Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisnal and I'm Tracy. Tracy. I'm gonna say
Speaker 1: something and I don't think it's particularly sort of controversial,
Speaker 1: but this is my assessment. No, no, no, this is
Speaker 1: my basic assessment of where we are, like big picture,
Speaker 1: like you know, over two years since the start of
Speaker 1: the pandemic, which is that the labor market has recovered
Speaker 1: far faster than anyone would have expected in March and April.
Speaker 1: And the big issue now, of course, is the sort
Speaker 1: of above trend, significantly above trend, above target inflation. So
Speaker 1: that's not controversial, that's right. I mean, yes, if you
Speaker 1: look at headline unemployment, I think it's a what is
Speaker 1: it three point five or three point six percent? Three
Speaker 1: three point five percent for July. But I think the
Speaker 1: controversy or where there is a lot of disagreement is
Speaker 1: over what that's telling you exactly, because if you look
Speaker 1: at some other indicators of labor market health, things like
Speaker 1: the participation rate, those show a very different picture, very
Speaker 1: different picture. You're totally right. So I'm looking at the
Speaker 1: overall labor force participation rate here on the Bloomberg and
Speaker 1: as the latest reading it's sixty two point one PENT
Speaker 1: pre crisis February sixty three point four. So it is
Speaker 1: clearly like by this measure we have clearly not recovered.
Speaker 1: And of course this was trending down through much of
Speaker 1: the post Great Financial Crisis period, it started picking up,
Speaker 1: started gaining steam in so by this measure we've suffered
Speaker 1: a setback, a real reset perhaps. Yeah. And this is
Speaker 1: where a lot of the tension in dissecting the labor
Speaker 1: market exists right now. This idea that the unemployment rate
Speaker 1: is really really low, but there is also this narrative
Speaker 1: that no one wants to work anymore and that it's
Speaker 1: hard for companies to find the right workers and things
Speaker 1: like that. And even within the labor participation rate, there
Speaker 1: are variations between gender, between race and age and things
Speaker 1: like that. So there's a lot to discuss, right So,
Speaker 1: you know, one other statistic that's important part of the
Speaker 1: story with declining labor for force participation might be retirees.
Speaker 1: You have a lot of old people who maybe after
Speaker 1: the pandemic hit the like retirement, great retirement, etcetera. But
Speaker 1: that can't explain the entire story because even if you
Speaker 1: look at say employment to population for fift year old
Speaker 1: sort of so called prime age workers. Another way of
Speaker 1: measuring sort of labor force participation, that's at eight percent,
Speaker 1: not too bad. But again, prior to the crisis, we're
Speaker 1: at eighty point five percent. And so again, you know,
Speaker 1: these some of these things like say old people retired,
Speaker 1: like they don't seem to explain the full story anyway.
Speaker 1: The bottom line is there still seems to be some
Speaker 1: mystery about like what's going on with labor. Yeah, well,
Speaker 1: the mystery is, you know, if you look at unemployment,
Speaker 1: it all looks great, everyone seems to be working. If
Speaker 1: you look at some other things then, especially anecdotal data
Speaker 1: from companies who say they're having trouble finding workers, then
Speaker 1: it seems like no one's working. You know what, Let's
Speaker 1: talk to someone who is much smarter than us and
Speaker 1: who knows a lot about the labor market data, and
Speaker 1: in fact that's their entire role, their entire job. We're
Speaker 1: gonna be speaking today with Joel Gamble. She is the
Speaker 1: chief economist at the Department of Labor, and she's going
Speaker 1: to clear all of this stuff up for us, hopefully. So, Joel,
Speaker 1: thank you so much for coming on the podcast you're
Speaker 1: going to you're gonna answer all our questions. We're gonna
Speaker 1: walk away from here without a mystery. But in all seriousness,
Speaker 1: you know, I remember, in the wake of the Great
Speaker 1: Financial Crisis, we had also a big drop in labor
Speaker 1: force participation rate, employment, the population ratio, and people said
Speaker 1: things like, oh, this is like a structural change in
Speaker 1: the labor market. Something happened, that's just different, And it
Speaker 1: turned out most of those people are wrong. We just
Speaker 1: needed a stronger economy, and when growth picked up, most
Speaker 1: of the jobs came back, and we actually, uh, you know,
Speaker 1: we did eventually get all the jobs back. It just
Speaker 1: took way too long because growth was so sluggish. Do
Speaker 1: you see evidence of a more structural shift in who's
Speaker 1: working these days post pandemic or is this going to
Speaker 1: be another story where everyone is quick to rush to
Speaker 1: pronounce structural change but really it's just a matter of
Speaker 1: time before full normalization. Well, I think in a very
Speaker 1: online world there's often, you know, a rush to assess
Speaker 1: the state of the labor market. But I see things
Speaker 1: a few ways when there are real through lines that
Speaker 1: are trends, especially when we're talking about the labor force
Speaker 1: participation rate right there's an aging population, for example, you
Speaker 1: know there's gender shifts, particularly with labor force participation rates
Speaker 1: for men, particularly white men, declining over time. That was
Speaker 1: pre pandemic, that was occurring during the recovery from the
Speaker 1: Great Recession um and so there are there are real
Speaker 1: things that are more structural. I would think would also
Speaker 1: include immigration in the way that's affecting overall labor supply
Speaker 1: as a structural change. Those administration is doing all we
Speaker 1: can to increase authorized immigration and fixing some of the
Speaker 1: mistakes that were made by the last administration. But there's
Speaker 1: also some things that may be unique to what we've
Speaker 1: just experienced, which was a huge disruption to the US economy,
Speaker 1: a deep recession, and a really fast recovery. I think
Speaker 1: Claudia Golden actually has a really interesting working paper that
Speaker 1: came out this year that highlights kind of the relationship
Speaker 1: between some of the pre pandemic labor market trends and
Speaker 1: how we assess it today, particularly the fact that, for instance,
Speaker 1: there's a big run up and female labor force participation
Speaker 1: right before the pandemic recession, and that matters for how
Speaker 1: we think about female labor force participation today, and that
Speaker 1: big increase in the run up right before the recession
Speaker 1: was among you know, women with lower levels of education,
Speaker 1: young children, younger women, they're more marginally attached. Those are
Speaker 1: also some of the women whom we could see coming
Speaker 1: back now and that would improve labor force participation. In fact,
Speaker 1: education believe is a big role. For instance, both men
Speaker 1: without college degrees and women without college degrees who are
Speaker 1: in their prime age working years could come back to
Speaker 1: the labor market and you know, improve labor force participation.
Speaker 1: That's an addition to like the fact that people die,
Speaker 1: there's excess retirements, all those other stories that we've been
Speaker 1: talking about. So there's a mix of structural trends and
Speaker 1: there are some unique things that are happening right now,
Speaker 1: um that are affecting, you know, the composition of the
Speaker 1: labor force. Could you dive in a little bit more
Speaker 1: into the gender discrepancy in labor force participation because if
Speaker 1: you chart, for instance, the participation rate for prime age
Speaker 1: women versus prime age men, those two lines just go
Speaker 1: in very different directions. So for men, you know, it's
Speaker 1: been trending down for a while. For women, it's been
Speaker 1: trending up right up until COVID hit as you mentioned,
Speaker 1: but it certainly recovered a lot faster than the male
Speaker 1: participation rate. What's going on there? So I think a
Speaker 1: few things are happening, but I think it's important to
Speaker 1: delineate even within gender different populations. Right women are not
Speaker 1: a monolith. Men are not a monolith. And I think
Speaker 1: it's important to do that in part because, you know,
Speaker 1: we think about how the recession affected women and their
Speaker 1: labor force participation rate. You know, the ability to work
Speaker 1: from home likely played a big role. Women with higher
Speaker 1: of levels of education, you know, even if they still
Speaker 1: had caregiving duties, were more like, we're more able to
Speaker 1: keep their jobs. Women who had to go in person
Speaker 1: for work, whether they were mothers or not, were more
Speaker 1: likely to have to you know, lose their job, get
Speaker 1: laid off, etcetera. And so I do think that the
Speaker 1: education plays an important role there. And then in terms
Speaker 1: of you know, the labor force participation rate right now,
Speaker 1: I think this is a very well told story. Worry that,
Speaker 1: you know, for women, the ability to into the workforce
Speaker 1: is affected by a number of factors, including including care
Speaker 1: including you know, workplace safety, including school policies as well,
Speaker 1: and so I think there's there's a pretty complex story there,
Speaker 1: but I would really underline the importance of, you know,
Speaker 1: looking at the nuance within the population of women in
Speaker 1: the U. S. Economy, and we can get into race
Speaker 1: as well. I think that's that's important too. Obviously, even
Speaker 1: last year, there were a lot of schools that were disrupted,
Speaker 1: They that weren't open the entire year. Both of my
Speaker 1: I think at least one of my kids definitely head
Speaker 1: days where they had to stay home due to the
Speaker 1: school being closed due to COVID. Do you see significant
Speaker 1: potential upside gained still for women once we get to
Speaker 1: a place in which the care question to some extent
Speaker 1: is at least no longer uncertain. Maybe not as ideal
Speaker 1: as it would be in the sort of ideal scenario
Speaker 1: of like universal child care, but something or at least
Speaker 1: like the uncertainty of whether you're going to have someone
Speaker 1: watch your kids during the day goes away. I think
Speaker 1: the word uncertainty is key there, because when you have
Speaker 1: certainty about childcare arrangements, for example, or other care arrangements,
Speaker 1: that enables you to plan, That enables you to plan
Speaker 1: either of your having to work from home, you know,
Speaker 1: or it'll enables you to plan to go in person,
Speaker 1: especially as more people feel comfortable going into work or
Speaker 1: more employers feel comfortable asking their workers to come in
Speaker 1: and so you know, there's probably some upside risk there,
Speaker 1: but as you also mentioned, you know there are bigger
Speaker 1: investment needs in that space. So setting women aside, which
Speaker 1: is a terrible phrase, if we focus on the male
Speaker 1: participation rate for a second, I'm still wondering, like, why
Speaker 1: has that been trending down for so long and why
Speaker 1: does it seem to be struggling to recover. What do
Speaker 1: you see there, because I imagine you see a mix
Speaker 1: of the data but also you know, some anecdotes as well. Yes,
Speaker 1: I think I think it's a few things in terms
Speaker 1: of why it's been declining downward. Um, there are some
Speaker 1: structural challenge there in terms of access to opportunity. It
Speaker 1: depends on heavily by race to you know, folks who
Speaker 1: are interacting with the criminal justice system are also you know,
Speaker 1: going to struggle more defined employment to get discouraged to
Speaker 1: end up leaving the labor force. You know, there are
Speaker 1: people who are not in the labor force right so
Speaker 1: they're not participating, But who do actually want a job.
Speaker 1: But I think it's an important distinction and to make
Speaker 1: here that not everyone who wants a job is actively
Speaker 1: looking by the way we measure it in in the
Speaker 1: Bureau of Labor Statistics surveys, so there are challenges there. Um.
Speaker 1: I also think that frankly, you know, this is a
Speaker 1: place where tighter labor markets can help. You know, I
Speaker 1: mentioned women with lower levels of education being mark more market,
Speaker 1: I'm more likely to be marginally attached. That also can
Speaker 1: happen for men, particularly for for black men, And we're
Speaker 1: actually seeing for black men at least a much higher
Speaker 1: level of employee or a much faster employment recovery than
Speaker 1: in the last recovery. So for example, their prime, their
Speaker 1: employments population level has been pretty elevated for for some time.
Speaker 1: Why do you why do you think it's been so
Speaker 1: the trajectory has been so different. I mean this way
Speaker 1: for years, you know, post grade financial crisis, Like we
Speaker 1: talked about this slow recovery and all of these measures,
Speaker 1: and we talked about there's this huge gap between white
Speaker 1: unemployment and black unemployment, and it's still high, but it's
Speaker 1: closed a lot faster than, you know, than anything that
Speaker 1: we've seen post grade financial crisis, and A why do
Speaker 1: you think that is? And B is this something that
Speaker 1: you think we can build on as an economy and
Speaker 1: that some of these gains can be locked in and
Speaker 1: that the benefits of having a job that seemed to
Speaker 1: you know that have lots of positive externalities long term benefits.
Speaker 1: Is this something from the current environment that you see
Speaker 1: is benefiting the economy for years to come. Yes, So
Speaker 1: there's a lot a lot to unpack there. But I
Speaker 1: think to your observation about the unemployment gaps, that is,
Speaker 1: you know, an important aspect of this recovery, right, the
Speaker 1: gap between black unemployment and white unemployment, or Hispanic unemployment
Speaker 1: and white unemployment, tends to be correlated with the business cycle.
Speaker 1: So when you see a fast recovery, um you see
Speaker 1: a lower ratio of of unemployed persons to vacancies, then
Speaker 1: you are more likely to see better labor market outcomes
Speaker 1: relative to a looser labor market for black and Hispanic workers.
Speaker 1: So that is definitely part of the story. I think
Speaker 1: the nature of the recovery may have particularly helped the
Speaker 1: black men in terms of obtaining a job. So you know,
Speaker 1: there was a big increase in consumption on goods relative
Speaker 1: to services last year, and that has ripple effects along
Speaker 1: supply chains, including through e commerce and transportation and warehousing jobs,
Speaker 1: those kinds of moving jobs, frankly that black men disproportionately hold,
Speaker 1: So that's probably a part of the story there, though
Speaker 1: I will also, of course note that those are not
Speaker 1: always the best quality jobs, and so we do want
Speaker 1: to improve them. The Department has an initiative called the
Speaker 1: Good Jobs Initiative that's really focused on that because we're always,
Speaker 1: you know, so worried in these recoveries about getting jobs,
Speaker 1: and now we're at the point where we at least
Speaker 1: get a chance to think about are these good jobs?
Speaker 1: How can we give people choices um in this labor market?
Speaker 1: So do you think that that's certainly a part of
Speaker 1: it in terms of locking in gains. That is a
Speaker 1: huge policy question and policy priority for us at the
Speaker 1: Department of Labor, in part because we want to make
Speaker 1: sure that workers have rights, they have protections through of
Speaker 1: course enforcement, whether it's discrimination issues, wage theft, etcetera. We
Speaker 1: also want to make sure that workers who want jobs
Speaker 1: have pathways. Sometimes you know, you don't have these clear
Speaker 1: pathways to jobs based off where you live, you know,
Speaker 1: based off of your social network, etcetera. And so you know,
Speaker 1: creating pathways for training, apprenticeships, connections to employers who offer
Speaker 1: good jobs is also really important part of lucking and games.
Speaker 1: And then of course, you know, ensuring that workers do
Speaker 1: have power when they're on the job. This is an
Speaker 1: administration that cares deeply about supporting workers choice to join
Speaker 1: a union if they want to. And Tracy just looking
Speaker 1: at the charge here. You know, in summer, so basically
Speaker 1: like over four years after like the financial crisis started,
Speaker 1: the gap between white and black unemployment was seven points
Speaker 1: six percent. Today is down to two point nine percent.
Speaker 1: So the speed with which this isn't compressed, which often
Speaker 1: happens in a in a business cycle as it goes on,
Speaker 1: is just clearly much faster than anything we saw in
Speaker 1: the past. This kind of leads into another question. So,
Speaker 1: if black men are disproportionately present in industries like warehouse
Speaker 1: or warehousing, aren't transportation and things like that, do you
Speaker 1: worry that those gains won't be sustainable if we do
Speaker 1: see consumers start to pull back. You know, for instance,
Speaker 1: we've seen some of the big box retailers talk about
Speaker 1: having too much inventory at the moment, do some of
Speaker 1: those jobs start to look vulnerable. I mean, I wish
Speaker 1: that this was a new story for black workers, but unfortunately,
Speaker 1: you know, there's a I think a phenomenon that is
Speaker 1: kind of common parlance these days, which is last five,
Speaker 1: last hired, first fired. And so, you know, frankly, black workers,
Speaker 1: black men and black women are often you know, the
Speaker 1: most reliant on the labor markets strength to be able
Speaker 1: to achieve better outcomes, and so you know, yes, I'm
Speaker 1: always worried about, you know, making sure that they have
Speaker 1: pathways to know better jobs, jobs that are sustainable. At
Speaker 1: the same time, we also want to see sustained labor
Speaker 1: market progress. As a department, we're focused on outcomes, So
Speaker 1: wage growth that's sustainable is important here. You know, the
Speaker 1: ability for workers to find trainings and apprenticeships and access
Speaker 1: other jobs if they want to, especially if they're industries
Speaker 1: where job quality isn't great, or industries that are particularly
Speaker 1: susceptible to swings in the business cycle. And you know,
Speaker 1: I think that that's kind of the best way to
Speaker 1: kind of bridge that gap, to not just rely on
Speaker 1: where we are at in the business cycle, but to
Speaker 1: instead make investments in you know, long run growth and
Speaker 1: making sure that the benefits of that growth is shared.
Speaker 1: So I want to get your take. And I on
Speaker 1: a question, and I posed this to Goldman sex as
Speaker 1: chief economist Jan Hatzi is a few weeks ago. But okay, everyone,
Speaker 1: tight labor market, tight labor market. We're companies having a
Speaker 1: hard time hiring. We hear about that all the time,
Speaker 1: and yet wage growth has been negative. And this is
Speaker 1: and this has sort of been the frustration of a
Speaker 1: lot of people that's like, yes, there are jobs out there,
Speaker 1: but wages aren't keeping up with prices. If the labor
Speaker 1: market is really so tight, why aren't workers able to command,
Speaker 1: in your view, strong high enough wages such that they
Speaker 1: can outpace the pace of inflation high end of raises. Sorry,
Speaker 1: So it's absolutely an important question, And first off, I
Speaker 1: would just say it emphasizes why it's so important to
Speaker 1: get inflation down to a reasonable level. We saw that
Speaker 1: in July because real wages increase the zero point flag percent, right,
Speaker 1: because cp I was unchanged at one, which is just
Speaker 1: one measure of inflation, but it was unchanged for the
Speaker 1: month of July UM and so so I think that
Speaker 1: that's a very important piece of the puzzle in part
Speaker 1: because you know, workers can feel when the cost of
Speaker 1: living isn't up to you know, what they would like
Speaker 1: it to be. It's important too, I think, to think
Speaker 1: about some of the mechanisms by which sustained increases happen.
Speaker 1: One and also to think about the labor market not
Speaker 1: is just like this aggregate you know phenomenon, but actually
Speaker 1: a lot of different sectors industries that interact and that
Speaker 1: have different kind of needs and different standards for their workers.
Speaker 1: So at like a kind of big picture, you know level,
Speaker 1: you know, the mechanisms by which sustained wage increases happen
Speaker 1: in the long run or not just a tight labor market,
Speaker 1: though we're seeing that in this labor market, new workers
Speaker 1: have choice, they get bargaining power and switching jobs it's
Speaker 1: a good way to get a wage increase UM. But
Speaker 1: there's also mechanisms that are important, like you know, having
Speaker 1: bargaining power, whether it's through unions or some other collective
Speaker 1: action mechanism that allows you to negotiate changes in your
Speaker 1: employment contract like cost of living increases UM. So cola
Speaker 1: contract cola clauses and clauses and contracts can help there
Speaker 1: so that's another thing that we're just not seeing quite
Speaker 1: the same level of in part because as the undensity decline,
Speaker 1: the prevalence of cola contract and cola clauses and contracts
Speaker 1: also declined. UM. So there are some of the typical
Speaker 1: mechanisms that may have existed decades ago, um that allow
Speaker 1: workers to have power enough power to negotiate wage increases
Speaker 1: that top inflation mechanically, UM, that just aren't quite there
Speaker 1: in the same way. And then the last piece I
Speaker 1: will say is that I do think this question also
Speaker 1: varies by sector, in part because we're seeing I think
Speaker 1: the New York Fed actually had a publication on this
Speaker 1: where the sectors that are the farthest from full recovery,
Speaker 1: so the farthest below their February employment level, are the
Speaker 1: ones where we're seeing the highest wage growth. Those are
Speaker 1: also the sectors where you know, labor costs are a
Speaker 1: higher share of total firm costs, And so there's a
Speaker 1: different story bisector. It's not just like an aggregate wage
Speaker 1: growth figure that we often see that reported in the news.
Speaker 1: Can you talk a little bit more about how some
Speaker 1: of the videos syncrasies around the pandemic have impacted the
Speaker 1: labor market and whether or not you still see those
Speaker 1: as forces UM affecting the labor market as a whole.
Speaker 1: And I'm thinking specifically of things like the p p P,
Speaker 1: the paycheck Protection program UM, and also of course the
Speaker 1: impact of COVID itself and people who may have to
Speaker 1: stay out of the workforce because they're taking care of
Speaker 1: people who are ill or those who have unfortunately incurred
Speaker 1: things like long COVID. How are those affecting the labor market.
Speaker 1: Is there still a big effect from things like that,
Speaker 1: That's a great question. I think there are a few
Speaker 1: things that I think about when I think about the
Speaker 1: effects of COVID, you know, on the labor market. You know, first,
Speaker 1: I think this will be the subject of maybe one
Speaker 1: thousand research papers in the coming coming years, especially the
Speaker 1: relationship between the federal policy response and the labor market today.
Speaker 1: But we do know righte that strong federal policy response
Speaker 1: kept incomes relatively unchanged or by some measures that improved
Speaker 1: on average, and so that was really important because the
Speaker 1: income can translate into spending, which can translate into job creation.
Speaker 1: On the small business response, this seemed to be particularly
Speaker 1: helpful early on in the labor market recovery, because there's
Speaker 1: been studies that have found that, you know, small business relief,
Speaker 1: particularly PPP, helped increase employment, in particular through increasing the
Speaker 1: percentage of workers who were recalled from layoffs. We also
Speaker 1: know that leofs were a big of unemployment early in
Speaker 1: the pandemic recession. UM so I do think that there's
Speaker 1: some clear things about not just the pandemic but the
Speaker 1: response to the pandemic that have impacted the labor market today.
Speaker 1: Their persistence, I think is is unclear to me at
Speaker 1: this point. But we did just see five thousand new
Speaker 1: jobs at it last month, and so I'm not sure
Speaker 1: if that question will come to a head just yet.
Speaker 1: On some of the other trends that I think are
Speaker 1: really important in the labor market because of the pandemic. No,
Speaker 1: one piece that we haven't talked about yet, I think
Speaker 1: is is productivity. And so you know, I think there's
Speaker 1: been a really healthy debate around what is happening with
Speaker 1: labor market productivity. You know, it's both a statistical phenomenon
Speaker 1: output over hours worked, as well as a real economic phenomenon.
Speaker 1: So you know, our ability to produce more given the
Speaker 1: same inputs, including workers producing more with the same effort
Speaker 1: and on both friends. It's hard to measure this monthly
Speaker 1: or even the quarterly changes that we get because there's
Speaker 1: so much that can swing month a month in terms
Speaker 1: of business investment, in hiring um and yearly data is better,
Speaker 1: so I will caveat with that, but I do think
Speaker 1: that it does raise some some questions and there has
Speaker 1: been some interesting research on that front that I think
Speaker 1: is worth noting. One around, just like the way in
Speaker 1: which the pandemic may be affecting these kind of short
Speaker 1: term prints on productivity that we're getting, so you know,
Speaker 1: there could be uh, it could be possible that, for instance,
Speaker 1: you know, productivity rose above trend in one as businesses
Speaker 1: produced more with fewer workers, and that we're you know,
Speaker 1: now kind of recalibrating where businesses are hiring more workers
Speaker 1: and workers aren't average producing or working fewer hours. So
Speaker 1: output is you know, roughly constant or slightly negative. And
Speaker 1: then there's also you know, something else that could have happened,
Speaker 1: which is frankly that you know, during the pandemic, businesses
Speaker 1: operated with fewer workers because sick workers also affected overall
Speaker 1: from productivity, or frankly, workers were clocking the same number
Speaker 1: of hours but working less because of supply chain disruptions.
Speaker 1: And then finally, you know, it could be a compositional
Speaker 1: effect where right now we're seeing you know, stronger employment
Speaker 1: gains in lower productivity sectors like leisure and hospitality. That
Speaker 1: does not, of course mean those workers are not valuable.
Speaker 1: I just mean in macro terms, and so that could
Speaker 1: just be shifting the overall productivity numbers, and I think
Speaker 1: that's important in the short run. But then on the
Speaker 1: long term there are also possibly meaningful changes on the
Speaker 1: kind of you know, productivity as a real economic phenomenon,
Speaker 1: because before I think I was talking about more as
Speaker 1: like a statistical phenomenon, but here as like a real
Speaker 1: economic phenomenon, So things like the effects of work from
Speaker 1: home or automation that might have taken place in workplaces
Speaker 1: due to safety or labor supply concerns. And so I
Speaker 1: think there are some real questions here that are are
Speaker 1: yet to be you know, completely sorted out, but I
Speaker 1: think are really important and a big part of how
Speaker 1: I'm thinking about the labor market, in part because productivity
Speaker 1: is so important for making sure wage growth is sustainable
Speaker 1: for workers. And at the Department of labor. We just
Speaker 1: really want to see workers get paid what they're do. Yeah,
Speaker 1: I mean one thing in their hip been corporate executive
Speaker 1: talking about this on conference calls Neil Data, Renaissance Macro
Speaker 1: has flagged this, Like, I wonder if part of the
Speaker 1: productivity story is like if a bunch of people just
Speaker 1: started jobs relatively recently, Like no one is particularly productive
Speaker 1: in their first month at a new job, and that's
Speaker 1: slightly exaggeration. Not everyone is at their first month, but
Speaker 1: in a period of a lot of labor market churn
Speaker 1: and new hiring, and you mentioned that half a million
Speaker 1: jobs that were created last month, whether we still are
Speaker 1: just in this sort of state of flux in which
Speaker 1: we haven't gotten into sort of people finding their groove
Speaker 1: and businesses operating at a predictable clip again, I mean,
Speaker 1: that seems like a reasonable theory to me, and it's
Speaker 1: kind of plays into the composition piece that I mentioned
Speaker 1: about workers who are coming online and how that affects
Speaker 1: the top line figures. So there's one other thing that
Speaker 1: we haven't really spoken about yet, and that's the wealth effect.
Speaker 1: So this was also, you know, a pet theory of
Speaker 1: the past couple of years. When it comes to explaining
Speaker 1: lower participation rates. The idea that well, you know, maybe
Speaker 1: if you're older, or even if you're not older, but
Speaker 1: say you invested a lot in crypto or something like
Speaker 1: that a year ago, or how to house it right,
Speaker 1: or a stock portfolio or whatever. If you saw a
Speaker 1: lot of gains in those financial assets, you might think, well,
Speaker 1: it's not really worth working anymore. I can sit this
Speaker 1: one out, you know, wait for COVID maybe to blow over,
Speaker 1: and then rejoin the workforce if I want to, or not,
Speaker 1: if I'm financially able to sit it out. How are
Speaker 1: you viewing that kind of wealth effect? Is that a
Speaker 1: tangible thing in your opinion? It certainly makes sense on
Speaker 1: the surface, and I think it's part of what's enabling
Speaker 1: workers to have some choice in the labor market. They
Speaker 1: didn't have to rush back to a job that wasn't
Speaker 1: their ideal job, So there's some increasing worker power that's
Speaker 1: happening there. I am, on the surface, at least skeptical
Speaker 1: of it being a long run challenge, in part because
Speaker 1: you know, savings can run out, especially for workers who
Speaker 1: don't have a lot of wealth, which is frankly a
Speaker 1: lot of workers, and and also in heart, because so
Speaker 1: much about our financial well being as Americans is reliant on,
Speaker 1: you know, our job, not just the check paychecks we
Speaker 1: take home, but also things like health insurance and retirement
Speaker 1: benefits if we are fortunate enough to have a job
Speaker 1: or we have those. And so at a certain point,
Speaker 1: that kind of strategy will not work well for a
Speaker 1: significant chunk of workers, even if it does help workers today,
Speaker 1: I'm on the whole have more bargaining power. So how
Speaker 1: concerned are you that? You know, we do have very
Speaker 1: high inflation still, and the Fed is in tightening mode,
Speaker 1: and the mechanism, more or less people dance around it
Speaker 1: a little bit sometimes, but the mechanism more or less
Speaker 1: to combating inflation through rate hikes is to weaken the
Speaker 1: labor market, weaken wage growth, and hope that that's sort
Speaker 1: of like slowest things down. And maybe there's this hope
Speaker 1: that we can take care of most of it just
Speaker 1: by reducing job openings and relieving some of the pressure there.
Speaker 1: But how concerned are you? A followed like some of
Speaker 1: these gains that we've talked about unwinding as part of
Speaker 1: the anti inflation efforts. So I first must start off
Speaker 1: with an awkward disclaimer, which is I have full respect,
Speaker 1: as this administration does for the FEDS independence on these issues.
Speaker 1: So I will not comment on FED policy. Okay, Um,
Speaker 1: So I think a few things. One, I think this
Speaker 1: is why it's so important to see sustainable wage growth
Speaker 1: in the labor market, to see participation increase and to
Speaker 1: see wage growth, you know, reflecting the values work, the
Speaker 1: value that workers bring to business. Like I want to
Speaker 1: see wage growth, of course, I want to see sustainable
Speaker 1: wage growth. I also, you know, I'm really fascinated by slash.
Speaker 1: I've been following this really important debate in macro economics.
Speaker 1: I'm macro economist, so I will fully fully claim that
Speaker 1: I am just following it around. You know, wow, how
Speaker 1: we might land softly? How we might actually achieve a
Speaker 1: soft landing here? And it really does seem like there
Speaker 1: are a few ways things can go, but it doesn't
Speaker 1: seem completely improbable. Um in part because frankly, as you
Speaker 1: all know, as observers of this debate as well, there's
Speaker 1: a lot of wonky signals out there in terms of
Speaker 1: what's going on in the macroeconomy. We saw three consecutive
Speaker 1: months of job openings decline without major movement and the
Speaker 1: unemployment rate, which again it's it's premature to say there
Speaker 1: we go, mission accomplished. But you know, things could go
Speaker 1: a lot of different ways. We could see a vertical
Speaker 1: fallen job openings, and things might work out the beverage curve,
Speaker 1: which is what I'm referencing unemployment rates to vacancy ratio.
Speaker 1: It could shift back to where it was in prior recoveries,
Speaker 1: and then we might be in a different situation. Um.
Speaker 1: I think this debate is really healthy. I think it's important.
Speaker 1: I don't pretend to have an opinion on it. I'm
Speaker 1: mostly focused on outcomes for workers here. But it does
Speaker 1: seem like, you know, it's really worthwhile to try to
Speaker 1: do all we can to make sure we get cost
Speaker 1: down and try to get on a sustainable path in
Speaker 1: terms of the labor market and the economy overall. It
Speaker 1: doesn't seem like a full serrand. Yeah. I just remembered
Speaker 1: we've actually done a whole episode on shifts in the
Speaker 1: beverage curve, haven't we. Oh yeah, yeah, although that was
Speaker 1: last year. But okay, So on this note though, and
Speaker 1: you know, I take the point that you're not involved
Speaker 1: in this debate specifically but I'm wondering if you could
Speaker 1: talk generally about the impact of online job searches on
Speaker 1: labor market data and statistics, because this is also one
Speaker 1: of the pet theories for why that beverage curve relationship
Speaker 1: might be changing, which is that it's much easier for
Speaker 1: companies to just post a bunch of job openings somewhere
Speaker 1: online and you know, maybe hope and wait that they'll
Speaker 1: get a really good candidate, but they don't have to
Speaker 1: accept anyone. So there's this discussion point that maybe online
Speaker 1: job searches are kind of skewing that data. I think
Speaker 1: that that's a very valid theory. If the cost of
Speaker 1: job postings is go going down, especially due to technology
Speaker 1: like the ability to post online, then you would expect
Speaker 1: employers to, you know, to go fishing a little bit more,
Speaker 1: and even if they're not always interested in catching a fish,
Speaker 1: and so you might see you know, slightly elevated job
Speaker 1: opening I think as the Bureau of Labor statistic defines that,
Speaker 1: you know, they are running a survey by which they're
Speaker 1: during which they're actively asking employers, you know, is this
Speaker 1: an opening that you were actively hiring for now, there's
Speaker 1: probably a lot of room for interpretation there, but you know,
Speaker 1: by the Department of Labor Standards, you know, we're doing
Speaker 1: our best to try to measure job openings for which
Speaker 1: employers are trying to fill a job versus you know,
Speaker 1: this kind of more passive approach to looking for for
Speaker 1: workers that might happen if job openings are less costly.
Speaker 1: I think something else that's really interesting about you know,
Speaker 1: the job openings data is that it may also and
Speaker 1: I think this is bearing out with data, it also
Speaker 1: might just reflect some shift in preferences to So some
Speaker 1: of the highest job opening levels by sector are the
Speaker 1: service sector job openings, so you know, retail, trade, healthcare,
Speaker 1: food services, and accommodations. Especially food services and accommodations was
Speaker 1: kind of skyrocketed right when the recovery began, in part
Speaker 1: probably because there's a high exposure risk to COVID if
Speaker 1: you work those jobs um and lower wages. Those those
Speaker 1: wages are rising really fast, and so you know, some
Speaker 1: of the opening data, again I'd like to emphasize the
Speaker 1: sick told differences because they tell you an additional story
Speaker 1: may also be influenced by where workers are trying to
Speaker 1: actually search for work and filled jobs, especially those lower
Speaker 1: SCIPE workers who may have slightly better opportunity in this
Speaker 1: tightly moment. What's the Inflation Reduction Act going to mean
Speaker 1: for workers? Um, a number of things. I'm like, oh,
Speaker 1: I'd love to talk about that. So, you know, we
Speaker 1: were talking earlier about the real wage growth, and I
Speaker 1: think that the Inflation Reduction Act is really important because
Speaker 1: you know, we're seeing the impact of inflation on real wages,
Speaker 1: and it highlights the broader importance of lowering the cost
Speaker 1: of living overall. Inflation Reduction Act is doing that by
Speaker 1: tackling some of the real cost of living challenges that
Speaker 1: Americans feel now, of course especially at the pump part
Speaker 1: of the grocery store, but they're also long standing challenges,
Speaker 1: so bringing down energy costs, healthcare costs, you know, the
Speaker 1: high costs for prescription drugs, because you know, those are
Speaker 1: all things that workers have to pay for with the
Speaker 1: wages that they are earning. And so when I think
Speaker 1: about the Inflation Reduction Act and I think about, you know,
Speaker 1: improving the cost of living, I think about workers who
Speaker 1: are going to have paychecks that that stretch a little
Speaker 1: farther than they did before. Actually just you know, sort
Speaker 1: of in general, and I know, you know, we were
Speaker 1: talking about the FED. But in your work and in
Speaker 1: your day to day and at the Department of Labor,
Speaker 1: how much are you thinking about essentially, And again, you know,
Speaker 1: the White House just signed something called the Inflation Reduction Act,
Speaker 1: But how much are you thinking generally about this idea
Speaker 1: of of non monetary efforts to reduce inflation, both through
Speaker 1: the law but other through other regulations, finding ways to
Speaker 1: relieve pressures, finding ways to expand the supply side, finding
Speaker 1: ways to bring about productivity so that we have other
Speaker 1: ways of fighting inflation other than just the raid hike
Speaker 1: layoff channel. Well, I frankly think about it as things
Speaker 1: that we should be doing no matter what. To be
Speaker 1: completely honest, you know, we were talking about the labor
Speaker 1: force participation rate, and you know, increasing labor supply is
Speaker 1: important to along one growth of the U. S economy,
Speaker 1: creating new high quality jobs here at home, including in manufacturing,
Speaker 1: which the Inflation Reduction Act would do, clean energy manufacturing
Speaker 1: in particular. It is important for the growth of the economy.
Speaker 1: I mean, it also is important for bringing down the
Speaker 1: cost of energy. It's also important for growing the economy
Speaker 1: because you know, if we have a bigger pie, and
Speaker 1: we you know, to grow that pie in a way
Speaker 1: that is shared, so workers have more powers, so they
Speaker 1: get a bigger piece of that pie. You know, that
Speaker 1: has the bonus of both, you know, growing use economy,
Speaker 1: increasing productivity. Everyone benefits from higher living standards um and
Speaker 1: you know, American workers have again, like I was saying before,
Speaker 1: paychecks that stretch a little bit farther, or they get
Speaker 1: a chance to get a job in a sector that
Speaker 1: they could not work in before. I'm taking home a
Speaker 1: bigger paycheck that comes with you know, strong worker protections
Speaker 1: and maybe retirement benefits, healthcare, all the things that a
Speaker 1: lot of workers need. I have a basic question, or
Speaker 1: maybe it's a weird question, but what's the impact of
Speaker 1: inflation on labor force participation? Because I could see I
Speaker 1: could kind of see a way to argue it both ways,
Speaker 1: which is, you know, on the one hand, if the
Speaker 1: cost of live thing is going up and you can
Speaker 1: no longer afford, for instance, food or to pay your rent,
Speaker 1: then that would force you back into the labor market.
Speaker 1: But on the other hand, you know, you could also
Speaker 1: imagine a subset of workers who think, well, if prices
Speaker 1: are going up, and everything is unaffordable, then what's the
Speaker 1: point of taking on, for instance, a part time job
Speaker 1: or something that's not really going to be able to
Speaker 1: help me offset those So how are you viewing that relationship?
Speaker 1: I think it's a really interesting question. My first thought
Speaker 1: was to look to frankly, consumer expectations for inflation. We
Speaker 1: just saw that there was a fairly big drop between
Speaker 1: June and July and in the short and long run expectations.
Speaker 1: Because I imagine that that might give you a sign
Speaker 1: as to whether or not that's playing a big role
Speaker 1: in your decision making. But again this is off the
Speaker 1: cuff hypothesis, so so that that's one thing. But at
Speaker 1: the same time, if you have an urgent need to
Speaker 1: feed your family, you know, pay your bills. I imagine,
Speaker 1: even if your paycheck wasn't stretching as far, the choices
Speaker 1: probably to try to earn a wage there. Of course,
Speaker 1: you know other reasons which lay before participation might be
Speaker 1: lower for some workers, like I mentioned earlier, you know
Speaker 1: care uh, you know, lack of access opportunities or discrimination.
Speaker 1: You know, the opiates places prices has even played a
Speaker 1: big role in in the declining rate of participation for
Speaker 1: for white men like there are other bigger structural factors
Speaker 1: that play a role, but that individual decision feels it
Speaker 1: feels it feels like it leans more on the side
Speaker 1: of if there's a job on the table, I might
Speaker 1: take it. Then then that can you talk a little
Speaker 1: bit more about immigration? And we know that over the
Speaker 1: last few years, starting with the last administration, there has
Speaker 1: been this very big drop overall in immigration. How do
Speaker 1: you see that. Is this something that's going to affect
Speaker 1: the economy in the long run or when you look
Speaker 1: at data right now, whether it's productivity data, wage data,
Speaker 1: are there areas in which this is clear showing up
Speaker 1: right now the effects of that. I think the effects
Speaker 1: of immigration are definitely showing up in the labor market
Speaker 1: data today. Um, there are individuals who have measured this.
Speaker 1: I wish I could remember the papers off the top
Speaker 1: but of my of my head. But you know, the
Speaker 1: gaps can be fairly significant, you know, hundreds of thousands.
Speaker 1: I think even there was an estimate that was showing
Speaker 1: last year that there were two million missing immigrants in
Speaker 1: the US economy. Obviously, not all of those immigrants would
Speaker 1: be participating in the labor more labor market, but a
Speaker 1: sizable share would and so you know, that does affect
Speaker 1: overall supply of labor. Like we're actually also seeing that
Speaker 1: even for you workers who are born outside of the
Speaker 1: U S who are working in the US today, you know,
Speaker 1: they are also taking advantage of you know, this bargaining
Speaker 1: power and are switching to sectors that may seem maybe
Speaker 1: higher quality, which I thought was interesting because often the
Speaker 1: thought is, will just bring in a bunch of immigrants,
Speaker 1: they'll slut the labor market and take all these terrible jobs.
Speaker 1: But we're born, were present in the US also have choice,
Speaker 1: and so we're saying when there is opportunities for workers
Speaker 1: to have choice, they also, you know, we'll choose better
Speaker 1: quality jobs. So I think that that's that's important on
Speaker 1: the you know, solutions front. I think obviously the policies
Speaker 1: of the last administration played a big role, and frintly,
Speaker 1: the pandemic hamperedly the federal government's ability to process you know,
Speaker 1: you know, legal immigrants into the US, and so at
Speaker 1: least where I set from what I've seen, the administration
Speaker 1: is doing all it can to kind of fix you
Speaker 1: know a lot of those challenges, including just the undermining
Speaker 1: of our ability to actually make the immigration system work
Speaker 1: for people who are doing their best to navigate it.
Speaker 1: So I just have one last question here, and it
Speaker 1: just goes back to the last nonfarm pay payrolls report.
Speaker 1: We got five hundred and twenty eight thousand new jobs.
Speaker 1: That was well ahead of expectations. And not only that,
Speaker 1: adding a half a million people to the workforce does
Speaker 1: not exactly feel like something that should or is supposed
Speaker 1: to happen in the labor market as tight as this one,
Speaker 1: Like if really employers are like really scrape bing and
Speaker 1: like there's you know, everyone who wants a job in
Speaker 1: theory can find one, and employers to say, oh, we
Speaker 1: can't find workers, Like it's hard to imagine. How how
Speaker 1: do you add another half a million jobs in that environment?
Speaker 1: What does that tell you? What does that change any
Speaker 1: of your assumptions about the state of the labor market
Speaker 1: that is recently is July, this is still an economy
Speaker 1: that's just adding that many workers per month. My biggest
Speaker 1: question is always what's the trend line going to be?
Speaker 1: And excuse this very wonking answer, but I love three
Speaker 1: month averages for this reason. Um So one I think
Speaker 1: it's important to watch to see if this continues or
Speaker 1: if this was a temporary uptick, because prior to July,
Speaker 1: you know, we were seeing slightly lower figures that were
Speaker 1: trending trending lower than they were before. So that's you know,
Speaker 1: out the gate. First reaction is is this going to stick?
Speaker 1: Is this the start of a new trend? That doesn't
Speaker 1: seem likely to me, but we will see very very soon.
Speaker 1: And then and then the second thing is, you know,
Speaker 1: so a question you asked earlier, it's a sign that
Speaker 1: Americans do want to work. It seems like, you know,
Speaker 1: every time we have a recovery, you know, the employer
Speaker 1: side story kind of dominates the headlines, which is the
Speaker 1: idea that Americans don't want to work, but they want
Speaker 1: good quality jobs in sectors where they're not at risk
Speaker 1: of contracting a deadly virus. They want to make enough
Speaker 1: money to pay the bills, especially in an environment where
Speaker 1: you know, inslation can be eating away at what they're
Speaker 1: what they're taking home, um and and that's that's kind
Speaker 1: of what I what I see in that data in July.
Speaker 1: Joel Gamble, thank you so much for coming out odd lots.
Speaker 1: You know, the labor markets obviously such a big and
Speaker 1: sprowling topic. But that was really helpful in terms of
Speaker 1: sort of understanding where we're at right now. So appreciate
Speaker 1: you coming up. So glad to have been here. Yeah,
Speaker 1: that was fun. Thank you so much, Thanks so much. Sure,
Speaker 1: thank you, true Basy. I found that to be very useful,
Speaker 1: all kinds of interesting things. You know. One of the
Speaker 1: things that we haven't talked about that much is this
Speaker 1: productivity question, and I find that I think Joel will
Speaker 1: talk about that. Maybe we talked a little bit about
Speaker 1: that with Yon, but I'm not really sure. But uh,
Speaker 1: I do feel like that's one of the big sort
Speaker 1: of mysteries questions, key determinants like where we go from here.
Speaker 1: And I also like the way she sort of distinguished
Speaker 1: between productivity as the sort of statistical artifact, which is like, yeah,
Speaker 1: you can look at GDP and you can look at
Speaker 1: ours work and come up with some math that say
Speaker 1: workers with this productive. But then also productivity is this
Speaker 1: sort of true deep economic phenomenon of we're going to
Speaker 1: have higher pay and a more robust economy. We need,
Speaker 1: you know, we need productive workplaces. Well, I'm also getting
Speaker 1: flashbacks to actually the old Jannatsis argument about productivity just
Speaker 1: not being you know, measured accurately in a modern economy
Speaker 1: where there's a lot more emphasis on software and things
Speaker 1: like that. That whole versation was a really good reminder
Speaker 1: that the labor force is not a monolith, as Joel mentioned,
Speaker 1: and there are of course these different groups within it,
Speaker 1: all of which may be reacting in different ways to
Speaker 1: the past two years. And then of course she made
Speaker 1: the point also, you know, in addition to demographics, it's
Speaker 1: also about industry type. And I thought her point about
Speaker 1: the proportion of black men in transportation and warehousing and
Speaker 1: things like that, and the relationship with the overall business
Speaker 1: cycle those kind of being the first hired, first fired,
Speaker 1: that was really interesting to me and a good reminder. Yeah,
Speaker 1: we'll have to see what happens, because again, look, it
Speaker 1: is really encouraging that the spread between black and white
Speaker 1: unemployment is much narrower and compressed much faster in this recovery.
Speaker 1: On the other hand, you know, as she pointed out,
Speaker 1: there's questions and as you just mentioned about last hired,
Speaker 1: first fired, there's a quality of those jobs. Okay, we
Speaker 1: saw this huge explosion in demand for warehouse labor, huge
Speaker 1: explore in demand for transportation, labor, huge explosion in demand
Speaker 1: for food service and lodging things like that, not high
Speaker 1: volume jobs, that's not necessarily high paying jobs, not necessarily
Speaker 1: the most stable jobs. So I'll have to see and
Speaker 1: of course throw into the mix of FED that is
Speaker 1: clearly trying to slow down the labor market, and whether
Speaker 1: these gains will hold persistent, have positive carry over for
Speaker 1: the future I think remains a question mark. Yeah. So, okay,
Speaker 1: So we've come out of the Labor Market Mystery podcast
Speaker 1: with more questions, or at least more things to watch,
Speaker 1: more things to watch. So yeah, we we answered a
Speaker 1: bunch of questions and now we have a went to question. Yeah, alright,
Speaker 1: shall we leave it there? Let's leave it there. This
Speaker 1: has been another episode of the All Thoughts podcast. I'm
Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy
Speaker 1: Alloway and I'm Joe Wisn'tal. You can follow me on
Speaker 1: Twitter at the Stalwart. Follow our guest Joel Gamble, She's
Speaker 1: at Joel Underscore Gamble. Follow our producer Carmen Rodriguez at
Speaker 1: Carmen Armand and check out all of our podcasts at
Speaker 1: Bloomberg under the handle at Podcasts so, Joe, we have
Speaker 1: something pretty exciting coming up. That's right. We're going to
Speaker 1: be doing a live episode of the podcast and listeners
Speaker 1: are invited to join. Yep. We are going to be
Speaker 1: playing host to Perry Maryland and Sultan Posar. The two
Speaker 1: of them are going to be debating the future of
Speaker 1: the dollar. It's on September six at three pm at
Speaker 1: Bloomberg h Q and if you want to come, Tracy,
Speaker 1: how can people sign up? It is totally free. All
Speaker 1: you have to do is make sure you r s
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