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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Your leadership of the National Association for Business Economics is

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Speaker 2: noted with KPMG. Diane Swank joins us right now. Diane,

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Speaker 2: just a sixty thousand foot question for our listeners, those

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Speaker 2: with the job, those with Google stock options and the

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Speaker 2: Google one hundred year piece, and those flat on their

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Speaker 2: back across America. How case shaped are we this morning?

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Speaker 1: Well, we are as much as we've been since the

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Speaker 1: data started on corporate profit share versus wade share in

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Speaker 1: the economy going back to the nineteen seventies. What we're

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Speaker 1: seeing is a record break between the share of profits

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Speaker 1: going to wealthholders versus the amount of going to wages.

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Speaker 1: And I think that's where the bulk of this is.

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Speaker 1: You're seeing the productivity gains a crew to the owners

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Speaker 1: of capital as opposed to workers, and that's why workers

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Speaker 1: are not very happy about where are Also when you

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Speaker 1: think about wages, I think it's very important to understand

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Speaker 1: that we are seeing this labor market looks like it's

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Speaker 1: now healing after getting cratered last year. That's important, but

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Speaker 1: it's healing at a pace as Claudia and Eric pointed out,

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Speaker 1: where we just don't need to generate many jobs be

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Speaker 1: able to bring the unemployment rate down, which could push

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Speaker 1: wages higher. That's great if it does not also be

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Speaker 1: accompanied by information, and we know that much like stock

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Speaker 1: returns compound, also inflation compounded over the last five years,

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Speaker 1: leaving too many prices out of reach for too many.

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Speaker 2: Paul, I was just going to say for your weekend reading,

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Speaker 2: it's not Friday, it's.

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Speaker 3: When I know we got a waste to go tom

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Speaker 3: or red headline crossing the Bloomberg terminal traders fully price

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Speaker 3: in FED rate cut by July versus June previously. So

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Speaker 3: the WORP function kind of we're seeing it right there

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Speaker 3: here on this strong labor print, Diane. We know that

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Speaker 3: FED likes to look at this unemployment right and boy,

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Speaker 3: you tick down from four point four percent to four

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Speaker 3: point three percent. That's full, full, fully employed America, isn't it.

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Speaker 1: Actually it is. It is even better under the hood.

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Speaker 1: What we saw was the U six rate, which is

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Speaker 1: that sort of underemployment rate where you get discouraged workers

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Speaker 1: and those having just cut part time for economic reasons,

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Speaker 1: that fell to eight percent from eight point four percent

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Speaker 1: in December. That's an important move It's still well above

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Speaker 1: the six point two percent we saw back in twenty nineteen,

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Speaker 1: but it is a move down and an important move

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Speaker 1: down for those who were really struggling to get a job.

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Speaker 1: What we're starting to see is some of the ice

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Speaker 1: melt in the labor market now and things beginning to

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Speaker 1: shift a bit, and we need to keep up that

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Speaker 1: momentum for workers on the flip side of it, it

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Speaker 1: keeps the fed on the sidelines longer.

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Speaker 4: We're not seeing you know, what does economy This labor

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Speaker 4: economy has been described as a kind of a low higher,

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Speaker 4: low fire type of environment. How about some of the

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Speaker 4: industries that rely historically upon immigrations, such as housing, agriculture.

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Speaker 4: Are we seeing any problems there?

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Speaker 1: Well, we are seeing a major shift in things like

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Speaker 1: leisure and hospitality in terms of quit rates. Quit rates

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Speaker 1: in that sector have soared, even as they've cooled and

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Speaker 1: sort of come to a near standstill across the economy

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Speaker 1: and the job openings and labor turnover survey, we saw

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Speaker 1: those quit rates really soar. That has not been accompanied

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Speaker 1: by a lot of wage pressures in the economy that

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Speaker 1: was very weak last year, and in fact, vacations actually

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Speaker 1: went down a bit. Over the course of the year.

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Speaker 1: We saw only the affluent households continuing to spend heavily

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Speaker 1: on vacations, and that showed up in the breakdown in

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Speaker 1: terms of people paying to go to the front of

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Speaker 1: the bus, in terms of the planes and luxury hotels

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Speaker 1: continue to do extremely well, but the rest of the

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Speaker 1: economy side of vacations did not. In twenty twenty five, the.

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Speaker 2: Binging you here, folks, I believe is doctor Swark. That's

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Speaker 2: that's Kevin Worsh. Yes, seeing Diane Swark right now, Like

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Speaker 2: Kevin Warsh is saying to Dan, we need to talk

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Speaker 2: right now, Diane. One of the things here, and you know,

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Speaker 2: I'll pick on you know a city that I know

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Speaker 2: is really having trouble. Alexander County, Illinois. Six percent unemployment right,

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Speaker 2: this is kro It's you know, southern Southern Illinois has

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Speaker 2: really struggled. How do you synthesize, Diane with all your

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Speaker 2: decades of work the easy gloom path versus observing the

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Speaker 2: vibrancy of the American economy. I mean, the media and

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Speaker 2: Tom Keen are really really good at going out and

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Speaker 2: finding a six percent unemployment rate and saying, OMG, the

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Speaker 2: world's going to end, but there's an America that's vital

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Speaker 2: out there. How do you balance that after this report?

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Speaker 1: Well, I think the important issue is is that we

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Speaker 1: know that fewer firms and fewer households are counting for

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Speaker 1: more of the ECONO gains in the US economy. And

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Speaker 1: that's where you get to the K shaped economy. We've

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Speaker 1: talked about it a lot, but it's showing up and

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Speaker 1: just about everywhere and every strata, even with higher income

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Speaker 1: households now trading down and going to big box discounters

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Speaker 1: trying to get more value because they're feeling strained as

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Speaker 1: well unless they have a large stock portfolio. So there

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Speaker 1: really is this delineating thread that goes through the US

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Speaker 1: economy in terms of wealth versus non wealth, and it's

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Speaker 1: not just housing market wealth. Equity in your home cannot

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Speaker 1: be as easily tapped, but wealth in the stock market

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Speaker 1: has moved up dramatically, and that is important because it's

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Speaker 1: not filtering down to workers and the dichotomy of those

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Speaker 1: two things happening at the same time. The hard part

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Speaker 1: is that it keeps inflation void as well, and I

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Speaker 1: think that's something that the Fed is going to be

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Speaker 1: watching for and we know that, as you heard earlier.

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Speaker 1: I think Eric pointed it out. If these losses that

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Speaker 1: we saw on jobs last year were more structural than

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Speaker 1: cyclical in nature, then rate cuts don't help them. If

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Speaker 1: they are more demand driven, and the rate cuts actually

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Speaker 1: helped to reignite employment, that's great, although they don't usually

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Speaker 1: work quite this quickly, so I have my doubts about that.

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Speaker 1: I think you are working through some big uncertainty issues

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Speaker 1: that finally abated a bit, but measures of uncertainty move

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Speaker 1: back up again in the month of January.

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Speaker 2: Dayne Swack, thank you for your work. Dayne Swack is

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Speaker 2: KPMG here