It was a bad day for the stock market. But one local economist has a message: Relax.

The stock market tumbled again today. Investors’ apprehension became evident on Friday when the U.S. jobs report showed a slowdown in hiring, and the unemployment rate rose to its highest level in nearly three years. 

Then, this morning, the three major stock market indexes dropped sharply. All of this is attributed to growing fears of a recession as the Federal Reserve continues to hold out on cutting interest rates. 

Jon Gruber, department chair and Ford Professor of Economics at MIT, joined GBH’s All Things Considered guest host Judie Yuill to bring some clarity to the situation and explain whether these fears are warranted. What follows is a lightly edited transcript.

Judie Yuill: Let’s get straight to the point: Realistically, is this cause for panic?

Jon Gruber: A short-term movement in the stock market is never a cause for panic. It’s very important to remember that listeners to the show should be investing in the stock market only as a long-run way to invest their money. The stock market moves up and down all the time — even a sharp move like this, about 2.3%, happens not infrequently.

It often gets corrected, and no one who’s in the market should be overreacting to one day’s movement. If they’re so sensitive to what’s happening one day, their money should be invested somewhere else.

Yuill: Now, one of the market indexes that tumbled is the tech-heavy Nasdaq. This comes with reporting that the “AI bubble is bursting.” What does that mean? And how troubling of a sign is this for the tech sector, which has such a heavy presence in Boston? Are jobs in Boston in trouble?

Gruber: You know, one reason I made that earliest statement is [because] it is so hard to know what drives these sometimes dramatic movements and stock prices. Nothing has changed fundamentally with AI in the last five days, OK? AI is, today, where it was five days ago or 10 days ago or 15 days ago. It’s a dramatic development that’s going to take a very long time to play out.

So, once again, these short-run reactions are really overreactions to individual bits of news. We may have overblown in AI. We may be thinking that AI is going to be more transformative than it is. But that’s not something we’re going to learn in five or 10 days. That’s something we’re going to learn over years.

Yuill: When it comes to unemployment rates more broadly, Massachusetts tends to hold up a little better than the country as a whole, partly because our industries — medicine, higher-ed, biotech — tend to be more recession-proof. Does that still hold true today?

Gruber: I mean, I think there’s a long-run concern with biotech, as there always is, that the engine of innovation will continue to grow as rapidly as it has. You never want your economy to be too dependent on any one sector, and we are pretty dependent on biotech and health care more generally.

But the things we’re talking about today don’t really impact, fundamentally, the growth prospects for the sectors that really drive Massachusetts.

Yuill: What could this mean for interest rates? The Fed didn’t reduce interest rates at its last meeting, so people are looking to the next one. Does this hamper any possibility of rate cuts — or conversely, for people looking to buy a home, could there be a silver lining in mortgage rates coming down?

Gruber: It’s a great question. Let’s remember the basics of interest rates, which is: the interest rate is the money you get for saving your money. So the higher the interest rate, the more you want to save. The lower the rate, the more you want to spend. When interest rates fall, that means people spend more. That is good for economic growth and for job creation — and bad for inflation.

Given the inflationary burst we had in the 2021-2022 period, the Fed raised rates to try to focus on lowering inflation. Inflation has been low, and it’s stayed low for about a year. However, what’s changed is, now, employment seems to be falling, and unemployment rates seem to be rising. So the natural reaction for the Fed would be to cut rates. Whether they’ll do so depends on how fundamentally unstable they view the economy as.

There are many factors that may be driving this poor employment result, including hurricanes, bad weather and other things. The question is: Will the Fed want to wait to see after those temporary factors go away if employment is still down? Or will the Fed not want to wait and act more quickly? They’re not going to raise rates, but I think there’s a real possibility they’ll cut them.

Yuill: From a practical perspective, should people be doing anything like putting off large purchases, rethinking retirement or holding off on investing in the stock market?

Gruber: Timing those decisions never works well. Basically, these are movements that are unpredictable and really are decisions that you should make based on the long-term prospects. When you buy a house, whether to buy a house, whether [to] invest in the market — these are decisions for 10-year periods, not for one-week periods.