Good morning and happy Monday.

JPMorgan has a message for any young staffer planning to leave for another gig: You can’t quit, because we’re firing you.

At least that’s the gist of a leaked memo from leadership to new recruits, posted to the Instagram account Litquidity last week. “If you accept a position with another company before joining us or within your first 18 months, you will be provided notice and your employment with the firm will end,” bank executives wrote. The warning comes as big banks increasingly see young talent poached by private equity firms, which can offer heftier pay packages to junior staffers than Wall Street heavyweights — though the positions often come with starting dates two or three years away, after the staffers have completed their investment bank training. In a guest lecture at the University of Georgetown’s business school last year, JPMorgan CEO Jamie Dimon labeled such job-hopping as “unethical.” Hey, Jamie: Maybe a competing offer sheet, rather than a scolding, can reverse the trend.

Personal Finance

Ripped Job Market Swipes Left on New Grads

Photo of a graduation ceremony — Photo by Andrej Lišakov via Unsplash

Youth is a wonderful thing. Unless you’re looking for work.

A much-anticipated jobs report from the US Labor Department on Friday showed that employers added 139,000 workers in May. It’s a cooldown from the 147,000 jobs added in April but above the 125,000 figure that economists surveyed by The Wall Street Journal had expected. That keeps the unemployment rate at 4.2%, still near historic lows. Just don’t rub that stat in the face of the recent grads in your life, who, in all likelihood, are struggling to score their first gigs. No, it’s not because they’re obsessively playing their new Nintendo Switch 2 instead of scouring LinkedIn — this is simply a historically tough labor market for entry-level job seekers.

Welcome to the Big Leagues

For the first time in decades, recent grads have a higher unemployment rate than the rest of the economy. Indeed, the unemployment rate for recent college-educated job seekers aged 22 to 27 reached 5.8% in March, according to a recent survey from the Federal Reserve Bank of New York that noted the job market has “deteriorated noticeably” for the group. In another telling stat, according to a recent study from Oxford Economics, the recent grad cohort has seen its unemployment rate increase at about triple the pace of the national average; it’s now notably elevated compared with pre-pandemic years. Their non-degree-holding peers, meanwhile, have seen unemployment track nearly evenly with the national average.

So what gives? It’s likely that some healthy competition — both old and new — is keeping Gen Z stuck on the sidelines (and, sure, in their parent’s basements, probably playing a little too much of the new Mario Kart):

While corporate job cuts have started to spike in recent weeks, the layoff rate had been hovering around historic lows for months — causing what some call a “no hire, no fire” labor market that effectively kept entry-level job seekers on the sidelines as employers held onto current workers.
At the same time, entry-level job seekers are the first group attempting to enter the workforce in the age of artificial intelligence, and the computers may be outperforming them. That seems to be particularly true in the tech sector; while computer science programs ballooned in size in recent years, tech firms have significantly scaled back hiring — especially as AI proves particularly adept at coding.

Fed Up: That tough job market may yet come for everyone else, too. “We expect more slowing over the course of the year,” Barclays’ Chief US Economist Marc Giannoni told the Financial Times last week, while noting Friday’s job report is likely another data point solidifying the Fed’s wait-and-see approach to cutting rates (even though the White House made known its desire for a “full point” cut following the report’s release). Futures traders now see a 99% chance that the Fed maintains current rates this month, according to CME Group’s FedWatch tracker, though odds of a 50 basis-point cut by the end of the year edged up to 39% on Friday. Meanwhile, traders on prediction market Kalshi pegged those odds at just 26%.

Written by Brian Boyle

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Banking

Wall Street’s Elite Get Serious About Debt Alarmism

The US has been racking up budget deficits for most of the past half-century, but the leader of the country’s largest bank by assets and the head of the world’s largest asset manager think enough is enough.

JPMorgan CEO Jamie Dimon and BlackRock CEO Larry Fink were the leading voices in a chorus of billionaires who sounded off last week about higher deficit spending in the US. The resulting mountain of debt could soon rival Denali (the highest US peak), leading to concerns that interest expenses will engulf federal spending, which will drag down growth, which in turn will drag down everything else.

The Game is Bond

The worries start in the bond market, which Dimon warned could “crack” during May 30 remarks to the Reagan National Economic Forum. The long-term yields in America’s $29 trillion Treasurys market have flirted with 5% in recent weeks, with the 30-year yield at 4.963% on Friday. That has made for the highest levels since 2023. The yield on the 10-year Treasury note, meanwhile, has risen to 4.51% from below 3.7% in September. Higher yields mean the government generally has to pay higher interest to bond investors, who are fewer and increasingly less inclined to offer cheap, long-term funding to finance the nation’s debt, hence Dimon’s prediction of a “crack.”

US deficit spending, which is at 120% of GDP, according to the Federal Reserve Bank of St. Louis, is set to balloon under the “big, beautiful” Trump-backed GOP spending bill in Congress. The Committee for a Responsible Federal Budget estimates the bill would add $3.3 trillion to the $36.2 trillion US debt by 2034. That means more interest payments, which are already eating up federal spending: The $892 billion in interest payments on the debt equaled approximately 13% of the total federal budget in 2024, according to the Center on Budget and Policy Priorities, leapfrogging what is spent on Medicare or defense. None of this, Dimon, Fink and others are warning, is ideal:

“If people decide that the US dollar isn’t the place to be, you could see credit spreads gap out; that would be quite a problem,” Dimon told Fox Business last week, alluding to the greenback’s 9% decline this year, an indication foreign investors have become less interested in US assets. “It hurts the people raising money. That includes small businesses, that includes loans to small businesses, includes high-yield debt, includes leveraged lending, includes real estate loans. That’s why you should worry about volatility in the bond market.”
Fink, citing the GOP spending plan, warned a Forbes conference in New York last week that if US economic growth continues “to stumble along at a 2%” rate, deficits will overwhelm the country and “we’re going to hit the wall.” Citadel founder Ken Griffin, speaking at the same conference, offered his own two cents: running a deficit of 6 or 7 percent of GDP with full employment was “just fiscally irresponsible” (Moody’s cautioned that the bill will push the deficit from 6.4% of GDP in 2024 to nearly 9% by 2035).

Problem Solver: Treasury Secretary Scott Bessent dismissed Dimon’s concern about the bond market. “He’s made predictions like this” before, Bessent said. “Fortunately, none of them have come true.” Dimon, who told the Reagan Forum he doesn’t know “if it’s going to be a crisis in six months or six years,” was insistent but offered a way to ward off his prediction: “Change the trajectory of the debt” and relax rules on banks’ engaging in bond trading, allowing them to provide more financing if markets freeze up.

Written by Sean Craig

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Consumer

Consumer Goods Giants Slim Down to Spur Growth

For US consumer giants, smaller is better.

Procter & Gamble, the maker of Tide laundry detergent and other household goods, announced a restructuring plan last week that includes cutting 7,000 people from its workforce and potentially exiting certain product categories over the next two years.

Anti-conglomerate

“We are evolving into the next phase of our organization design with a program that we have just announced today,” P&G executives said at a Deutsche Bank conference in Paris. “The strategy is inherently dynamic. It adapts to the changing needs of consumers, customers, society, and the geopolitical dynamics around us.”

Scale for scale’s sake appears to have become passé, with conglomerates jockeying for market share with a more focused brand identity than in the past:

Kimberly-Clark, the maker of Huggies diapers, said on Thursday it would sell a majority stake in its international tissue business to Brazilian paper company Suzano, which agreed to pay $1.73 billion in cash for 51% of the unit. The deal is expected to close next year. General Mills, the maker of Cheerios, completed the sale of its Canadian yogurt business to Sodiaal in January and received regulatory approval last week to offload its US yogurt unit to Lactalis. The companies plan to close the transaction later this month.
J.M. Smucker Co., the maker of Folgers, finalized its sale of Cloverhill, Big Texas, and private-label products to JTM Foods in March. Some 400 employees are part of the transaction. Those brands in the baked goods category were under Hostess Brands, which was acquired in 2023. Unilever, the maker of Dove soap and Hellmann’s mustard, is selling plant-based food brand The Vegetarian Butcher as part of its plans to slim its portfolio. It is in the process of spinning off its ice cream business, including Ben & Jerry’s and Talenti; the company announced last year that it would cut 7,500 jobs to simplify operations. Newly appointed CEO Fernando Fernandez said he was focused on “portfolio quality over portfolio scale” during his first earnings call as chief in April.

Breakups Pay Up: Shedding misaligned businesses can help boost growth, according to PwC. The Big 4 accounting firm’s analysis of US divestitures from 1998 to 2017 found that sellers tended to show higher growth in earnings before interest, taxes, depreciation, and amortization (Ebitda) in the years following a transaction. Record levels of US corporate cash and the dry powder sitting at private equity firms may also be inspiration enough for yard sales.

Written by Crystal Kim

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