Jefferies' David Zervos Says Fed Was Flying Blind, Warns AI-Led Productivity Gains Could Result In A 'Lot Less' Jobs Created: Report

• Zervos noted that there are many excellent policies outside of monetary policy that are providing tailwinds to the U.S. economy.
• He highlighted the recent layoffs announced by Amazon and United Parcel Service, among others, adding that the unemployment rate could hover at 5% in the future.
• Zervos had previously stated that the Fed’s monetary policy was too restrictive, backing calls by President Donald Trump and Treasury Secretary Scott Bessent for rate cuts.

David Zervos, Chief Market Strategist at Jefferies, reportedly cautioned on Tuesday that the Federal Reserve was “flying blind” by keeping its monetary policy restrictive.

In an interview with CNBC, Zervos cautioned that the Fed will have to consider the possibility of far fewer jobs being created despite the U.S. economy growing at a healthy rate, due to productivity improvements from artificial intelligence (AI) technology.

Other Tailwinds

He stated that nearly 1.5 million jobs had been revised downwards over the last 18 months. However, Zervos noted that there are many excellent policies outside monetary policy that are providing tailwinds to the U.S. economy.

“The Fed was flying blind, really flying blind for many, many meetings. And now all of a sudden we realize, we created all that growth with a lot less jobs.”

— David Zervos, Chief Market Strategist, Jefferies

He also downplayed concerns of price rise, stating that there is no problem of anchoring inflation expectations.

AI’s Impact On Jobs

Zervos highlighted the recent layoffs announced by Amazon.com Inc. (AMZN) and United Parcel Service Inc. (UPS), among other companies, stating that it could present the Fed with a challenge of jobs growing at a slower pace, while unemployment could be at 5%.

“You can feel it, you can feel it everywhere you go. I think you have to benchmark to a possibility that we’re going to have a world of 3+ percent of growth with 5% unemployment. That’s a real risk,” he said in the interview.

Zervos had previously stated that the Fed’s monetary policy was too restrictive, backing calls by President Donald Trump and Treasury Secretary Scott Bessent for rate cuts. According to data from the CME FedWatch tool, there is a 97.8% probability of a 25 basis point rate cut during the October meeting.

Meanwhile, U.S. equities rose in Tuesday’s midday trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.08%, the Invesco QQQ Trust ETF (QQQ) gained 0.44%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.41%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.09% at the time of writing.

Also See: Apple, Microsoft Join Nvidia In $4 Trillion Valuation Milestone

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