LARRY KUDLOW: Trump’s drill, baby, drill is paying off

Delayed government data show a continued restructuring of the U.S. labor market under the Trump administration: federal payrolls are down roughly 270,000 while private employment is up about 700,000 year-to-date, native‑born jobs have risen ~2.7 million and foreign‑born jobs fallen ~1 million; unemployment ticked up but middle‑class wages increased roughly 5% year‑over‑year. The most significant development is a sharp decline in oil prices (WTI from about $80 to $55 YTD) as U.S. production runs near 13.8 million barrels a day and outpaces domestic demand, pulling pump prices below $3 nationwide (Oklahoma ~$2.30, California ~$4.35). Larry Kudlow argues that the energy-driven drop in commodity costs will push headline inflation lower, create room for materially lower interest rates, and that deregulation and tax incentives under Trump are key drivers of these real‑wage and disinflationary effects.

Analysis

Delayed government data show a material reconfiguration of the U.S. labor market: federal payrolls have fallen roughly 270,000 year-to-date while private employment has risen nearly 700,000, native‑born jobs are up about 2.7 million and foreign‑born jobs are down almost 1 million. The jobs report is characterized as "decent" with unemployment edging higher as displaced federal workers search for private roles, and reported middle‑class wages up approximately 5% year‑on‑year.

The dominant macro development is a sharp decline in oil prices — West Texas Intermediate down from roughly $80 to $55 year‑to‑date — as U.S. production runs at about 13.8 million barrels per day and outpaces domestic demand. Retail energy transmission is visible at the pump (national gasoline under $3; Oklahoma ~$2.30; California ~$4.35), and the author argues that falling energy costs will depress headline inflation across many categories.

Lower commodity-driven inflation is presented as creating room for materially lower interest rates, which would boost real wages (5% wage growth versus a projected ~2% inflation) and lift disposable income. Key near‑term risks in this narrative are the unemployment uptick, timing/quality of delayed data, and regional/regulatory divergence in fuel costs that could blunt uniform consumer benefit.

Key Decisions for Investors

• Favor consumer discretionary and consumer staples exposure that benefit from improved real incomes and lower pump prices, given reported 5% wage growth and gasoline below $3 nationally
• Trim or hedge pure upstream energy equities and high‑cost producers as WTI fell from ~$80 to ~$55 amid 13.8M b/d U.S. production outpacing demand
• Position for a lower‑rate environment by modestly lengthening duration and increasing exposure to rate‑sensitive sectors (utilities, REITs) if subsequent CPI prints track the anticipated disinflation
• Monitor upcoming official inflation and payroll releases and regional fuel pricing (e.g., California premium tied to climate regulation) as the primary catalysts that could validate or reverse this view