Unemployment Climbs to a Four-Year High

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0:01:56 Today’s number, 1,500.
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0:02:22 Welcome to Profit New Markets.
0:02:23 I’m Ed Elson.
0:02:25 It is December 17th.
0:02:28 Let’s check in on yesterday’s market vitals.
0:02:32 The S&P and Dow declined following the jobs report.
0:02:33 More on that in a moment.
0:02:38 The Nasdaq snapped a three-day losing streak as Tesla rose to a record close.
0:02:40 Meanwhile, the yield on 10-year treasuries fell.
0:02:42 Bitcoin climbed.
0:02:49 And finally, news broke after hours that Warner Brothers Discovery is telling shareholders to reject Paramount’s hostile bid.
0:02:52 Netflix shares rose in extended trading.
0:02:54 Meanwhile, Paramount shares dropped.
0:02:54 Meanwhile, Paramount shares dropped.
0:02:57 Okay.
0:02:58 What else is happening?
0:03:02 The latest jobs report is in, and the message is clear.
0:03:05 The labor market is slowing.
0:03:12 Employers added just 64,000 jobs in November, which was slightly more than economists expected.
0:03:19 However, this report also included data showing the economy lost 105,000 jobs in October.
0:03:27 Meanwhile, the unemployment rate climbed to 4.6%, which is the highest it has been since September 2021.
0:03:32 Wage growth also slowed to its weakest pace since 2021 as well.
0:03:35 The Trump administration is trying to spin this report.
0:03:41 They posted, quote, that the best is yet to come on social media, but the markets aren’t buying it.
0:03:47 Stocks fell, signaling growing concern about where the economy overall is headed.
0:03:48 Okay.
0:03:55 For a deep dive into this jobs report, we are speaking with Catherine Ann Edwards, labor economist and host of the Optimist Economy podcast.
0:03:59 Catherine, thank you for joining us on Prof G Markets.
0:04:00 Thank you for having me back.
0:04:03 So, we want to get into this jobs report here.
0:04:10 We added 64,000 jobs, but the unemployment rate is now up to 4.6%.
0:04:16 That is the highest it’s been in four years, more than four years.
0:04:18 Your initial reactions?
0:04:21 Well, my initial reaction is that’s not good.
0:04:25 An unemployment rate continuing to rise is not good.
0:04:31 The fact that it’s been trending upward for about six months, three consistently, is not good.
0:04:36 And the jobs number is hard to parse, right?
0:04:38 What are the number of jobs we need in a month?
0:04:41 How much is enough for the U.S. economy?
0:04:44 And in some ways, the answer to that is the unemployment rate.
0:04:51 I can’t tell you if it’s 15,000, 100,000, 200,000 is the right number for the economy in any given month.
0:05:00 But the fact that the unemployment rate is going up is a very clear indicator that for whatever the jobs numbers that we’ve been posting, they aren’t enough.
0:05:05 Yeah, we started the year at around, I think it was 4%, if I’m getting that correctly.
0:05:07 It keeps on inching up.
0:05:10 Then we went to, most recently, 4.4%.
0:05:12 Now we’re up to 4.6%.
0:05:19 I know it’s kind of impossible to answer these questions, but if you had to, like, what is happening?
0:05:22 Why are people unemployed right now?
0:05:24 Well, they can’t find jobs.
0:05:24 Done.
0:05:26 This is easy, actually.
0:05:26 Yeah.
0:05:37 We are seeing an increase in unemployment rates because hiring is still not keeping up with the number of people who want jobs.
0:05:44 So the number of people who are hired into jobs, the number of firms that are expanding and hiring, it’s not fast enough.
0:05:51 So it’s not to say that no one is hiring, but not enough people are hiring at a high enough rate to keep up with the number of people who want jobs.
0:06:08 And although there is, you know, huge attention paid to new entrants to the labor market, young people who are looking for their first job, one of the largest kind of groups within the unemployed are re-entrants, people who are out of the labor market for a period of time and come back.
0:06:10 They’ve worked previously.
0:06:13 They might have been out for a health reason, for a personal reason.
0:06:15 They might have taken time off.
0:06:17 They might have given up looking and come back.
0:06:18 They’re the largest group.
0:06:29 So it’s not a question of why isn’t the economy producing jobs for young people, which is how it’s often portrayed when we talk about it because young people are such a kind of naturally sympathetic group.
0:06:31 It is economy-wide.
0:06:33 We are not hiring enough people.
0:06:37 I guess my question should have been phrased as who or what is to blame.
0:06:42 And I guess there are multiple things that are swirling around in my head and probably everyone else’s head.
0:06:44 AI is certainly one of them.
0:06:47 Tariffs would be perhaps another.
0:06:52 Maybe this is from the interest rate environment from yesteryear.
0:06:54 Maybe that’s part of it.
0:06:56 Maybe this was a long time coming.
0:07:07 I mean, if we had to identify an overarching theme as to what is driving this level of unemployment at this point, what do you think it would be?
0:07:12 Uncertainty that’s caused by any one of those things that you just said.
0:07:20 What matters is that none of them have to be – those things can all be right and still – or all be wrong and we could still see what we’re seeing.
0:07:31 I characterize it as uncertainty in the sense that firms on the whole do not have a stable enough footing to feel like they could rapidly expand.
0:07:36 So we’re seeing a lot of reduction via attrition as opposed to layoffs.
0:07:49 People leaving the job and then not being replaced or just kind of being – possibly because with the return to office mandates trying to get people to quit to get a head countdown without having to enter layoffs.
0:07:50 All of that can be happening.
0:07:52 None of them are the smoking gun.
0:07:57 It really comes down to policy and economic uncertainty, which I think is a twofold problem.
0:08:18 One is that our economy naturally cycles and the severity of the last recession in the pandemic and afterwards was so severe and acute in both how quickly we fell and how quickly we rebounded that there is kind of a natural kind of recalibration of the economy to what is a normal pace of expansion and contraction.
0:08:29 But at the same time, it is being hit with multiple fronts of policy uncertainty and aggressively kind of negative economic policy, things like deporting workers and raiding work sites.
0:08:36 The tariffs in some way are emblematic of that and that it is very hard to plan around a bottom line that you can’t predict.
0:08:51 Yeah, we were talking with Justin Wolfers and he was pointing out that, you know, many of the consequences of these policies that we’ve seen – and I guess this is something that I’ve been saying as well – they don’t show up until later.
0:08:55 And so you don’t really see the damage being done until it’s done.
0:08:57 It’s sort of the frog in boiling water.
0:09:10 This feels like a pretty good example of the frog in boiling water here where, I guess, tariffs and the policies that we’ve seen – maybe immigration would be included in this – seems to be, you know, fine.
0:09:16 I mean, I’m reading articles saying, oh, you know, it wasn’t as bad as we thought.
0:09:22 And then I’m looking at inflation, which is going up, and we’ll see later this week.
0:09:25 And now I’m looking at unemployment also going up.
0:09:32 I mean, it feels like this is our evidence, at the very least, that the policies aren’t working.
0:09:36 Am I suffering from derangement syndrome for saying that?
0:09:38 Oh, I wouldn’t be the one to tell you if you were.
0:09:39 Fair enough.
0:09:47 I think what’s important to remember about the economy is that we do not often have the luxury of obviousness.
0:09:48 Right.
0:09:52 We don’t have a single cause and a single fact at the same time.
0:10:02 Something could be happening that’s incredibly detrimental to the economy, but because our economy is $30 trillion in size, even that incredibly obvious detrimental thing isn’t making a difference in the aggregate.
0:10:06 That leads to so much speculation of just how bad is bad.
0:10:14 You know, I think I saw four trend pieces just this week of, like, why were economists wrong about how bad tariffs were going to be.
0:10:20 Like, it’s – I think those things are kind of almost – I don’t want to say lazy, but they’re evergreen.
0:10:28 You can always write about how economists said the thing was going to be bad, but it wasn’t bad enough, and were they all wrong, and are they all wrong as a profession, and so on.
0:10:37 I mean, all of that happens because something can be bad in our economy and not enough to tip the whole thing over.
0:10:51 I mean, it’s worth noting that even in a terrible recession, you know, aside from the pandemic, unemployment is max 10 percent, which means roughly 90 percent of the economy is doing okay relative to the 10 percent that’s weak.
0:10:57 And we don’t have a weak economy when 100 percent of it is going wrong, but when there’s enough of a problem to be considered a slowdown.
0:11:04 That’s a lot of ambiguity, a lot of things moving in different directions at the same time.
0:11:11 And so what I would say to, you know, Justin’s point in your suspicions is these policies are absolutely causing damage.
0:11:16 It’s just a matter of when that accrues enough to take down more of the economy with it.
0:11:19 How concerned are you about this employment report?
0:11:27 I mean, I’ve seen some economists are very concerned about it, that this is really a problem.
0:11:35 Then I’ve also seen people saying, yes, it’s bad, but, you know, the Fed hasn’t gotten all of its data because of the shutdown.
0:11:36 So maybe you take it with a grain of salt.
0:11:39 Then there’s obviously just like the spin that we’re seeing from the administration.
0:11:40 Oh, it doesn’t matter.
0:11:41 We’re totally fine.
0:11:45 I mean, where do you land just on a vibes basis?
0:11:47 How bad do you think this is?
0:11:51 This report has everything moving in the wrong direction.
0:11:52 Right.
0:11:54 You can you can say statistical error.
0:11:57 You can say that it’s, you know, within a confidence interval.
0:12:00 You can say that there was a shutdown, that data collection was affected.
0:12:07 But that won’t change what we have in fundamentals, which is that the economy is slowing down and taking the labor market with it.
0:12:09 Unemployment rate is going up.
0:12:11 How much and how quickly?
0:12:13 There’s a lot of statistical noise in there, but it’s going up.
0:12:17 The number of jobs being added in the economy is falling.
0:12:24 It hasn’t gone negative, not consistently, not every month, but it’s a lot lower than it was at the start of the year or in years past.
0:12:37 And taken together, we’re seeing that kind of manifest in various kind of secondary indicators like hours worked, like part time on a part time for economic reasons, whatever is kind of like the trend indicator of the week.
0:12:42 They’re moving in the wrong direction, maybe not every month, but on the whole.
0:12:47 And so if you if you think of the jobs report, you know, you’re getting dots.
0:12:48 Right.
0:12:49 And you’re you’re trying to fill in the line.
0:12:53 And so the question is, is the dot enough to change direction?
0:12:54 And it’s not.
0:12:58 It’s another dot kind of pointing to a downward trend of the labor market slowing down.
0:13:10 So I took this as yet another weak jobs report, not weak enough to say we’re definitely in a recession, but having almost nothing within to make me think we’re turning it around.
0:13:15 Yeah, just looking at the individual sectors here, some numbers that jumped out to me.
0:13:19 One, manufacturing shed another 5000 jobs.
0:13:25 Last time we spoke, we were discussing how manufacturing was shedding jobs already.
0:13:31 And the irony of that, given the stated premise of this whole administration, but we can set that aside.
0:13:36 The other thing that we’re seeing, health care jobs up 46,000.
0:13:39 Again, this is another theme that you’ve pointed to on our podcast.
0:13:46 It feels as though the health care sector is basically the only thing keeping the job market afloat.
0:13:52 We keep seeing huge numbers from health care and we keep continuing to see huge numbers from health care.
0:13:53 And we saw it again.
0:14:02 Are there any other sectors that stood out to you and also just your reactions to what we’re seeing on that on that sector by sector basis?
0:14:05 I didn’t like that leisure and hospitality had come in quite weak.
0:14:08 That’s a that’s a fairly cyclical sector.
0:14:12 And by cyclical, we mean it’s just it tends to move with the business cycle.
0:14:13 So health would be a cyclical.
0:14:16 It moves with old people and how healthy they are.
0:14:23 Whereas, you know, leisure and hospitality is is really your your bread and butter of I go out, I spend money.
0:14:26 I go to restaurants, I I take vacations.
0:14:38 And as you start to see that pullback, that’s for me an indicator of broader problems that you are having a pullback in kind of this fringe consumption, which means there’s not a lot of room at the edges.
0:14:43 And of course, if you ask Americans, they will tell you there is not a lot of room at the edges right now.
0:14:48 In some ways, December is a very critical month because it’s not like every other month.
0:15:00 It has Christmas and it does lots for our economy to have a total reorientation around buying presents for people, which which doesn’t make me sound very in the holiday spirit.
0:15:02 But this is a very special month.
0:15:03 It’s a very special quarter.
0:15:14 It’s a very significant time of year in so many ways in the economy just because of how much we fall into a very different and predictable consumption pattern around the holiday.
0:15:21 And so for for the next month, I guess I would have expected a little bit more of retail trade and a little bit more of leisure and hospitality.
0:15:34 And December is going to be, for me, a key month in thinking about it because it’s a genuine reflection of at the time of year when Americans are most predisposed and willing to spend a little extra.
0:15:36 How much is extra?
0:15:37 That’s what we find out in December.
0:15:39 Yeah, it’s really interesting.
0:15:44 Just before we let you go, we are coming to the end of the year here.
0:15:46 This is one of our final episodes.
0:15:48 We’ve got a couple left before 2026.
0:15:55 What are you paying attention to going into the new year when it comes to the labor market?
0:15:59 And are there any themes that you think we are going to see in 2026?
0:16:03 I would assume if there is a spike in layoffs, they happen at the start of the year.
0:16:13 You typically don’t have a ton of layoffs, again, around Christmas, New Year, New Year, New You.
0:16:15 That applies for firms as well.
0:16:20 And I think there’s so much psychology that goes into economics.
0:16:29 I was saying this morning on Bloomberg that the problem with 4.6 unemployment rate is that it’s closer to 5 than 4.
0:16:32 And that means something to people.
0:16:40 It hits different if you 4.5 and 4.6, you don’t have a 0.1 effect on that psychologically because it is so much closer to 5.
0:16:48 And now we’re rounding up to an unemployment rate that’s typical in recessions as opposed to one that’s more typical to really strong labor markets.
0:16:51 I think the new year is different starting out.
0:16:54 I would be worried for big layoff adjustments.
0:16:59 I’d be worried for, you know, big shifts in hiring announcements.
0:17:06 I think the start of year shakeups, kind of like let’s let 25 go to rest.
0:17:06 Let’s wait.
0:17:07 You know, we had all this uncertainty.
0:17:10 We’re not going to do anything before the end of the year.
0:17:13 But come January, if something doesn’t change, we’re going to do X.
0:17:16 Again, it’s a big psychological marker for employers.
0:17:19 And I worry that we’ll see some large numbers in January.
0:17:21 And I very much hope that I’m wrong.
0:17:21 All right.
0:17:25 Catherine Anne Edwards, labor economist and host of the Optimist Economy podcast.
0:17:28 I encourage you all to go check it out.
0:17:29 Catherine, thank you.
0:17:30 Happy holidays.
0:17:31 See you in the new year.
0:17:32 Happy holidays.
0:17:36 After the break, an update on the EV industry.
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0:21:03 Ford is rolling back its electric vehicle ambitions at a cost of nearly $20 billion.
0:21:13 The company is scrapping its planned electric truck and redirecting overall production away from electric vehicles and back towards gas and hybrids.
0:21:20 Ford will take most of those related charges in the fourth quarter, but says the restructuring will make its EV division profitable by 2029.
0:21:23 The stock rose 1% on the news.
0:21:33 Meanwhile, as I mentioned earlier, Tesla closed at a new record high yesterday after the company began testing robo-taxis in Austin without a safety driver.
0:21:45 Okay, so for more on what is happening in the EV space right now, what all of this means, we’re speaking with John McNeil, CEO and co-founder at DVX Ventures, also a board member at GM.
0:21:51 He’s also the former president of Tesla and the former COO of Lyft.
0:21:53 John, thanks for joining us on the show.
0:21:54 Good to see you too, Ed.
0:22:02 So Ford is taking a $20 billion charge, pulling back on EVs.
0:22:05 I guess kind of a general question, what went wrong?
0:22:07 I think there’s kind of a macro and a micro answer to your question.
0:22:14 On the macro side, this kind of illustrates when you’re in a long-term large capital industry like autos.
0:22:16 You’re in a five to 10-year planning cycle.
0:22:29 And so if administrations flip-flop policies and goals and regulatory kind of structures, it gets really expensive because you can’t recover that fast.
0:22:49 And so I think that’s the macro comment is that when you have industries that are on five to 10-year capital cycles, completely flipping and doing 180s on policy every four years, then has this kind of cost and a substantial cost and a substantial cost to investors.
0:23:00 I think the micro comment on Ford is this is a little bit unique to Ford in that they took a bit of a shortcut on their first product.
0:23:02 And that was they took an F-150 pickup.
0:23:04 They didn’t change much about it.
0:23:06 And they put an electric drivetrain in there.
0:23:11 And the thing would only go 210, 220 miles.
0:23:17 That’s not a product that’s going to have a lot of customers at the end of the day because you’re below that 300-mile magic mark.
0:23:26 And especially for pickups where you’re going to haul things and tow things, it really needs to be 300 miles with towing.
0:23:29 So that means it needs to be more like 450 to 500 miles of range.
0:23:33 So I think there’s two lessons in this.
0:23:42 One is for policymakers, you’ve got to give people, I think, a longer runway on some of these policy decisions.
0:23:47 And secondly, if you’re stepping into a new market, you’ve got to do so with fantastic product.
0:23:52 Because if you come into a new market with mediocre products, you’re going to get your head handed to you.
0:23:54 And that’s sort of what happened to the F-150 Lightning.
0:24:03 Yeah, I guess if I were just reacting to this at total face value, I mean, my reaction is, okay, Ford’s pulling back from EVs.
0:24:07 Perhaps that means that the demand for EVs is not what we thought.
0:24:09 I mean, everyone was talking about EVs.
0:24:13 We all kind of agreed that EVs are the future.
0:24:18 This, I guess, puts a question mark at the end of that statement.
0:24:20 Or maybe it doesn’t.
0:24:23 Maybe it was just Ford’s execution.
0:24:25 Their execution was wrong.
0:24:26 What do you think?
0:24:31 What does this say about demand at large for electric vehicles?
0:24:40 I think if we’re talking about demand at large, like internationally, globally, one in five cars this year in 2025 is electric.
0:24:41 One in five new cars sold.
0:24:43 There’s 80 million.
0:24:46 The new car market globally is 80 million units.
0:24:48 And 16 of that’s in the U.S.
0:24:54 Next year, one in four cars globally sold will be electric.
0:24:56 So you see kind of where this is heading globally.
0:25:03 And then if we isolate into the U.S. market, the U.S. market is now taking a different path.
0:25:11 And I think that’s maybe short and medium term, probably not long term, because unless you’re an automotive that only wants to compete in the U.S.,
0:25:22 once the barriers to trade come off around EVs, if you haven’t established a real EV advantage in the U.S.,
0:25:27 we’re going to give a lot of space to competition to come in internationally, globally.
0:25:30 And so I think in the U.S., we don’t know.
0:25:33 Honestly, I don’t think we know what demand is going to be.
0:25:40 We had such a pull forward with the end of the tax credit this fall that demand went crazy.
0:25:45 And I think it’s going to take five or six months for us to normalize and see what demand is.
0:25:52 If you take like November and December, which I don’t think are normalized yet, still 5% to 6% of cars sold in the U.S. are electric.
0:25:54 That’s down from 8%.
0:25:56 That’s not a huge—that’s not, you know, falling through the floor.
0:26:03 But I think we’re going to have a much better sense come this spring, like what is constant or more normalized demand in the U.S.?
0:26:09 And so I’d say, yeah, there’s decreasing demand and market in the U.S.
0:26:11 from what people thought it was going to be.
0:26:14 It’s certainly not going to be 20% or 30% of cars over the next few years.
0:26:22 But I think what is happening globally is a pretty strong signal to what is happening with EV demand globally.
0:26:29 Just some other EV news, kind of EV news, maybe we’ll call it robo-taxi news.
0:26:31 Tesla’s hitting all-time highs.
0:26:31 Yeah.
0:26:44 After basically there was this announcement that their robo-taxis are indeed going to be driverless in Austin, the taxis that they are testing in Austin.
0:26:46 Elon Musk confirmed this.
0:26:51 I just wanted to get your reactions to that news.
0:26:55 And maybe before you react, I’ll just couch it in my view.
0:26:59 Which is, what’s the big deal?
0:27:02 I mean, we had the robo-taxi announcement.
0:27:04 We keep on getting the robo-taxi announcement.
0:27:16 And, you know, as a consumer of the news, when they put those robo-taxis on the road, I kind of assumed that there won’t be drivers in the car with them.
0:27:19 I mean, is this really a big deal?
0:27:22 I say that to the former president of Tesla.
0:27:30 A, it’s a big deal for Tesla because it’s been a long road to get to the point where they could get a driverless vehicle on the car with nobody behind the wheel.
0:27:35 However, in the grand scheme of things, I don’t think it’s a big deal.
0:27:38 As we’ve talked about, Tesla’s sort of a meme stock.
0:27:44 And so if you can keep pumping the retail investor with tidbits of news, it seems to work.
0:27:46 It’s certainly working in this case.
0:28:12 But I think in the grand scheme of things, when you’ve got Waymo doing 450,000 rides a month or a week, I’m sorry, and growing, and you’ve got Chinese robo-taxi at those numbers, if not higher than those numbers, amongst three players in China, to have one car on the road or two cars on the road sort of seems like a non-event.
0:28:15 Now, how fast they can scale it safely is a big question.
0:28:26 Because they’re doing end-to-end, in this market where you’re regulated, and if you get in an accident, the regulator’s going to come and say, where did the code break?
0:28:31 And if you have an end-to-end model, it gets really hard to say where the code broke.
0:28:34 And it gets really, really hard to say, here’s how we’re going to fix it.
0:28:36 And so you’ve got different approaches.
0:28:39 Waymo is taking a hybrid approach.
0:28:41 It’s not a pure end-to-end model.
0:28:44 Because they realize, hey, we’re in this regulatory environment where safety is really going to matter.
0:28:50 And if our car makes a mistake, we’ve got to be able to tell the regulator, here’s what happened, and here’s how we fixed it.
0:28:52 And if you can’t, your cars are going to be off the road.
0:28:59 So I think Tesla’s got to solve that problem for themselves, given their architecture is quite different than everybody else’s.
0:29:05 When you just look at the auto market, I mean, there are so many interesting themes now.
0:29:07 I mean, EVs are a huge theme.
0:29:09 And how are you deploying EVs?
0:29:11 How good is the product?
0:29:14 You point out the issues of the F-150 there.
0:29:18 And then there’s the question of autonomous and robo-taxis.
0:29:24 These are all kind of large macro questions for car companies.
0:29:31 Given all of that, who is kind of winning in the auto race right now?
0:29:37 Who is, which kinds of companies and which CEOs are making the right decisions?
0:29:40 How do you think it’s all going to shake out in 2026?
0:29:45 I think there’s a question in 2026 and then maybe 2030 or 2035.
0:29:48 So let me start there.
0:29:54 In 2030 or 2035, I firmly believe that it’s existential for car manufacturers.
0:29:57 That if you’re non-autonomous, you won’t survive.
0:30:03 Because who amongst us is going to be a car, going to buy a car that isn’t the chauffeur for free?
0:30:05 We’re all going to move to that product.
0:30:08 It’s a little bit like moving from flip phones to smartphones.
0:30:10 And it will happen rapidly.
0:30:16 And so I think there’s one question, which is which car companies are making the right moves to be a player in AV.
0:30:21 And there’s only a handful of those so far that are making that move.
0:30:23 And GM is one of them.
0:30:26 And we’ve really put a lot of capital behind it.
0:30:31 But we’ve pulled our effort in with crews so that we can create personal autonomous vehicles.
0:30:34 Because we believe there’s going to be a market for robo taxis.
0:30:37 And there’s going to be a market for you and me where we want our car to drive us.
0:30:40 And we want to commute to work at the same time everybody else does.
0:30:42 So we’re not putting our car on a network as a robo taxi.
0:30:43 We’re using it.
0:31:00 For 2026 success, it’s all going to be, I think, who’s agile and riding through all of the tariff challenges, the EV policy challenges, and who’s got the right product on the market.
0:31:02 And there, it’s a handful of names again.
0:31:05 It’s Toyota, it’s GM, it’s Hyundai.
0:31:09 They’ve all got fresh product that is flying off the shelves.
0:31:14 And then you’ve got a number of companies that are challenged, Honda, Nissan.
0:31:16 You may put Ford in there.
0:31:19 You definitely put Stellantis in there that don’t have refreshed lineups.
0:31:25 They don’t have this kind of newness in product that’s flying off the shelves.
0:31:33 And so I think 2026 is shaping up to be who’s got the strongest product lineup is probably the answer to that question.
0:31:38 But that doesn’t answer the long-term question of who the survivors are going to be.
0:31:40 Final question before we let you go.
0:31:45 U.S. versus China, who’s winning on autonomous?
0:31:54 I think if you say who’s got autonomy, software-defined vehicles at the lowest cost,
0:32:00 you can argue that this cost is subsidized, and that’s a fair argument, but I think China’s winning right now.
0:32:09 And we really have to get behind this industry, much like we’re getting behind AI.
0:32:12 I mean, the autonomy race is also an AI race.
0:32:14 It’s one of the hardest problems in AI.
0:32:24 And the way we’ve gotten behind our chip manufacturers, I think, is the way we’ve got to get behind our OEMs, because we are behind right now.
0:32:25 All right.
0:32:29 John McNeil, CEO and co-founder at DVX Ventures.
0:32:30 John, appreciate your time.
0:32:31 Thank you.
0:32:31 You bet.
0:32:42 A new consumer research report is out that reveals what might be the next top retail platform.
0:32:42 It isn’t Walmart.
0:32:44 It isn’t Shopify.
0:32:46 It certainly isn’t physical retail.
0:32:51 It is actually TikTok, or more specifically, TikTok Shop.
0:32:55 This is TikTok’s e-commerce platform that was launched in 2023.
0:32:59 It allows brands to sell their products directly in the TikTok app.
0:33:07 It also allows creators to promote those products directly to their followers, which they can then buy straight from within the feed.
0:33:10 By the way, the creators also get rewarded with affiliate commissions.
0:33:12 Anyway, that’s TikTok Shop.
0:33:13 Back to the data.
0:33:24 So basically, this report found that in just two years, TikTok Shop is now processing nearly $70 billion in gross merchandise volume around the world.
0:33:27 And in America, that number is roughly $15 billion.
0:33:37 Just to put that in context, $70 billion, that is almost equal to the $75 billion worth of merchandise that eBay processed last year.
0:33:43 It’s also more than Target, Home Depot, and Etsy did last year in online sales combined.
0:33:48 In short, TikTok Shop is on an absolute tear right now.
0:33:51 Now, I guess the obvious question is why.
0:33:53 Well, probably an obvious answer.
0:33:56 This is where young people are spending most of their time.
0:33:58 More than half of American teenagers use TikTok.
0:34:04 And many users are spending as much as four and a half hours a day on that app.
0:34:14 So naturally, the more you use it, the more interested you become in the people on the app, specifically the influencers, and the stronger that bond with those influencers become.
0:34:22 In fact, roughly half of Gen Z now trust their favorite influencers more than they trust journalists or public officials.
0:34:26 Basically, TikTokers are more powerful today than ever before.
0:34:33 So when a TikToker shows up on your feed with a product they like or that they say they like, that can go a long way.
0:34:36 And we’re starting to see it now in the numbers.
0:34:42 U.S. monthly spending on TikTok Shop rose 52% last month, year over year.
0:34:45 That means that TikTok Shop is now growing faster than Oracle.
0:34:47 It’s growing faster than Amazon.
0:34:49 It’s even growing faster than Google Cloud.
0:34:53 Now, maybe none of this really surprises you.
0:34:55 We all know that TikTok is big.
0:34:56 We all know it’s a big deal.
0:34:58 Maybe this was expected.
0:35:01 And maybe that is why no one is really talking about these numbers.
0:35:04 But we feel that they should be.
0:35:11 Because even if this confirms something we already suspected, it represents something very important.
0:35:15 And that is, TikTok isn’t just changing the way we consume media now.
0:35:18 It’s actually changing the way we transact.
0:35:23 It has become a platform not just for dancing videos, but for literally everything.
0:35:28 I mean, some of the biggest brands in the world are now listing directly on the platform.
0:35:33 Brands like Ralph Lauren and Disney and Samsung.
0:35:38 And what that means is that TikTok isn’t just coming for Instagram’s lunch like we used to think.
0:35:45 It seems they’re now coming for Shopify’s lunch and Target’s lunch and possibly even Amazon’s lunch.
0:35:48 These are some of the largest businesses in the world.
0:35:52 Now, that tells us basically two things.
0:35:56 Number one, TikTok’s probably a lot more valuable than most people think.
0:36:01 And number two, TikTok U.S. is probably a lot more valuable than people think.
0:36:09 Remember, this was the deal that Trump orchestrated to sell TikTok’s U.S. business to a group of basically his friends.
0:36:12 And the idea was to sell it for $14 billion.
0:36:18 And by the way, according to Scott Besson, that deal has now been cleared by China and it’s set to go through.
0:36:20 So that is $14 billion.
0:36:22 That is less than the market cap of Ryanair.
0:36:29 That is the price tag for a company that is both the fastest growing social media platform in America
0:36:32 and also the eighth largest online marketplace in the world.
0:36:41 In sum, TikTok is beginning to take over retail or beginning to show signs that it is going to take over retail,
0:36:48 which is obviously great news for ByteDance, but probably most importantly, great news for Larry Ellison
0:36:52 and all the other guys who got in on the TikTok U.S. deal.
0:36:58 We thought that those guys had bought America’s most ascendant media platform, which is true.
0:37:07 But what we are beginning to learn is that at the same time, they also bought the most ascendant retail platform in America as well.
0:37:12 Okay, that’s it for today.
0:37:17 This episode was produced by Clive Miller, edited by Joel Passon, and engineered by Benjamin Spencer.
0:37:19 Our associate producer is Alison Weiss.
0:37:23 Our research team is Dan Shallan, Isabella Kinsel, Kristen O’Donoghue, and Mia Silverio.
0:37:26 And our technical director is Drew Burrows.
0:37:29 Thank you for listening to Prof G Markets from Prof G Media.
0:37:31 If you liked what you heard, give us a follow.
0:37:32 I’m Ed Elson.
0:37:34 I will see you tomorrow.
0:37:34 Thank you.
0:37:34 Thank you.