the economy, you saw an increase in construction jobs.
That is Pierre Yared.
He is from the NEC.
For a closer look at these jobs data, I'm joined by Jeffrey Roach.
He is chief economist at LPL Financial.
Jeffrey, thank you so much for being here.
What did you make of the employment report?
Well, I think there are a couple things.
So we do have something I've I highlighted in my notes to my clients here at LPL.
So downward revisions, no surprise there.
Um I think the big surprises were a fairly strong reading.
Of course, it was health care and social assistance construction.
I think the the really interesting takeaway for me is this emerging trend in hours worked.
So, you know, we've had this low higher, low fire environment for quite some time.
Now, granted, 160,000, that's that's not low at all.
Uh, so that's pretty strong.
I don't know if this is gonna be a trend that that's gonna continue on the rest of the year, but it's it seems as if employers are more interested in increasing hours worked rather than uh just outright going back to you know 175, 180k run rate.
Uh, but we we think this is we think this is indicative of the fact that firms have had a very difficult five time finding qualified workers.
That was the problem.
Remember NFIB surveys, several other surveys suggested uh the same thing.
Beige book highlighted this, you know, during that great reshuffling, firms couldn't find people.
I think they're at this point where they say, okay, we know the economy has risk of slowing down, but we don't want to give up the people we worked really hard to try to find.
So these data seem to have forced the markets to reconsider the magnitude of Fed rate cuts later in the year.
How did the employment data impact your thinking in terms of Fed policy?
Well, it pushes things out a little bit.
I I don't know if it changed too much, but it just confirmed the fact that we think the Fed uh initiates cutting and easing of policy in the second half of 2026.
We think uh certainly with the role of strong growth out of the the last half of 2025 and inflation still running too high, that it's uh that it's pushing the Fed out toward later in the year.
Uh, I don't think uh, you know, perhaps maybe some people were thinking an April time frame, perhaps it's a little bit later.
So the Fed has to uh continue to to focus on inflation.
Uh a strong January jobs report with an unemployment downtick, that certainly gives the Fed a lot more time to focus on the inflation side of their mandate.
So speaking of inflation, Friday we get the CPI data.
Uh, do you think that it's we have the risk here of a hot reading?
Well, we're still running in the.1 and 0.2 type numbers, these month-on-month r run rates here.
So I I think it is gonna run hot even before this non farm payroll report.
I do expect this uh this latest CPI number to run on the hot side.
And that's partially due to, you know, the fact that the economy is is humming pretty well.
Who would have thought we had a a greater than four percent quarter on quarter number for Q three and Q4 is looking like uh above two and a half percent?
One of the things that the equity market has been struggling with recently, the notion of disruption being unleashed by artificial intelligence.
Last week, obviously, we saw it hit many different software stocks.
Today, in fact, real estate services companies were hit on the notion that they are vulnerable as well to applications and tools of uh artificial intelligence.
Do you have a sense?
Are you beginning to develop a sense of how AI is going to impact the overall economy?
Maybe more so in terms of the job market.
Well, I am most concerned with those that are coming right out of college, those that don't have a long uh lineup of experience there on their resumes.
That's certainly going to be hurting uh those folks with with the the increased utilization of AI.
Interestingly enough, I think we're still a little bit of uh we're still far out until we see real bona fide impacts on productivity from AI.
And that's because utilization rates are still pretty low, particularly in sectors that would benefit from AI.
So think leisure and hospitality, think healthcare services, some of those sectors I just mentioned very, very low utilization rates.
So we're we're just in the very beginnings, I think, of AI usage that would actually flow into productivity is really the hot button political issue.
And at the same time today, we learned that Trump is privately weighing whether or not to quit the U.S.
Mexico Canada trade agreement that he signed during his first term.
Talk to me about the way in which you see tariffs impacting the economy and whether or not they are indeed feeding into this problem of affordability.
Well, no doubt tariffs are a headwind.
You know, it's a tax, whether you want to admit or not, right?
So the fact is the economy could actually do even better if it weren't for the uncertainty around trade policy.
I think one of the biggest things in my mind that is a real uh negative impact from these tariffs and just the uncertainty of tariff negotiations is businesses are are hesitant to make a three-year, five-year plan, right?
So you think about the capex that could be spent if businesses felt more comfortable about the the you know the years ahead.
There's just still so much uncertainty, it's it's hampering CapEx spent, I think.
We've had four straight sessions of dollar weakness.
The flip side has given us a much stronger Japanese currency, but if we stay focused on the dollar, its weakness, is this something you think the administration is really angling for as a way of supporting a lot of the manufacturers in the states that rely on markets overseas?
Is this a a big positive, the dollar weakness that we are seeing right now?
Well, as it relates to the administration, interestingly enough, I think the administration is more focused on the tenure, where yields are.
I think it it is fair to say that there is this notion that a weak dollar would allow a little our exports to be a little bit more competitive on the global scale.
And that's a fair point.
Say, look, we still have global central banks holding a lot of U.S.
dollars.
So they don't want to see their portfolio value decline because their dollar holdings are becoming uh weaker and weaker.
Uh but I do think there is there is a component of trade on this.
Uh interestingly enough, there is there does seem to be such a focus from the administration on the trade deficit.
And I think as we all know, uh trade is inherently a vulnerability, but there's really nothing out of the ordinary of a of a largely developed economy having a trade deficit.
Just means we're wealthy enough to support one.
So you mentioned the ten year with a yield right now around 417.
It seems as though the market at the long end of the curve doesn't really show much in the way of concern as it relates to inflation.
Could that change in a dramatic way?
Is there the risk that the tenure could, let's say, move up beyond four and a quarter percent?
Well, there certainly are some important levels to to watch.
I think we're in a pretty comfortable range.
When you think about be uh seeing the the tenure between a you know a 410 to a 425, the economy can handle that markets, financial markets and uh derivative type markets that base contracts off of that.
Uh we'll feel comfortable.
I think once you start approaching four and a half on the 10 year, and of course, we we were talking about the risk of approaching five percent just you know a few quarters ago.
But I think we're in a pretty comfortable range and mark and markets can handle that.
And we're we're seeing that uh even play out now.
Uh that's that's not a cause for concern.
So does this change if the Fed begins to unwind its balance sheet, let's say between now and the end of the year in a slightly more aggressive fashion?
Well, I think of course you're referencing Kevin Warsh and the nominee that most likely will pass.
Uh, you know, by the way, he's not a yes man, uh, and he does seem to have a a pretty good history in his career with uh crisis management, et cetera.
But as it relates to the the unwinding of securities, letting security, the bond securities mature, uh, that's certainly going to tighten financial conditions.
In in some ways, you could say that that's okay, that at least we'll be a little bit of a disinflationary impact on an economy that needs that kind of influence right now.
Um, but I think when you you think about how the markets are reacting to that, there's still probably a little bit of uh, you know, the the the push pull is we try to understand what a war-led Fed might look like.
Uh so uh you know, maybe maybe we have a little bit more time and uh to try to make our best uh guess on how that's gonna play out.
Uh in in the end, though, I do think uh this is this needs to happen.
We do need to see a balance sheet that's a little bit smaller than where it is now.
And uh if they do it in a very measured fashion, I think they can shrink the balance sheet without creating undue volatility.
Okay, Jeffrey, thank you so very much.
We'll leave it there.
Jeffrey Roach is chief economist for LPL Financial, joining from Charlotte, North Carolina here on the Daybreak Asia podcast.
Today's show is brought to you by Vanguard.
To all the financial advisors listening, let's talk bonds for a minute.
Capturing value and fixed income is not easy.
Bond markets are massive, murky, and let's be real.
Lots of firms throw a couple flashy funds your way and call it a day.
But on Vanguard, at Vanguard, institutional quality isn't a tagline, it's a commitment to your clients.
We're talking top grade products across the board of over 80 bond funds, actively managed by a 200 person global squad of sector specialists, analysts, and traders.
These folks live and breathe fixed income.
So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.
That's vanguard.com slash audio.
All investing in subject to risk, Vanguard Marketing Corporation distributor.
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Welcome back to the Daybreak Asia Podcast.
I'm Doug Chrisner.
In Japan, the markets are back online after a holiday Wednesday.
Today, the reading on Japanese wholesale inflation was pretty much in line with estimates.
The producer price index was up last month at an annual rate of 2.3%.
For a look at markets, I'm joined by Charu Chenana.
She is the chief investment strategist at Saxo Bank.
Charu joins us from Singapore.
Thank you for being here.
Obviously, much of this is tied to Prime Minister Takaichi's victory in the recent snap election.
And it seems as though this so-called Takaichi trade still has power.
Is that the way you see it?
Very interesting election outcome that uh we've had in Japan with that uh two-thirds majority uh for a single party uh a kind of victory that we haven't seen in a very, very long time.
Uh so as you talk about, you know, yeah, the Takaichi trade, certainly a lot of focus on that uh going into this election, I would say, uh, because this election was really a test of uh fiscal credibility.
You know, there were a lot of promises around uh suspension of uh the consumption tax um uh you know uh uh the consumption tax being um uh you know removed uh if she was to get the kind of mandate um that the markets were expecting, and that kind of did lead the markets to think about um what that would mean, you know, in terms of fiscal credibility, given that we know that Japan's uh debt is really high.
It's about 200, 200 plus percent of GDP.
Uh so uh I think uh with that kind of victory, although the massive um you know majority that we've got there, I do think the Takaichi trade is not going on as expected.
Of course, on the equity side, it looks um quite positive because of the fiscal impulse that could come through.
Uh, but the Takaichi trade also had uh risks of a bond sell off and the weakness in the Japanese yen, for instance.
And those are not the things that have really uh materialized.
Uh because I think the sense here is that uh even though you get that fiscal impulse, this kind of a majority also increases the chance of uh flexibility of policy coherence and potentially lesser prices.
So the markets actually uh really taking this in in a positive sense, equities are stronger.
Uh the yen is uh turning out to be significantly stronger as well, also a little bit helped by the weakness in the US dollar.
Uh, but certainly I think overall the clarity, um, the strong mandate um have really been a bigger positive uh uh compared to any risks of um you know fiscal uh on the fiscal side uh right now.
What does that do in terms of the thinking at the Bank of Japan?
Uh that we know that at least the bias seemed to be to raise interest rates again.
Does the BOJ have to take a break for a while?
Again, that was, I think, the sense going into uh the election that if she was going to get a strong mandate and you have fiscal loosening, then uh there is potentially going to be some um you know risks for the BOJ as well to continue to normalize policy because you cannot have that divergence play out in the fiscal and the monetary policy sides.
But um I would say uh, you know, um I think again, given the kind of mandate she's got, I do think there is actually room for that divergence to play out.
Uh because uh certainly uh the there will also be inflation risks uh in the Japanese economy.
We have seen those uh lingering for quite some time now, and with this kind of a fiscal impulse that only gets stronger.
And you know, cost of living pressures will certainly be something that uh I think Takai Chi continues to focus on.
So um restricting the hand of Bank of Japan uh in that scenario does not seem to be the best option to me.
So I do think we could get uh further normalization from the Bank of Japan, even as we continue to see that fiscal impulse coming through.
Charu, I'm curious as to whether you're still finding, even with the elevated levels of the Nikkei, opportunities in Japanese equities.
That's uh totally fair that you asked that question.
We've had a strong support from, say, corporate governance reforms uh in the last two years.
Um the weakness of the yen has supported the exporters uh in the economy.
So certainly I think has been a very strong story.
Uh I do think uh the positivity continues, it only gets better, uh, but will also be uh I think um later this year and going into next year, it will also be a lot about selectivity in uh the Japanese markets.
I think it does stop being that broad story that it has been so far.
Because like we talked about, right, the Japanese yen, if we were to see some strengthening of the yen, I mean, we know it has uh significant room to appreciate here, given you know how uh the short positioning is uh so wild and you know the valuation of the yen is so cheap.
Um and if the yen is going to strengthen, the rate-sensitive sectors, um certainly the yen sensitive sectors, exporters, for example, uh start to um have an impact on that.
But of course, you know, I mean, if we are to get the kind of fiscal impulse that is looks like it's coming through, at least those sectors where uh the subsidies really get targeted, you know, say defense or strategic capex.
There's been a lot of talk about AI and semiconductors being in focus in terms of that spending as well.
Uh a lot of domestic investment themes, I think they continue to still hold up uh significantly better than probably those yen linked sectors.
So if the region is benefiting from this build-out of artificial intelligence that's primarily happening in the US, is that essentially a trade on certain technology firms that have proved indispensable to the supply chain in particularly in the semiconductor industry?
I mean, actually, AI has been a big theme in Asia as well.
And I think investors are slowly realizing that the backbone of uh the manufacturing backbone of AI actually sits in Asia.
So uh there has been, of course, uh, you know, that realization of late, and investors are trying to position accordingly.
Of course, you know, I mean, I think US firms still remain those innovation leaders.
Uh, but since uh, you know, towards the end of last year, we have seen a lot of risks around concentration, around circularity of those US tech firms, around the CapEx signals that we've been getting from them, and what kind of ROI uh could they deliver.
There's been questions around that.
Um, there's been questions around uh whether or not the US really has all of that infrastructure in place um to kind of really meet the growing electricity, the growing power demand that this whole AI theme demands.
Um, and of course, we've had, you know, because of the massive run into the US stocks, there has been um uh, you know, overpositioning or valuation fatigue, so to say, and investors have been questioning as to uh if you do want to stay in that AI theme, where does the story still have legs?
And Asia has been um uh a top answer, I would say, on those fronts.
I mean, it like I said, it's been the manufacturing backbone, you know, Tai Taiwan's uh TSMC, for example, which produces advanced wafers, which powers leading AI chips, uh, that's been very much in focus.
We've been getting some strong numbers from Taiwan, even for January, um, you know, uh revenue growth focus.
I mean, we've gotten some really good numbers there.
Uh Korea's uh leaders like you know, Samsung and SK Heinex, uh, they are um they hold uh more than 90% of the global uh HBA market share.
So again, a very, very critical component of that entire chip manufacturing um uh story.
Charu, what is your assessment of the tech story on the Chinese mainland, particularly as it relates to some of these advanced semiconductors?
Uh so there's obviously been a huge policy push um in China uh to, you know, there's been two reasons for that.
I would say uh one, as we all know, has you know, uh, because of the export controls that they faced from the US, uh, there was uh an increased need for self-sufficiency on that chip side, and that's why they've given a huge amount of uh policy benefit to uh develop those chips domestically.
Uh so that's obviously aided that sector in a big way.
But we also know that um, you know, on a more global on a more macro front, uh China's economy has been um uh facing multiple headwinds, you know, from demographics and um the property sector slowdown.
Uh these are things they've been trying to reverse, but have not achieved a lot of success with so far.
Uh so if you look at their um AI plan, uh they are actually starting to talk about the productivity gains from AI being really the big drivers of growth going forward, especially as these headwinds um on the other sides continue.
So, both from a growth perspective, but also from a self-sufficiency um and a strategic priority perspective.
China has been pushing a lot of policy support towards the tech sector, and I think that has really played out again.
And again, you bring up the valuation differences that we've had between US and China's uh tech plays.
Uh the efficiency gains that we saw with Deep Seek last year, for example.
I mean, the models certainly seem far more able to justify the ROI uh versus the Capex spend.
Um, you know, if you compare them to their to their US peers.
So those are stories that have certainly been extremely helpful to the China Tech side.
Okay, Charu, we'll leave it there.
Thank you so much.
Uh, Charu Chanana, Chief Investment Strategist at Saxo Bank, joining from Singapore here on the Daybreak Asia Podcast.
Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition Podcast.
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