WEBVTT - The Worst Way to Fix Inflation 0:00:13.920 --> 0:00:17.200 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.320 --> 0:00:20.200 My name is Mike Reagan. I'm a senior editor at Bloomberg, 0:00:20.360 --> 0:00:23.720 and I'm Aldana Higher, across Asset reporter with Bloomberg. This 0:00:23.800 --> 0:00:27.159 week on the show, Well, despite all those doom and 0:00:27.200 --> 0:00:31.000 gloom predictions about a recession on the horizon, the job 0:00:31.040 --> 0:00:34.400 market remains red hot, with the unemployment rate at just 0:00:34.560 --> 0:00:38.840 three point five yet with inflation out of four decade high. 0:00:38.920 --> 0:00:41.760 Many economists believe that some pain in the labor market 0:00:41.960 --> 0:00:46.080 is needed to get consumer prices under control. But is 0:00:46.120 --> 0:00:50.280 that necessarily true. We'll get into it with a veteran economist, 0:00:50.680 --> 0:00:54.040 but Voldonna, I have to ask you first, how many 0:00:54.040 --> 0:00:55.920 cups of coffee do you drink? Aday? Do you want 0:00:55.920 --> 0:00:58.080 to guess? I want to guess. I want to say 0:00:59.280 --> 0:01:02.959 zero cups? Zero? Yeah? Zero? Yeah? How did you know? 0:01:03.360 --> 0:01:06.880 Because I felt like it was a trick question even 0:01:06.880 --> 0:01:10.559 though I asked it. Yeah, how could you know? Zero? 0:01:10.760 --> 0:01:13.280 I'm so like hyper usually I know, but it's something 0:01:13.640 --> 0:01:18.400 also very healthy with the cauliflower. I love cauliflower. If 0:01:18.400 --> 0:01:21.200 they were cauliflower coffee, I would have that. Yeah, yeah, no, 0:01:21.319 --> 0:01:24.959 I stopped drinking it. Earlier this year. Actually, no caffeine 0:01:25.000 --> 0:01:27.600 at all. No caffeine really. Yeah, it was giving me 0:01:27.600 --> 0:01:30.840 a headache every time I didn't have it. So I 0:01:30.840 --> 0:01:32.480 don't think it's for health reason. I mean, I think 0:01:32.520 --> 0:01:35.320 it's healthy for you. Right, Well, I don't know. I 0:01:36.560 --> 0:01:39.240 the headache. I've never gotten past the headache I needed 0:01:39.280 --> 0:01:40.800 every day. How do you get out of bed in 0:01:40.840 --> 0:01:43.000 the morning. Then well, I had food poisoning, so I 0:01:43.040 --> 0:01:46.600 couldn't eat anything like at all, and so that's when 0:01:46.640 --> 0:01:49.160 I stopped just drinking it. I don't know now I 0:01:49.160 --> 0:01:51.920 feel about the coffee I drink. How much coffee do 0:01:51.960 --> 0:01:55.200 you drink? Well, the pants are you buying? If you're 0:01:55.240 --> 0:01:58.960 buying I'm buying, Yes, then like five cops. But we're 0:01:59.000 --> 0:02:01.800 not going to Starbucks. That's like seven dollars. Will go 0:02:01.960 --> 0:02:06.880 to like the Little Stance, the little carts. But our 0:02:06.960 --> 0:02:10.600 our guest, actually I think she drinks a lot of coffee. 0:02:09.520 --> 0:02:13.360 I have a feeling. Our guest today is Nila Richardson. 0:02:13.360 --> 0:02:16.080 She's a chief economist at ADP Miila, thanks so much 0:02:16.120 --> 0:02:18.680 for joining us. Oh, it's great to be here with you. 0:02:18.800 --> 0:02:21.280 Thanks for having me. Well, the I think the reason 0:02:21.280 --> 0:02:23.359 we're talking about This is because you had a blog 0:02:23.360 --> 0:02:27.560 post recently where you h It was titled Inflation and Coffee, 0:02:27.600 --> 0:02:31.000 a love story about how you go through how how 0:02:31.040 --> 0:02:33.640 prices have gone up but the Fed's not really paying 0:02:33.680 --> 0:02:36.679 attention to things like food costs, and you said, there's 0:02:36.680 --> 0:02:38.560 a problem with this kind of thinking. So I was 0:02:38.600 --> 0:02:40.720 hoping we could just start out with with you talking 0:02:40.720 --> 0:02:45.440 about this my love of coffee and my dislike of inflation. 0:02:46.480 --> 0:02:49.600 That's a that's a great way to start. Yeah, I mean, 0:02:49.840 --> 0:02:53.160 I do love coffee, and I think that actually coffee 0:02:53.240 --> 0:02:55.600 is a good prop for what's going on in the 0:02:55.639 --> 0:03:00.640 global economy, not just domestically. So coffee prices. You mentioned 0:03:00.639 --> 0:03:03.320 that seven dollar a cup of coffee across the street. 0:03:03.600 --> 0:03:07.080 Coffee prices are actually up almost six from a year ago. 0:03:07.760 --> 0:03:11.639 And you know, when everything is going up, isolating one 0:03:11.720 --> 0:03:15.079 thing seems like you're piling on. But coffee is kind 0:03:15.080 --> 0:03:18.320 of unique because for all those years and months leading 0:03:18.400 --> 0:03:21.880 up to the pandemic, prices were either flat or falling. 0:03:22.000 --> 0:03:24.600 So to see this big surge and you're over your 0:03:24.600 --> 0:03:28.200 coffee prices, it's like for a lover of coffee, it's 0:03:28.520 --> 0:03:33.120 traumatic has been for me. Um, I won't say how 0:03:33.120 --> 0:03:36.960 many cups I drink. I'm generally just a morning coffee person. 0:03:37.160 --> 0:03:40.720 But um, you know, coffee is important to some of us. 0:03:41.120 --> 0:03:45.240 But food prices just rit large have been going up. 0:03:45.760 --> 0:03:48.800 And the point of the blog is, you know, coffee 0:03:48.840 --> 0:03:53.280 represents a global supply chain that's quite complicated, that has 0:03:53.320 --> 0:03:57.800 been affected by the pandemic. It represents the big surge 0:03:57.960 --> 0:04:00.720 in food prices that we've seen over the past year. 0:04:01.320 --> 0:04:04.480 It represents the fact that Main Street sees food and 0:04:04.560 --> 0:04:09.600 gas as inflation. But when the Federal Reserve makes monetary policy, 0:04:09.640 --> 0:04:13.320 they exclude food and gas prices and volatile prices and 0:04:13.360 --> 0:04:17.200 look at core inflation, what's known as those baskets of 0:04:17.240 --> 0:04:20.920 goods that are not affected by something that's really really volatile, 0:04:21.040 --> 0:04:24.320 like coffee. So um, While I get a lot of 0:04:24.360 --> 0:04:27.359 attention to coffee, the Fed doesn't. I'm sure they drink it. 0:04:28.680 --> 0:04:31.400 I guess their argument, Neila, is that, as you say, 0:04:31.440 --> 0:04:34.320 those prices can be so volatile. You know, if there's 0:04:34.400 --> 0:04:39.160 a bad harvest in Columbia or if there's a hurricane, 0:04:39.200 --> 0:04:41.200 the oil prices are going to go up. Are they 0:04:41.240 --> 0:04:42.640 wrong to do that? Though? Do you think I mean, 0:04:42.640 --> 0:04:45.560 should should you know, should the headline number carry more 0:04:45.560 --> 0:04:48.919 weight for the Fed. Do you think I think the 0:04:49.000 --> 0:04:53.360 headline number should carry more weight because it feeds consumer expectations, 0:04:53.720 --> 0:04:56.599 and we know that the long term driver of inflation 0:04:57.080 --> 0:05:00.280 is what people think will happen with inflation. So if 0:05:00.360 --> 0:05:03.560 you think that prices are going up, you are going 0:05:03.600 --> 0:05:06.640 to behave in a way that actually causes prices to 0:05:06.680 --> 0:05:09.360 go up, Like go to trade to Jews and hoard 0:05:09.400 --> 0:05:12.720 a bunch of coffee and your your cart because you 0:05:12.760 --> 0:05:15.200 think that you know next month is going to be higher. 0:05:15.520 --> 0:05:21.080 Not saying I do that. It's that that example is 0:05:21.120 --> 0:05:27.080 a little too real. They're yeah, well, you know, experience 0:05:27.120 --> 0:05:30.800 is our best teacher. So um with the FED. While 0:05:30.920 --> 0:05:34.120 the Fed is not looking at coffee or food or 0:05:34.400 --> 0:05:38.880 gas specifically, when it's really focused on its interest rate policy, 0:05:39.360 --> 0:05:42.760 it is well aware as we all are, that consumers 0:05:42.760 --> 0:05:45.440 see it and that's what consumers are judging. And if 0:05:45.480 --> 0:05:49.640 that feeds back to long term inflation expectations, then we 0:05:49.760 --> 0:05:53.839 have a problem that spirals beyond, you know, the window 0:05:53.920 --> 0:05:57.640 that the FED is executing its policy. And well, I know, Neila, 0:05:57.720 --> 0:05:59.479 you pay a lot of attention to consumers, so maybe 0:05:59.480 --> 0:06:01.640 you can talk a little bit more about consumer sentiment 0:06:01.720 --> 0:06:04.000 right now, because I wanted to ask you if it's 0:06:04.040 --> 0:06:07.080 not the case that the wealth effect is also very 0:06:07.120 --> 0:06:10.560 real right now where we're seeing obviously uh downturn in 0:06:10.600 --> 0:06:13.520 the stock market and also a slowdown in the housing market, 0:06:13.560 --> 0:06:16.320 And does that not also affect the way consumers are 0:06:16.320 --> 0:06:19.640 thinking about things? I think it does. I think that's 0:06:19.680 --> 0:06:24.359 an important attribute of consumers spending. You know, that's the 0:06:24.400 --> 0:06:30.600 bulk of the economy. And so when consumers, especially wealthy consumers, 0:06:30.600 --> 0:06:35.000 feel confident about the economy, they spend more. But at 0:06:35.040 --> 0:06:39.479 the lower end of the income spectrum, it's not about confidence, right, Um, 0:06:39.520 --> 0:06:42.800 you're spending on necessity, so you spend when you have 0:06:42.960 --> 0:06:45.960 it at the lower income and so we've seen a 0:06:46.000 --> 0:06:50.560 transition of who's driving the spending in the economy from 0:06:50.600 --> 0:06:54.240 those people who benefited from those direct payments from the 0:06:54.279 --> 0:06:58.159 federal government through the heart of the pandemic. That translated 0:06:58.200 --> 0:07:01.599 into a lot of spending, which helps the US avoid 0:07:01.960 --> 0:07:05.359 a prolonged downturn and led to a pretty speedy recovery. 0:07:05.920 --> 0:07:09.240 Now on the other side of inflation, when things are 0:07:09.279 --> 0:07:12.720 slowing down in the stock markets and in the housing 0:07:12.760 --> 0:07:15.680 markets because of higher interest rates, you might start to 0:07:15.680 --> 0:07:19.640 see a slowdown in the spending of upper income folks UM, 0:07:19.760 --> 0:07:24.200 where the wealth effect is more prominent in their decision making. Yeah, well, 0:07:24.240 --> 0:07:26.920 I know, Neil. And now at a DP your your 0:07:27.040 --> 0:07:29.560 sort of laser focused on the job market too, So 0:07:29.840 --> 0:07:32.600 let's get into that. A little bit. Wage growth has 0:07:32.680 --> 0:07:35.320 picked up, but it is still lower than the rate 0:07:35.400 --> 0:07:37.480 of inflation, you know, So in other words, what they 0:07:37.520 --> 0:07:40.840 call real wage growth is negative, which means if you 0:07:40.840 --> 0:07:43.080 get a raise, it it doesn't necessarily feel like you're 0:07:43.080 --> 0:07:45.840 getting a raise because you're all your consumer goods are 0:07:46.840 --> 0:07:50.920 rising even faster. And you know that obviously triggers a 0:07:50.920 --> 0:07:54.880 lot of concern about what they call the wage costs spiral, 0:07:54.960 --> 0:07:58.120 you know, where labor demands higher wages to keep up 0:07:58.160 --> 0:08:00.920 with inflation. Are you seeing any signs of that? I mean, 0:08:00.960 --> 0:08:03.480 is that is that a risk that this inflation might 0:08:03.560 --> 0:08:07.360 prove to be stickier than um everyone's hoping. Let me 0:08:07.400 --> 0:08:10.320 take the second part of that question about is there 0:08:10.360 --> 0:08:14.559 a risk that inflation is stickier than we think? Yes. Now, 0:08:14.840 --> 0:08:17.440 the second question that proceeded to that is the wage 0:08:17.480 --> 0:08:21.360 is going to be the main driver of that stickiness. 0:08:21.640 --> 0:08:24.680 I do think that wages because they have accelerated so 0:08:24.800 --> 0:08:28.320 quickly over the past year and a DP data and 0:08:28.680 --> 0:08:31.440 we have some really good data on this, as you know, 0:08:31.480 --> 0:08:35.280 paying over twenty five million workers in the United States. 0:08:35.360 --> 0:08:41.280 It's showing that that that wages wage growth has been 0:08:41.320 --> 0:08:44.880 elevated and is now kind of bottling me out at 0:08:44.920 --> 0:08:49.560 this higher level. So in our latest report for August, 0:08:49.679 --> 0:08:53.600 we show that wage growth for the medium worker who 0:08:53.600 --> 0:08:56.760 stayed in the same job for the past twelve months 0:08:56.760 --> 0:08:59.360 with seven point eight percent. Now they put that in 0:08:59.400 --> 0:09:03.319 perspective in spring of that medium wage growth would have 0:09:03.320 --> 0:09:06.320 been around two percent, so a huge acceleration. But the 0:09:06.360 --> 0:09:09.200 seven point eight percent is basically in line where we've 0:09:09.240 --> 0:09:11.840 been for the past several months. So we're not seeing 0:09:11.880 --> 0:09:16.240 it go up dramatically, um, but it is elevated, and 0:09:16.280 --> 0:09:20.240 I think that's the story of inflation overall. Um. Perhaps 0:09:20.320 --> 0:09:25.079 we are slowing down from acceleration, UM, but for many 0:09:25.240 --> 0:09:30.040 items from coffee to your paycheck, Uh, those prices are 0:09:30.080 --> 0:09:33.120 are elevated and the growth rate or is kind of 0:09:33.240 --> 0:09:36.880 leveling out, it's still growing, right, So do do you 0:09:36.880 --> 0:09:40.079 think there's you know, the only way to cure inflation 0:09:40.240 --> 0:09:44.800 is in part to weaken the job market a little bit. Now, 0:09:44.840 --> 0:09:46.640 I don't think that's the best way at all. I 0:09:46.720 --> 0:09:50.360 think that's a horrible way to care inflation by destroying deman. 0:09:50.520 --> 0:09:53.200 I think that's the worst way. I think a better way, 0:09:53.280 --> 0:09:55.760 a way that you know, involves more than just the FED. 0:09:56.200 --> 0:10:00.520 That's the fed's tool, but it's about productivity. Productivity grows 0:10:00.520 --> 0:10:04.320 you out of inflation when more workers produce more output 0:10:04.520 --> 0:10:07.959 for the same amount of costs. That's what productivity is. 0:10:08.200 --> 0:10:10.960 That's what gets you out of the inflation wage price 0:10:11.040 --> 0:10:14.240 spiral conundrum. But that takes some other muscles that the 0:10:14.320 --> 0:10:18.760 economy hasn't really used all that well. It takes business investment, 0:10:18.800 --> 0:10:22.679 it takes government investment in jobs and workers. It takes 0:10:22.720 --> 0:10:27.520 more um partnerships with community colleges to build an agile 0:10:27.559 --> 0:10:31.080 and skilled workforce in the places that the economy needs it. 0:10:31.400 --> 0:10:35.360 So we're relying on a tool that is blunt, yes, 0:10:35.480 --> 0:10:38.840 but also painful by its own by the fed's own words. 0:10:38.920 --> 0:10:42.079 And there are better tools we just we we haven't 0:10:42.240 --> 0:10:46.839 had to use them in this economy until now. So then, 0:10:46.920 --> 0:10:50.040 can you talk a little bit more about the jobs market, 0:10:50.080 --> 0:10:52.800 because we have been having a very strong jobs market 0:10:53.160 --> 0:10:55.840 where we're getting numbers that are just so much better 0:10:55.880 --> 0:10:59.640 than a lot of times what economists are expecting overall. 0:11:00.280 --> 0:11:02.240 How long do you foresee that happening? And do you 0:11:02.320 --> 0:11:06.480 foresee a potential slowdown in the jobs numbers? Yeah, the 0:11:06.520 --> 0:11:09.439 slowdown isn't inevitable in the job numbers. I mean, we've 0:11:09.440 --> 0:11:13.160 already seen it. You can't expect an economy in normal times. 0:11:13.160 --> 0:11:15.000 They're as close to normal as we're going to get 0:11:15.040 --> 0:11:17.840 from here on out. To produce half a million or 0:11:17.840 --> 0:11:20.720 four hundred thousand jobs a month. That's not the US 0:11:20.760 --> 0:11:24.800 economy or any economy I'm aware of. Um, something more 0:11:25.000 --> 0:11:27.720 normal makes sense, and I think what you're seeing that 0:11:27.960 --> 0:11:32.520 is not necessarily a slowdown, but a normalization of job 0:11:32.600 --> 0:11:36.160 gains and post pandemic, right, And so we're still seeing 0:11:36.200 --> 0:11:39.720 some really solid job growth. And what we're hearing from 0:11:39.760 --> 0:11:42.040 clients at ADP is that they're still trying to find 0:11:42.120 --> 0:11:45.880 qualified workers. That's the top concern of many of our 0:11:46.080 --> 0:11:49.760 especially small business clients, who have been out competed by 0:11:49.920 --> 0:11:53.680 larger companies who were really aggressive and hiring over the 0:11:53.800 --> 0:11:57.240 last year. There's those large companies are slowing down, but 0:11:57.400 --> 0:12:01.320 they're just making room for smaller companies to higher instead. 0:12:01.360 --> 0:12:05.360 So when we think we'll see some pretty steady games ahead, um, 0:12:05.360 --> 0:12:08.880 but slower than what we've seen over the past six months. Right. Well, 0:12:08.960 --> 0:12:11.400 you know it's interesting. You know, I keep thinking back 0:12:11.480 --> 0:12:14.559 to uh I forget who invented it, but it's called 0:12:14.600 --> 0:12:17.320 the misery index, you know, and it's basically just very 0:12:17.320 --> 0:12:21.400 simple formula. Yeah, the inflation rate to the unemployment rate, 0:12:21.520 --> 0:12:23.800 and you know that's supposed to give us an indication 0:12:23.840 --> 0:12:26.200 of how miserable we all are. I mean, I guess 0:12:26.200 --> 0:12:27.800 it depends on how much coffee you had in the 0:12:27.880 --> 0:12:33.640 day to on an individual basis, but you said it. 0:12:34.400 --> 0:12:38.240 Let the records say I I did not say that data. 0:12:38.480 --> 0:12:40.640 But you know, I think the of the the issue 0:12:40.960 --> 0:12:44.480 is that the you know, the unemployment rate can obviously 0:12:44.520 --> 0:12:48.440 be very low, but if that inflation is high, real 0:12:48.480 --> 0:12:53.040 wage growth is negative, it sort of makes a lot 0:12:53.080 --> 0:12:56.800 of people miserable. Rather than say, in a recession where 0:12:56.840 --> 0:12:59.320 you get tempercent unemployment, you've got ten percent of the 0:12:59.320 --> 0:13:02.520 people miserable, as you know what I mean, as opposed 0:13:02.559 --> 0:13:05.600 to in this environment, you seem to have everybody miserable 0:13:05.640 --> 0:13:08.320 with inflation. So is that the equation do you think 0:13:08.400 --> 0:13:11.600 that the FED is trying to solve right now that 0:13:12.160 --> 0:13:16.160 UM inflation is almost a bigger sort of destabilizing risk 0:13:16.720 --> 0:13:20.120 in society and the economy then a recession and and 0:13:20.160 --> 0:13:22.760 sort of, you know, a recession is the lesser of 0:13:22.800 --> 0:13:25.760 two evils for the FED trying to trying to sort 0:13:25.760 --> 0:13:29.640 of chart its course. Yeah. I think that's a great question, Mike. 0:13:29.720 --> 0:13:33.400 I mean, it's always positioned as inflation or recession. But 0:13:33.480 --> 0:13:36.439 you know, I'm embarrassing to think that you can have both, 0:13:37.040 --> 0:13:39.839 especially when I don't have coffee. But for the for 0:13:39.880 --> 0:13:42.360 the FED, I mean, it really is and in my 0:13:42.480 --> 0:13:46.080 view two for the very reason that you said, inflation 0:13:46.160 --> 0:13:50.280 is job number one for the economy because without getting 0:13:50.320 --> 0:13:54.400 inflation under control, workers don't benefit from a growing economy. 0:13:54.760 --> 0:13:57.760 All of their paychecks are eaten up by inflation. And 0:13:57.840 --> 0:14:00.880 so in order to get that product ativity that leads 0:14:00.920 --> 0:14:04.880 to growth, you have to have inflation that's manageable. The 0:14:04.880 --> 0:14:10.400 the the economy just can't operate without having stable prices UM. 0:14:10.480 --> 0:14:14.000 And so I think the FEDS priority list is in 0:14:14.040 --> 0:14:17.199 the right order. It has to be about inflation until 0:14:17.240 --> 0:14:22.480 inflation is under control. But then, Nila, how realistic or 0:14:22.520 --> 0:14:28.200 maybe unrealistic is the FEDS to present target on inflation. Yeah, 0:14:28.240 --> 0:14:34.000 those goal posts probably would They would love to move them. Um. 0:14:34.120 --> 0:14:38.200 Some of those uh, disinflationary forces that we've relied on 0:14:38.320 --> 0:14:40.480 for the past ten years leading up to the pandemic 0:14:40.480 --> 0:14:43.240 are just not working so well anymore. The whole idea 0:14:43.240 --> 0:14:47.440 of the globalization bringing prices down, of having just in 0:14:47.600 --> 0:14:51.400 time inventory that kept priced and costs low, those things 0:14:51.440 --> 0:14:55.040 are kind of fragmenting at the scenes. And the way 0:14:55.120 --> 0:15:01.360 that we're sourcing um really um things like semiconductors around 0:15:01.360 --> 0:15:07.240 the world. It changes the landscape for inflation um. And 0:15:07.280 --> 0:15:10.840 so in my view, this episode of inflation is just 0:15:11.280 --> 0:15:15.840 one of a future world where inflation is more frequent 0:15:15.920 --> 0:15:20.440 and more persistent. It's not that the FED is doing, um, 0:15:20.520 --> 0:15:22.680 a one and done battle with inflation. This is going 0:15:22.720 --> 0:15:25.400 to be an ongoing war um and so what they 0:15:25.440 --> 0:15:28.000 do now I think sets the tone for the future. 0:15:28.080 --> 0:15:32.880 So um, Yeah, I actually forgot your original question I 0:15:32.920 --> 0:15:35.080 got in my own tandent, But I said, how how 0:15:35.680 --> 0:15:38.520 how unrealistic is two percent? And and so maybe just 0:15:38.560 --> 0:15:40.520 to add to your point, how how much longer do 0:15:40.600 --> 0:15:42.720 you foresee them? You know, if if we're going to 0:15:42.760 --> 0:15:46.360 be continuing to seek persistent inflation fro how much longer 0:15:46.400 --> 0:15:49.440 do you think? Yeah, I I don't have a crystal 0:15:49.480 --> 0:15:53.600 ball in the length of time, um, but I think 0:15:54.280 --> 0:15:56.920 it could be the inflation does stay a bit elevated, 0:15:57.120 --> 0:15:59.720 or for the purpose of this audience, that interest rates 0:15:59.720 --> 0:16:04.160 half to stay um at higher higher levels than they 0:16:04.160 --> 0:16:07.120 are now in order to keep inflation under control for 0:16:07.560 --> 0:16:10.320 several months or even you know, and the next year 0:16:10.440 --> 0:16:13.960 or two. Uh. And that's probably not great news for 0:16:14.000 --> 0:16:17.120 a lot of people. Um, But the two percent target, 0:16:18.000 --> 0:16:20.840 I don't think the Federal Reserve would change that at 0:16:20.880 --> 0:16:24.160 this point. Um. You don't change the goal post in 0:16:24.240 --> 0:16:26.240 the middle of the game. You have to wait till after. 0:16:26.840 --> 0:16:31.760 And that's because it's not just about inflation. It's about 0:16:31.760 --> 0:16:36.840 the Fed's credibility and changing it to to something higher. Um. 0:16:36.880 --> 0:16:39.160 They kind of already did that before the pandemic, but 0:16:39.200 --> 0:16:41.880 that was to get inflation up, and now they're trying 0:16:41.920 --> 0:16:45.600 to push it down, and so changing the target to 0:16:45.680 --> 0:16:49.000 three or four percent, as I've seemed suggested, really would 0:16:49.280 --> 0:16:51.720 they have their credibility would take a hit in doing that, 0:16:58.520 --> 0:17:00.840 you know, Neila, Obviously it used to be not so 0:17:00.920 --> 0:17:03.600 much anymore, but he used to always be. Every month 0:17:03.880 --> 0:17:06.879 in the market, the biggest main event of the month 0:17:07.000 --> 0:17:11.040 was the Job's report, and which means that two days earlier, 0:17:11.119 --> 0:17:13.240 you guys come in, ADP comes in and scoops the 0:17:13.240 --> 0:17:16.640 government with your own jobs report, and that is also 0:17:16.720 --> 0:17:20.280 highly anticipated but by everyone and often market moving. I 0:17:20.359 --> 0:17:23.240 understand you guys have made some changes to the methodology. 0:17:23.280 --> 0:17:24.959 Could you tell us a little bit about you know, 0:17:25.000 --> 0:17:29.479 about what you did. Absolutely, and honestly, Mike, the Jobs 0:17:29.960 --> 0:17:34.680 Week is still my favorite time of the month. I'll 0:17:34.760 --> 0:17:37.040 let you guys break down the CPI, but I'm always 0:17:37.040 --> 0:17:40.680 looking forward to jobs Week. You can't take vacation those weeks. 0:17:40.720 --> 0:17:46.679 I take it world. I don't have to be in 0:17:46.720 --> 0:17:51.040 the office, but now when one to, Honestly, I miss 0:17:51.040 --> 0:17:55.639 all the fun. But what we've realized that ADP is 0:17:55.760 --> 0:17:58.879 the need for real time data, especially during the pandemic 0:17:59.200 --> 0:18:02.760 um and we knew that with the scale we had 0:18:02.800 --> 0:18:05.160 and the breath of data that we could offer paying 0:18:05.200 --> 0:18:10.040 over twenty five million workers, that we could be more 0:18:10.119 --> 0:18:13.760 than just a today forecast of the BLS numbers. We 0:18:13.800 --> 0:18:18.280 could actually provide an independent estimate based on ADP client 0:18:18.720 --> 0:18:22.399 UH actual pay of what's going on in the labor market. 0:18:22.480 --> 0:18:26.720 So this is not survey data. This is real pay data, 0:18:26.840 --> 0:18:29.800 and it's very well crowd source. We have we we 0:18:29.960 --> 0:18:33.199 our whole business model is based around paying people and 0:18:33.240 --> 0:18:36.480 paying them on time, and so it's it was an 0:18:36.480 --> 0:18:40.480 important I think advancement and the way that we use 0:18:40.640 --> 0:18:43.720 data as an estimate, and I think it's not going 0:18:43.760 --> 0:18:46.760 to be the first. The need for real time data 0:18:46.840 --> 0:18:51.960 on the economy from the private sector has grown exponent exponentially. 0:18:52.000 --> 0:18:56.159 The government institutions realize this. They are incorporating some of 0:18:56.200 --> 0:19:01.359 this in their own statistical infrastructure. It's just another supplement 0:19:02.320 --> 0:19:04.960 of what's going on in the economy. There's a lot 0:19:04.960 --> 0:19:06.960 of people who will talk about the future of work 0:19:07.000 --> 0:19:09.919 and give you a forecast, but when you look and 0:19:10.080 --> 0:19:13.359 see what's actually going on in the economy, that really 0:19:13.400 --> 0:19:17.320 helps drive business decisions because it's based on something real, 0:19:17.760 --> 0:19:19.600 on a model. Yeah, I was, yeah, I was gonna ask, 0:19:19.640 --> 0:19:21.840 you know. Okay, So every month the government, I think 0:19:22.080 --> 0:19:25.520 in the Establishment Survey, they survey something like a hundred 0:19:25.600 --> 0:19:29.800 and some thousand businesses and get the responses. You guys 0:19:29.840 --> 0:19:33.960 have the actual hard data from twenty some million pay rolls. 0:19:34.080 --> 0:19:36.600 Isn't that a more You know, I'm kind of a 0:19:36.600 --> 0:19:38.919 softball for you here, Nila, But isn't that a It 0:19:38.920 --> 0:19:42.240 seems to me like you have a more accurate view 0:19:42.680 --> 0:19:45.760 on the labor market than the government. Should the market 0:19:45.840 --> 0:19:49.280 be paying more attention to your report than the BLS reports? 0:19:49.280 --> 0:19:53.000 You think the market should pay a lot of attention 0:19:53.040 --> 0:19:55.800 to the ADP National Employment Report. So I'm on record 0:19:55.840 --> 0:20:00.080 for saying that. And it is an independent estimate, and 0:20:00.160 --> 0:20:03.720 I would say that the b the b LS estimate 0:20:04.080 --> 0:20:10.560 is also an important and has a long lived lifespan 0:20:10.760 --> 0:20:14.000 in terms of providing data. So I am not on 0:20:14.040 --> 0:20:16.159 the record is saying that this is a replacement for 0:20:16.200 --> 0:20:18.680 government data. I don't think that. I think that this 0:20:18.800 --> 0:20:22.919 is a private sector view, uh that is highly complementary 0:20:22.960 --> 0:20:25.840 to government resources. And it doesn't have to be an 0:20:25.880 --> 0:20:28.640 either or it should be an And so this audience 0:20:28.680 --> 0:20:31.960 is sophisticated. They're really good with numbers. They can hold 0:20:31.960 --> 0:20:35.200 two numbers together. And what we've tried to do at 0:20:35.240 --> 0:20:37.720 a DP is make it as easy as possible. So 0:20:38.000 --> 0:20:41.360 when we launched the new n e R, we did 0:20:41.400 --> 0:20:45.880 it with twelve years of weekly data, cut by sector, 0:20:46.040 --> 0:20:51.399 cut by geography, industry, and establishment size. So it's really 0:20:51.400 --> 0:20:55.000 an opportunity dig into the numbers c where the n 0:20:55.040 --> 0:20:57.600 E R and the BLS matchup, see where they differ, 0:20:57.680 --> 0:21:00.480 see how it performs over the business cycle. And we're 0:21:00.520 --> 0:21:03.480 really excited to be able to provide that level of detail. 0:21:03.800 --> 0:21:06.119 And and last note on this, we did it in 0:21:06.160 --> 0:21:10.240 collaboration was the Stanford Digital Economy Lab. Standard has been 0:21:10.280 --> 0:21:13.280 a great partner, but we wanted to make the methodology 0:21:13.359 --> 0:21:17.320 as rigorous um and transparent as possible, so partnering was 0:21:17.400 --> 0:21:20.639 important for us. Can you talk more about the differences 0:21:20.680 --> 0:21:23.320 between your number and the b l S number because 0:21:23.640 --> 0:21:26.639 you because your yours comes out two days before the 0:21:26.680 --> 0:21:30.959 b S BLS number, inevitably somebody tends to point out 0:21:31.000 --> 0:21:33.359 that there is a discrepancy between the two, that they 0:21:33.359 --> 0:21:36.080 don't always match up, and sometimes the gap is pretty wide. 0:21:36.080 --> 0:21:37.600 So maybe you can tell us a little bit more 0:21:37.600 --> 0:21:40.960 about that lately. And you shouldn't expect them to match 0:21:41.080 --> 0:21:44.879 up because they're totally different samples. The BLS is based 0:21:44.880 --> 0:21:48.960 on the c S Survey run by the Census Department, 0:21:48.960 --> 0:21:52.520 which essentially asked establishments how many people did you pay 0:21:52.560 --> 0:21:57.159 this week? Right? So to survey data, and there is 0:21:57.200 --> 0:22:00.800 some issues around survey response rates that have been um 0:22:00.920 --> 0:22:03.520 made more apparent during the pandemic. We're all feeling a 0:22:03.560 --> 0:22:08.280 little survey fatigue these days, and establishments are no different. UM. 0:22:08.359 --> 0:22:11.840 So what the ADP data does is it it says 0:22:12.560 --> 0:22:16.720 not how many employees did you pay this week? Establishment, 0:22:16.760 --> 0:22:21.160 but we count how many employees are actually on your payroll. 0:22:21.520 --> 0:22:25.600 So it's a slight difference in and also perspective UM. 0:22:25.800 --> 0:22:29.159 And it's based on actual pay data. So if you 0:22:29.200 --> 0:22:31.359 look at your paycheck and you get that and direct 0:22:31.359 --> 0:22:34.879 deposit UM, that's what we're counting basically for all of 0:22:34.920 --> 0:22:38.080 our establishments. But the great thing about the number is 0:22:38.440 --> 0:22:41.000 we have such a breath and scale that we actually 0:22:41.119 --> 0:22:46.480 rewait that number with the Quarterly Census of Employment and Wages. 0:22:46.680 --> 0:22:50.080 I remembered it q c W, which is a near 0:22:50.160 --> 0:22:53.800 consensus of all the establishments in the countries, about nine 0:22:53.920 --> 0:22:58.040 d upwards of you know, fool data on all the 0:22:58.080 --> 0:23:01.920 businesses in the US. And so now we have something 0:23:02.000 --> 0:23:05.560 that is a private sector view, but it is really 0:23:05.640 --> 0:23:09.199 waited to to uh look at the national average. And 0:23:09.200 --> 0:23:12.760 I realized that that's a long answer, so any more detail. 0:23:12.800 --> 0:23:15.200 We have the technical note on our website ADP or 0:23:15.280 --> 0:23:18.280 I dot not dot org. And thank you for not 0:23:18.400 --> 0:23:20.119 like cutting me off, because I think I would have 0:23:20.119 --> 0:23:22.800 cut myself off if I had gone on on something. 0:23:23.280 --> 0:23:28.640 But you guys are so so polite. I'm actually not 0:23:28.720 --> 0:23:32.320 that polite because I'm I said, inevitably somebody points out 0:23:32.320 --> 0:23:34.600 the discrepancy between the A d P and the BLS. 0:23:35.040 --> 0:23:38.920 I'm that person. Yeah, yeah, don't don't worry, Nila. DNA 0:23:39.000 --> 0:23:42.600 is not played at all. I'm not sorry, Nila. Well, Nila, 0:23:42.720 --> 0:23:45.959 I know um and in sort of past stops at 0:23:46.000 --> 0:23:48.679 your career, maybe more so, but you definitely keep a 0:23:48.800 --> 0:23:51.480 pretty close eye on the housing market too, and we've 0:23:51.560 --> 0:23:56.560