Storms, Strikes and Startups
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Welcome inside economics. I am mark Sandy, the cheap economist of mood's analytics, and i'm joined by my colleagues here on jobs friday. Uh, get the job numbers for the month of october. Uh, that includes a priority. Chris. Ha.

i'm doing well. It's late on a job friday.

though IT is IT is indeed late on the friday afternoon. Um are you a low energy? is?

No, no, no. I just know more time to adjust uh, the platter a of data that we ever received this month.

this week oh, because I feel a little little low energy, so you're going to pick me up all right, right now. Okay, but we got mercer, always high energy. Mercer.

hi.

And how are you? Mercer, you?

I'm great. Yeah, i'm doing great.

Thank you. Did you vote? Yeah, no.

I think i'm going to do IT tomorrow. I can vote only in person. I wrote up my nail and ballot, so i'm gonna do a, do an in person boat.

Well, those male about is a big hello blue here in pencil. Genia, the fighting very right over the date isn't IT that is not request that there's a battle ever if you don't put the right date on the front and he has nothing to do with anything.

Yeah, everything, everything.

everything is a did you vote across?

No, no. I want to go in person that day.

I want in person. I talked about that.

Yeah, look the election worker in the eyes. Yeah.

make sure to not a bott anything.

That's right.

That's right. And don't day, doctor d. Antonio, how are you don't .

take good mark Carrier OK.

did you vote?

I did the male, and I think I think I filled out correctly. So for the best.

yeah, they want to vote, account for sure. Uh, I did like you, mark. Oh yeah, yeah. Male and ballet some time ago yeah, I was very, I debated, would be OK to put in into the mail box.

And I worried about the mail, should I go over to the counties? You know, you go to the account, they have a drop box, but that's twenty five minutes away. Do I real do that mean I like being paranoid? Yes, you are marker being paranoid.

So I stuck at in the mail box and you know the great thing is you can go up to the P A site as I guess it's the uh I know I state pending the state department, I guess and you can actually see where your ballot is and if whether it's been recorded and IT IT was IT has been so I am satisfied. Yeah, my vote count. Yep, I did my run today. Did the a long sign count?

OK. 好 fifty.

fifty on the nose.

really.

Yeah, i'm not kidding. I'm not kidding.

No one pull the sign. No.

no, no. Everyone one's been civil. O, K, O, K, as far as I can tell. Yeah.

any punched science or no?

no.

Painter, no, no. IT looks like everyone's. But, you know, let the other folks express their view. So which is a good thing. Yeah.

let's get IT. That's great.

Well, we get a judge report today. You know, you think I might be A A A proof B P hair because was pretty weak. But IT looks like there's a lot of if sands or buts with this report right down today.

I I was a messy one for sure. But I think I think my headline was one that can be ignored pretty safely to given all the one off effects that are baked into there. There are hard .

down tangle B I will tell us more sure.

Uh, so the headlines twelve thousand jobs at IT um not a Stellar showing the the weakest monthly reading since december of twenty twenty one I believe uh, where we had a negative prince. Um so it's it's the worst reading we ve had a while.

But that's obviously you have sort of convoluted by not only the boeing strike but also the impact of two hurricanes where we had, uh, hurricane hole in which hits lara georgian, north CarOlina, uh, just before the reference week in october. Then we had hurray e millton that went across the state of fda, uh, during the reference week in october. Uh, all three of those things combined uh certainly weight on that headline game. My estimate is that probably at least one hundred thousand jobs taken off the the top line number as a result of those three things accommodation um yeah weakness was pretty concentrated in a couple of spots, which makes sense. A manufacturing had a huge decline, obviously mostly strike related yeah ah you also had declines in time help services, uh, almost fifty thousand, yet a small decline in leading hospitality make some sense .

given would would the team help decline be related .

to the hurricanes in anyway probably more the strike .

I think manufacturing .

employment related to production process. So right, that could also be the herky a little bit, but I think manufacture .

probably more .

so um also its small declines in retail trade and transfers tion and warehousing. So your industries that have been adding jobs pretty reliably pulled back a little bit in october. You have not a whole lot of bright spots.

Industry was health care kept adding, uh, the biggest winner probably in october. Public sector still lending jobs, but a pretty weak across the board. Outside of that, unsurprisingly, private sector payroll declined by twenty eight thousand and october. But again, I don't think there's much to read into there other than, yeah, we have to sort of wait and see what the the bounce back effect looks like in november and december as you are hofus ly, the strike ends, hurrying effects disp here over time yeah.

I said it's no surprise at all. I mean, I I I think I tweet out what, right after a milton hit, that we could get a negative number, uh, you must be severe if we get a negative or because of the temporary effects of the hurry ane and because that was pretty disruptive, I mean, IT was right in the middle of the survey week, right? Uh, be of labor statistics conducts its payroll survey, the survey of businesses and households in the week that includes the twelve of the month and that included the week that melton hit.

And uh you know people obviously were evacuating well in events. It's highly disruptive. So it's not not surprising. I don't think that I came in as week as I did agree .

yeah and on on top you agree on top of that very low response .

yeah I mean what was going on there yeah I say I mostly hurricane .

related OK shut down power outages here you just end the the collection period was also very short. You we got A A very early jobs report on november first um and see you get A A short a shorter than Normal collection period of the actual amount. Time has to gather data from businesses. So that short collection period combined with the effects of the hurricane and a response or that was below fifty percent um for this first.

is that short collection period just a calendar cork or anything? Caller.

yeah, just calendar timing and you how many business days you have because you have to sort of close the collection period, they need time to produce the numbers. They're collecting new data, are incorporating new data right up until the release there of closing that off about a week at to give them time, actually calculate the estimates based on a fixed set of data.

So so we don't know what the BIOS c create. The fact that they had a short collection period, meaning they had therefore fewer responses uh and the IT out in the report. But you don't know for sure whether IT bias, the estimate, the payroll employment game down or up IT is by it's all likely, although feels like a biased IT down there. No, there's no guaranteeing .

that IT adds variability, volatility, IT makes IT more likely that you get a bigger revision in the next couple a month, but doesn't necessarily to predict recor the other okay.

I ask you this every month. I think what is on what I call underlying monthly job growth and stracted from the degrees these temporary things do the hurricanes and strikes and measurement issue, you know, you have track from the big grey of the data, the noise and the data. What's the signal? What's the kind of the underlying average monthly job growth right now?

I think I give the same as I think OK well is probably the you tell .

me the number I tell if it's try one hundred and fifty two.

one hundred.

And okay, that's exactly right. Okay, you must yeah, yeah. perfect.

You must told that to me. Yeah, yeah. Hey, h Chris. Mis, Chris, you is that kind of in line with you're thinking hundred fifty .

hundred five k IT is maybe on the lower under that.

But yeah yeah there was also a downtown revision to August two right in september.

Yeah despite that.

I think the three months moving average of job growth was most hundred fifty eight on the nose right up up to this month, up to yeah .

was like one forty eight through .

last month before .

we got this month data right.

right. And then August downward revisions is kind of weird, right? Because historically, that someone where you get these big upward revisions, right, I me just when you think you understand the data, they do this to, you know, they violate twenty years of history, you know so right? The same one fifty to one seven.

yes, I would say one fifty i'd be on the lower end of that. yeah.

O, K, O, K, I stand out in terms of employment. I what I want to do here is take a look at each of the indicators that give you a sense of what's going on the labor market to get an overall sense of the market, number one being the change in payroll employment of establishment, employment ment. Uh anything else on that that we you call out on day？

I don't think so. I mean, like I said, I I think yeah mostly just have to ignore IT and wait for a Better data to come yeah I don't think we should be much into IT.

okay, not to anything else on that.

I mean, the only other thing I would call out in terms of the industries, the construction industry, which obviously is very sensitive to weather, had a again, but I was very small compared to what it's been in the past several months. That was only eight thousand compared to twenty seven thousand a month prior, twenty eight thousand a month before that. So that clearly was affected by weather as well.

K, okay, this, the other a bunch of real important statistics that come out with the jobs report each month, the other being the unopened rate, and that held steady at four point one percent. Now dated. Did you go look and see what the four significant digital is?

Uh, I did. I did. yeah. I mean, if he was actually up a little bit um yeah we got a uh rounded up IT actually almost increased by a full tenth of a percent between last month and this month even though four one both times yes, I was a four point zero five. Last month, and this month there was four point one four, five, I think so you, I did IT actually increase some great the noise there on the household surveys as well. I think there's much to worry about, but IT is moving.

I just want to stop for a second and say, hey, listener, dear, dear listener, did you hear the expertise that we have here? I mean, this guy, this is a made them. I I thought I was gonna get trump him. You know, I thought I was gonna just stand me, him but .

no he he got you are .

always asking ready um uh, how did we get there in terms of household employment and the labor force? How what happened there? Yeah some things sort .

of baLanced had a decline in the labor force. You had A A decline in household by employment and then you had an any place in unemployment. So that decline in labor force and increasing unemployment essentially offset each other to a large degree and kept the unapproved ment rate stable.

I make someone statistic, but isn't there a question in the household survey about, uh, if you are not working because of a weather event, isn't there something like that in in the report? There is mercs. Rh, must do you know they are taking you. I .

because .

I was I was just, what did you say so?

Ah okay, so i'll find a new statistic.

I guess. So you you thought was gona move on without getting the number.

I thought you were, but but it's alright. I have like three because I figured this may come up. Yeah so um the number of people that were that were not at work for the entire week, yes, of the household survey was five hundred and twelve thousand in october, which is the highest of any october since the us.

Has been keeping records. right? right? So this is not seasonally adjust IT, obviously because it's weather. So if you go back to any october since the early eighties, that's the highest it's ever been. So over half a million .

people in the did I get the question right to be ill? And this is a certain now we've turned to the survey .

of households that so they ask, yeah, do you usually you know, you usually working? Do you have a job and where you not? King, last week someone says, no, I wasn't.

Why weren't you working? They can say, because of bad weather. So that was the number of people who said they have a job, but they weren't at work for the entire week because of bad weather.

And then there's a related statistics which asks, um were you working less than you Normally would have? So these were people that we're working part time, but they have a full time job. And there were one point four million people who said that they would have been working part full time, if not for the weather. And that's also the highest it's ever been back to the seventies of any october. So is really very impacting on the employment report.

Is he going back to that five hundred? K, yeah. What is this typically in the do do you know just roughly speaking is that .

half that or like in september is .

fifty two thousand OK OK.

I me again like so the numbers in like january are always really high because of weather, right? So like you get these big bikes, usually in january, for example, january twenty, twenty four to five hundred and eighty eight thousand, right? So you would expect to see that in a january when you have snowstorms battering, you know, the east coast in the midst west. But for october, that is like almost double any number we've seen in, in october before.

okay. So that that feels like proof positive.

The hurricanes play .

were a big deal here. Yeah, I A big deal. Yeah, right. okay. Uh, okay. Um and also I guess on the unapproved yet front, uh, still no layoffs.

I mean, if you look at initial claims employment insurance, if you go to the jolt report, the job opening labor turnover survey report, the where they break down, whats going on in the labor market, uh, no layoffs. ChAllenger, I think came in that the chinese report on announced corporation pretty low. No no sign of any pick up and layouts at all. And I right don't say yeah I mean.

outside we got an up taking claims in sort of the first two weeks of october as a the result of the strike in the hurrying, but actually now lower than they you at the end of september. They're they've come down ah actually backpack their sort of your preoccupy .

level already OK all right OK um oh h before we uh how the other indicator we we don't spend a whole lot of time on, but I just to to round out the indicators in the report that are important hours work per week, what what what they do.

Unchanged point three, and that .

measure .

was also unchanged as well. I mean, looks like there wasn't a huge impact.

uh, because that's usually where you see weather effects, right? Because people they they they all they have to do is work one hour in the survey week and account employed, if I have that correct right on the peril survey, on the on back now back on the peril survey. And so they could be kind employee， but their hours generally cut back because they are evacuating or they were just unable to go to work because there is no power of them, so on. But didn't we didn't see that in the data .

I did not show up. And I my assumption is that given the timing that you just had more people who are out the whole time. And so that didn't weigh on.

You just said people they were away from work entirely, didn't wait on average hours quite as much. There's less part time working and more just people. They were gone completely OK OK.

嗯 OK。 Before we I want to talk about wages and product T. V.

But before we do that, Chris, what what was the market reaction to all this? I mean, were at of the day, markets, equity markets close. I I have a chance to look what's going on on what happened.

Yeah equity market was up. The stock market was up three points okay so they can .

look through this um yeah yeah .

um the expectation for a rake but was a rake cut next week is like ninety about ninety eight percent so almost guarantee ed according at this ten year rose as well, right really significantly about ten basis well is ten basis points nic ant anymore maybe maybe not but no party significant. It's uh we're closing in on four point four percent uh, for the time year so .

right despite the .

weak job number.

Yeah you went up on up on the equity market up on you. So something now is not the employment report that yeah.

there are some time in the train raps here, uh, going on a expectations for a federal that increases based on the election outcome, right? Be also of things yeah going on here.

but we're going to come back to the labour market in second. But since I have you brought this serb, uh, let's let's explore that a little bit more. Uh, so if I go back a few weeks, go in my mind's eye, I recall the ten year treasury eld.

And this now back before six weeks ago, the ten year treasury old was three point seven, something like that. I think the fixed mortgage rate was closing in on six. That was, you know yeah right from north of six percent. Now here we are, are four, six weeks later and you said the ten treasury is at four point three percent.

so four point three .

nine and h four point four. So are up seventy basis points point seven percentage points. And I think the thirty effects is now over seven percent isn't IT.

But I looked last I looked yeah so about almost a point. And so what's what that's A I know as as you were just alluding to, the bond market is very violated for less of different reasons. So we get these big moves that a pretty substance of move in six week. What things going on there?

Yeah, I think this election, I think election maybe playing a big role here. Uh, expectations for, again, dead issues. Well.

run one another piece of information out there. You wing in ten year yields happened the same time that the probability that former present trumper win the election started to rise in a significant way. He gained on Harris in the polls and in the prediction markets.

He's now leading her. I think he was he was losing to, I think, in the prediction markets six weeks ago and now he's he's winning in those markets pretty handily. Uh, and could IT be that markets investors are nervous about terrorist, other things that might lead to higher inflation, which obviously are bad for bonds and means our interest rates. And also, as you point out, you know, he's talking about tax cuts that will be unfunded, the lousy deficit for and that also means higher real launcher interest rates. So you know is is safe to connect those dots.

That's my sense that that your it's policy related right there is an right in pleasant assumption .

here um and I guess consistent with that, the equity market is basically gone on flat over .

that six weeks in .

stock Prices. They're high, but they're gone consistent with a stronger economy. But the fact that the equity markets flat and and bonior are up is consistent with oh, this is inflation and that that's what IT feels like yeah ah you shake in your head bagging yeah yeah up down side way up side ways OK and in that on that sa no .

now has been as Chris what the .

cypher a markets .

in yeah he should know .

i'll let me check on the rip market. You don't follow the cryptic h it's.

Down one thousand and over a thousand dollars per bitcoin, right? I don't know sixty nine thousand dollars will get you a big clean these days.

but are really sixty thousand .

OK you know there two. I think it's been up quite substantially. Yeah again, I think that's a persue that inflation related or a friendly yeah uh crypto environment post election yeah knows .

right yeah yeah uh OK back to labor market um a weight growth uh down to uh what cross a job report now back to the establishment business survey gives us a read on average early earnings, a measure of wages. What what did they do during the month?

Uh, I was up point four percent in october. Uh, kept the year. We are growth at four percent.

Uh, so no change from from september. Uh again, I mean that job or wage growth measure can be a little bit affected. Hereby, the same weather affects you have got a different composition of job growth happening. So it's always subject to revision. But I would say even more so you could be moving a little bit more in one direction or the other come next month. But it's not a whole lot right home about on the wage girl front, my mind and we got the E, C, I data yesterday and IT sort of confirmed a similar story that wage growth is somewhere in the four percent neighborhood, which feels like a perfectly fine place for to be given relatively strong credit tivy growth we've had in .

the last several quarters. The E C I employment cost index, and it's a different measure of wages and average real earnings in in a Better measure in the sense that, that controls for the mix of jobs, occupations and industry so that that uh that you get a much cleaner read on underline wage, a wage dynamic action after saying that came close to four percent as well.

Yeah just under four percent I believe yeah .

feels like all the weights numbers and there's a bunch of a more coal listing around four percent doesn't IT yeah yeah OK. What is a good thing, right? Because inflation IT depends on the inflation measure that somewhere between two and two and eight percent, so that, you know, you take the four minus the two or two nine percent, that so called real wage growth, uh, after inflation.

And that goes to purchasing power. And that means people more, uh, more purchasing power, the dollar is going further, which is obviously is very important. H in terms of people's perceptions about how they are doing or the reality, how are yes OK.

Um and you don't think that I think if we had if you go back a couple years ago, uh, when we were having these discussions, we were saying wage growth that was above three and a half would be deemed to be inflationary because that was you know uh above underlying productivity growth and inflation uh the two percent inflation target. So we people feel uncomfortable. We got numbers above three years. I I don't think that anymore right because I think to you to what you said, party T P growth has picked up and people feel comfortable that the economy can generate four percent wage growth without generating inflationary pressures.

Yeah, they got to me right. But sort of before we were relying on that productivity growth average of about one and a half person that lead, and that's where three and half percent which growth number came from. But we've a fair manner activity growth data here. You have sort of post pandemic, and that's been averaging at least two percent at least over the last year or so. Um so you I think that makes people a little more comfortable with where wage growth is right now.

okay. This is anything on that. You want to say what we're going to come back and talk about productivity.

But you know because I know you you can't wait. Image ching, yeah, yeah. Ah I make sense.

I'll make sense. It's okay. Uh O, K, going according .

the script that .

I would say according descript, I couldn't say any Better than that script.

I know you can.

Um okay, before we talk about productivity growth, uh let's let's play the game, the stats game. Uh, we before stat um the rest of the group tries to figure IT out with close deductor reasoning, questioning the best. That is one that's not so easy we get immediately.

One is not so hard that we never get IT if it's a proposed to the topic at him, which is the labor market but doesn't have to be all the Better. And we always begin with. Marisa m, so what's your stat?

Okay, this is a last minute stat. So so it's not that great. You're probably going to tell me it's not that great. Three point eight percent.

That's the C I way. yeah. 呼， how come on now? Oh.

jees. Well, that was my backup to my back up. So that was third in line.

And then you guys started talking about the E. C. I. So yes.

what you say I was going to say, what do you think I was going to say? That's a bad statistic. Yeah, right. yeah.

It's a bad statistic. thanks. Thank you. So I said at first.

my first statistic was .

the number of people, not second. That was the I said then I had the survey response rate was my third. So now we're down to this.

H, what? Sorry, you didn't say what is the survey response?

Ory, well, IT was forty seven point four percent, but dante had said that was under fifty percent. So then I abandon that in typically what IT is.

I know it's been a steadily follow. This is the first act.

It's it's been in this yeah I mean, it's been above fifty. It's been like fifty five to sixty that was really low and I think that's the lowest. And like one thousand eighty five.

something like that OK. Yes.

I mean that that was so, oh.

really no. I that I was on the list were good. We had the lowest first print for october since one thousand nine .

hundred eighty five along. Well, that was so easy. I thought I was a head fake, you know, like I was like, scared to say IT because I going to be that easy. Yeah.

sorry, joking. It's it's the first reading below four percent. This is for private sector workers are uh the year over year growth rate of of wages, particularly uh for private sector workers, excluding benefits. And it's the lowest since lowest in over three years since twenty twenty one in the first time, under four percent since then.

Do you recall a prior to the pandemic kind of what was the underlying growth in .

the employment?

Dex three.

I thought I was like toes.

or let's really spent .

so far back you go. I mean, if if you're .

looking IT .

had been pretty low for a while and then sort of creep back up in twenty.

Well, let me put in this way the last time we were a full employment. You know, in that period before the pandemic, we were back up to three and .

have roughly IT. IT was three. IT was like, yeah, I mean, again, if if we look at private sector wages, IT was two point nine percent.

Yeah ay, wow. okay. So that this is impressive.

I'm immigrating close to four IT pretty consistently now in part of the pandemic, we were getting closer to three. Yeah yeah right. 呃， OK, 呃， don't take you up.

I managed to avoid giving this one away earlier. So feel feel pretty good about IT. Um four thousand .

is IT a again in unemployment in some sector of the economy.

It's not a sector .

now A A demography.

No, no.

no in jobs.

IT is jobs. Yeah geography.

It's not a geography.

right? It's jobs. Four thousand jobs, four thousand fourth thousand jobs is IT in the household survey.

Now is the establishment .

service .

is a related to manufacturing.

IT is not. No, do you want me to give you a hint?

Yeah, I can think you Better.

It's related to revisions. So we talked about there being is big downward revisions to aug september.

Something got revised down four thousand. Some sector got revised down four thousand .

jobs was a positive. Four thousand.

i'm sorry, yeah revised up. So in what so what sector is like top of mind that IT can be some s terr. You're not doing .

that to us.

Are you big four thousand. Was this revision?

Was the actual revision or was this the net job gain after the revision in this industry? The .

actual revision, not a specific .

industry, though I have a feeling this .

can be a very boring. Is the average revision for August oracle?

No, no, no, no.

Oh, I feel I .

really stuck stumped the crowd here today.

I I say I say we give because the listeners yeah the listener is getting avoid yeah so I would keep going but the listened to tell me I can hear IT. If you look at non seasonally adjusted.

it's the combined revision for August. September was actually plus four thousand, even though the revision, seasonally adjusted, was minus one hundred and twelve thousand.

喂喂喂， not seasonally adJusting that revision. What is your recently is a soft ball traveling thirty miles.

And I gave you a fast.

a turbo slider, you know, one hundred and three on the left, you know, I got, you know, i'm not think with baseball metaphors, but you know, you had my draft.

I want to the relevance. what? What's the point? right? yeah.

What pointing to was pointing to the big downward vision as a sign that the more weakness in August and september than we thought before. But the entire revision was just updated season adjustment factors, right? The actual underlying data shows essentially no change to job growth in August and september, but E, L, S.

Updates the seas adjustment factors every month. And given the volatility that we add in recent months and we ber, there is a big swing and seasonal adjustment. So you'd mentioned August right in the fact that it's almost never revised down August by itself. The unadj, the data was actually revised .

up by thirteen thousand .

and IT revised down by eighty one thousand because of just so okay.

so you don't you don't want to give yours. You have said .

that when came .

by doing the when .

you have him do the jobs s report breakdown because he can strategically avoid this statistic is while mentioning four of mine.

Yes, exactly. That's a good point .

for the right for .

the record. So so just to clarify, what you're saying is we saw these down or big down revision in August and a in a pretty sold one in september. But that, that all that was, was a revision to the seasonal factors that the beer of labor statistics IT, the actual number people wasn't revised down. Then you could get get a great net between those two two months. Yeah OK.

that's right. So yes, I mean, IT changed.

but I so don't read anything into those revisions.

What you're say, I mean, I would push back on that a little bit. I mean, we seasonally adjust the data for a reason and IT does mean something. I mean, we're comparing IT to previous August, previous july. If you want to be able to do a month over a month of comparison, you need seasonal adjustment. So I wouldn't totally discount, but they think .

is the not seasoning justice wasn't really revised.

IT was IT was the season? Yeah right. So I mean, I look at those revisions as saying, yes, the job market job market is slowing.

Th Epace a t w hich w e're c reating j obs i s s lowing. It's not you know it's not that nearly as slow as this past month would suggest given what we just talked about. But I think even coming into this month, it's pretty clear that th Epace o f j ob g.

rowth i s s lowly y eah, okay, right, Chris, you go go next.

sure. One point one nine, one point zero or nine.

the ratio of something to something, yes, uh, from number of .

unemployed people per job.

number of jobs per unemployed.

Oh, other way around. Yeah, another number of jobs per unemployed. Yeah, OK 走 呀。

Yeah, no number of open job positions per unemployed. correct? right? O, K, O, K.

Job openings to be over. Be over you. As they would say. That's right. Yes.

exactly, exactly. That's Larry balls. Uh, stat. So right yeah one point no nine is, is that been running down? It's the lowest level outside the pendel c since twenty eighteen, right? Just points to again a narrowing of that supply demand imbaLance in the job market.

So the the fears of uc and waged by spiral or no labor demand really driving wages up. Where are diminishing, right? As the number of job openings falls? IT, I think, was seven point four million in september that that number came out this week.

This, to use little jargon, the so called beverage curve is Normalizing. Yes, yeah. okay.

And and what is the ratio equal? One mean, would that be perfection? Or there are we pretty close to perfection, meaning later markets baLances at this point?

I think it's baLanced and baLanced. This number has has moved over time, right? I used to be the opposite and used to right job seekers and job openings, right instruction. Things have shifted um but if .

you had to pick a number to .

say this is ah say one.

say one, you say one and were there within .

spitting distant we're right .

there yeah yeah okay. And IT feels like everything is like right there, right? The unemployment rate, the employment to I didn't look at the employment to population. Anyone look at that for primary workers.

I mean, that has been very but I mean, I think that's just some of the meaning of this month. There is down a three tens per percent, but it's still high, I mean, in line with its prepare delic peak. So right.

participation rate came in a little bit, but again, very consistent with the with the labor market. That's right. Word should be feels like all the showing a giving us the picture of a labor market that is just call IT and more jargon in equal liberum. It's like supplies equal to demand. Everything is where should be.

This happens once every fifteen years yeah every generate, right? I mean how how often do we get a labour market is IT feels almost picture perfect, doesn't IT I know sounds where to say on today when we got that we job number because of the those factors. But the reality is it's it's it's just an amazingly but it's exactly where you want the labour market to be, right? We wanted to stay right here. You could pick up labor market that you would want for for us going forward. This would be yet well right now anyway and .

full employment. Yeah I mean, even mention in P, C, E, good to well.

that was the other thing, right? That was the other because we can focus on jobs. I mean, the other big report that came out this week was on the consumer expenditure of later the single P, C, E.

Deflation, which is the measure of inflation the fed looks at. And that is now two point one one percent. I believe you are a you so you know targets two, where check were there were there OK.

Um O K, let's move on. Um let's talk about productivity. I want to bring this up because I am gonna be traveling a bit here. I'm going to europe a visiting a different, different countries and and I just came back from canada, uh and seems like everywhere in the world that I go.

Now that we're at a recession and kind of recovered from the pandemic that focuses on longer term growth in countries are coming to the to to the, uh the to coming to notice that the U. S. Economy has been able to generate very solid growth, particularly productivity growth.

The protectively growth has been extraordinary, uh, in the gap, uh, that exists between the protective of performance here and overseas continues the is pretty wide and is now starting to wide that the us there's something going on in the U. S. Or alternate something in these of the country. Is that allowing the U S.

To kind of lead the way here in terms of productivity gains? Um let me go because church the productivity bull here and uh that is a bit of the uh relativity skeptic but uh uh which I which I want to come back to but let me turn to you first that characterize things correctly uh in in what we had to pick one, two or three things that might explain this gap. See, you're helping me because i'm gonna giving a speech next week.

This would be very helpful to be A H yeah, this is, this is prep work. Uh, what would they be a person? Or do I get a right in second? Uh, you know what's the secret sauce here for us or what's alling these other countries back?

You you certainly the right predictive of growth and you is faster than most countries, uh, absolutely developed countries. And things that would point to include, uh, just are very we have a very dynamic business environment in the U. S.

Right, small business formations. We've talked about this on the podcast before, but that's A A really significant portion of the uh, job market of the of the industry overall. Uh, small business formations have been remarkable.

Be strong in the U. S. Throughout this post pandemic period, right? We saw a Spike in twenty twenty. We thought, well, maybe that's short lived, but no, it's been very sustained. We have people starting up businesses all across the country and all across different industries, right?

It's not just tech or high tech where you see know those start up, but you see, uh, entrepreneur ship everywhere. I I do attribute quite a bit of the success in terms of particular growth to that because small businesses are more innovative. Typically, they're looking for new businesses, no new goods and new services. They're going to get get copy by the bigger businesses or they're get acquired. Those business small business will get acquired.

And so that that uh D N A of innovation kind of spreads out from the small businesses throughout the um throughout the economy, and that's not something that happens in other countries, right? People come to the new height states because our environment is much more favorable to starting a business than in many european countries. For example, there are any permits and just a little a lot more regulation to go have and start a business in the U. S.

As we know, you can fill out a form with the arrest to get your employer identification number and you're often running there you go and there's there is business capital available, right? It's just a very unique environment. I would argue that favors that type of productivity growth right on top of that. I think abo.

yeah I guess because something that it's been bother me a bit, you know you bring up business formations and we get this data from the irs on uh employ employer identification numbers E I S I I think I think that ah because if you start a business you will have to pay taxes and you need to get an E I N number to do that.

Uh and they took off when the pandemic at the number of E I N numbers of people for the applying for to starting new businesses took off. And you've been very elevated, remain very high since the pandemic, uh, maybe off a little bit from the peak, but there so very high. So in that goes that you're making that the point that look that's like an indicator, a bome ter of that dynamism that is so critical to innovation and ultimately productivity gains and growth.

And you don't see that other countries. Can you just peel that? Don't you started peel a little bit, but peel the on your back one more layer.

why? What's you know and why the pandemic? You know what you know, cause there's a clear jump when the pan I get, when is that your people got thrown out jobs and they started revalue, you know what they were doing and they start they get they stimulus checks and know they need to pay their credit card or the mortgage and so they had some cash and oh, i'm going to start the company um this is the time to do IT, but you know we will pass that now it's still elevated. So IT, maybe there's something else going on.

Ah what do you think yeah you know some of this is speculative certain but I I think the pendel c was a game. Initial reaction to your have written off twenty twenty increase in small business formations as people just you know panic are worried about the future and you know very, uh, rationally deciding, hey, I need A, I need a plan b here.

What if these jobs don't come back or what if the future looks different and I have some stimulus cash? I've got some time because a locked down in soul, i'll go and started a business. But you're right, things have been sustained.

But I I think the pandemic did cause people to uh, reevaluate their lives. And I think you do have kind of sustained mindset that said, hey, you know, entrepreneurship is a is a viable option for me and something I can can pursue. I think that kind of stuck you have in the culture, even shark tag and a other you know pieces of of media that kind of favor people striking out and trying new things, something up their own company.

So I I think that's part of IT. I also would point to the immigration and increase that we've seen, both both legal immigration people coming into the country really wanting to to be here， right, as well as the on document. You know, we know by nature immigrants tend to be rich takers.

They may have more limited opportunities in the labor market for that first generation. And so they are the ones are typically we'll start that, that retail store or will be willing to you pursue some type of small business venture in order to get get the family started, get there, you know, live that american dreams. So I I think the the surge in immigration that we have seen, although certain as many, many costs on local on local local communities, it's also no supported our labor market. And I think IT has also translated into more. Entrepreneurship, at least the idea of entrepreneur ship has continued to spread.

Yeah makes no sense. Can I throw one other many one other that I think might be not well known and get your reaction? Just the age distribution of the population and there is a lot of baby boomers my age, and there's a lot of millennia of the kids of the baby boomers my age, and they are now in their early to mid thirties.

And that's when you tend to start a company, right? Because you've been working for some time, you've gained some experience. You you can see what works, what doesn't work. You've got a lot of energy you're buying even stupid thinking and talking about myself when I started my company when I was, but you know you kind of dumb. You know if if you kind of think there's this this is gonna work he even when he is nice but probably .

what were a well, you're less risk averse right when you're Younger .

you yeah that that's the way of saying, yeah, I said dumb okay, let's recovers. Yeah good point. What do you think of that theory?

There's some truth to that.

I think I might like that theory will come back to daunting in second.

But 各位 but i've also heard anodos at this， I confirming this that because of the rise and home Prices and stock market values throughout this uh period, also had older people retiring early from their a corporate job.

But there oh now isn't .

that is a job. And going ahead and opening up that small business. And now we have tools, you know to make IT easier to even come up with some type of smaller or smaller business, let's say, your part time business on the side, and that certainly contributes to as well. So I think there might be something to that, but not just the Younger folks.

but you right people .

who I had a full uh full whole career and now are pursuing that a small business dream that they kind of had in the back of their mind as well because they have the wealth uh.

to support that. Well, that would be consistent with the uh, well, I can say that would be consistent with the lower participation rate for sixty five plus, but that that's wrong be their yes so that doesn't work yeah that doesn't consistent.

Um um so don't take your kind of the productivity skep tick the kind of the conversation the Chris yb and having is a little bit different than the one that you increase have been having when I believe with crisis I S M Y is production to be growth stronger in the U S. And elsewhere. The debate or conversation you to have been having is why in real productivity growth here in the united states is IT is IT as IT improved and will continue to improve on sustained basis.

So it's it's a similar conversation but a different one, right? So you you heard what he said about the dynamism and in personal, that goes to continued in strong, improving relativity grows here. What what makes you more of skeptic? You know why do you think party to be growing won't be stronger going forward? And the first all know I I I did I character ze your view correctly?

Yeah I must say very I think the dynamism mango, i'm just a little bit more cautious that, that trend will continue like I don't see what the fundamental driver is of that dynamic staying much higher than IT was over the last couple of decades, right? I can see the pandemic as sort of an ipads for change for a certain man of time, but IT doesn't feel like that alone is enough to sort of drive that higher level of dynamism moving forward.

And so I still think we could see some pull back in that as time goes on and more brothers, I see other reasons why i'm skeptical. There's demographics of the population you point in to that could be supportive of some of the dynamism, but the aging population is, I think, still a headwind on overall agreed productivity growth. Um I don't see technology is and criticism hasn't made the argument that the technology is the primary boost of productivity right now. But I don't see IT as uh, as big of a driver. I don't think of a productivity growth over the next five or ten years that some .

other people might believe that IT will be the facial you saw as safe from beal. By the way, quick tangent. He saw that beal has put out a kind of a medical study on remote working productivity.

I I did I didn't get chance to read IT carefully yet. I don't know if you did, but I think this story I was a positive at least the slight positive for productivity growth is that.

So yeah wasn't in a game change or any sense, but slight positive. But that is kind of looking at different studies that are looking at different aspects of the question and kind of bringing IT together in a meta study. But I have to take a culture look at IT yeah yeah um um okay uh so you you're kind of skeptical that artificial and tells A I or remote work or any other technologies is going to come along here and really give us a meaningful a pop to productive grow. Yeah I get .

supportive like any new technology, but I don't for productivity right right.

uh right OK. And I also am a little .

bit worried about remote work and its impact on turnover. You there's some early evidence that, uh, people who are fully remotes have higher turn over rates. You quit jobs more frequently than people who are in the officer or hybrid.

And I think you Chris has argued before, I don't disagree with him that you as you get people who are staying in jobs longer, as we seen the Chris ray come down over the last few years, that's been a boost to productivity, right? You get people who are more familiar positions are able to contribute more or able to sort of make a bigger impact on a company as they've been in a position longer. So if you've got, uh, any reason that's gona keep turn over higher than that has been historical, I think that has the potential to be a negative for productivity growth.

What about the argument that remote work in hybrid work arrangements leads to Better job matching? So people aren't staying in maybe maybe are quitting more because are not staying in jobs that are not a good match for them. And ultimately, that would benefit both the employer and the worker.

Yeah, I think that's a positive side to and I guess it's a question of which of those affects is bigger, right? I think there is certainly some positive to an expanded labour market. Companies can hire more broadly if their hire remotely.

You can get a Better match potentially. If i'm looking nationwide or globally instead of just in a narrow areas, I I don't argue that there is no positive. I just onder what the the net effect is, right? I think there's there's probably positives to there's negative to and I I think maybe it's a little bit negative, but I say that as someone who works remotely and you obviously wants to a spell sive benefit of IT too.

你 easy to us。 Thanks for not for us. Yeah so just I think I done this in the past. We do IT again with some Carry things with numbers to make IT more concrete.

So since world between world war two in the financial crisis that hit back a generation ago, uh, productive v growth, nonfarm business productivity, wth I think was about two and a quarter percent anim between the financial crisis and the pandemic IT fell to about one and a half percent paranoia. And since the pandemic till now, you know, it's almost five years now. It's still it's only picked up and a little bit it's like a one point six percent parana.

Uh, do I have that? I think I have that right? No, you got your head.

Think it's a little strike. Depends on when you sort of cut the pandemic .

period for two and nineteen. That's when I I started one point .

eight percent. Yeah, mabe is a little bit stronger just there a lot of and okay.

okay, OK, but let's say it's kind of in that ball park. Are we, Chris, or you thinking we go back to two and a quarter? Are we going back to two? Or you know what are you thinking? I mean.

what's the number? I I think we're going to stick .

above to above two. We're going to over the say over the next ten years back over yeah a long period time, two person over .

well above where we were prior to the pendel c for okay.

of course, that's consistent with our forecast and downe think we're not got word kind of stuck where we are.

Yeah, I think we stay below too. I don't I don't know know. I think we go back to one and a half, but I don't know that we sort of keep accelerating from here.

Okay, somewhere between one to happen to yeah yeah immerse a where are you on this?

I do think it's gonna be meaningfully higher once the benefits of A I kick in. I just don't know when that's gonna happen, right? So I don't I don't know that, that necessarily happens in the next three, five years. Maybe it's ten years out or fifteen years out. I think the world looks very different actually once we fully of those benefits.

right and say above to abo you above .

term longer time. Yeah.

but but I been in over the next decade, 就是 not quite sure this is probably .

over the next decade。 I'd say roughly where we are right now OK.

I'd say that I I .

agree with you that the benefit of A I and some of the other technology, Green technology, so it's lots going on right, are probably further out than no a lot of the hype would have you believe I might. My argument in the meantime is you will have to pay off for some of the infrastructure and other investment that has gone on. I think that'll provide somewhat of a boost or maybe doesn't get this all the way so that at that level. But I think it's going to be supportive to increasing that protective while those while that research and development continues, right? So that's if we might have a little bit Better of runway then just having to wait for A I to really pay offs.

Guess the other thing going back to the in the conversation around us versus the other other, the rest the world IT. A I certainly a comparative vantage for the U. S.

right? Because, you know, word building out the infrastructure, the data centers, the getting electric grid and right place do all things we need to do to make A I reality much faster than I think anywhere else in the world. Maybe, maybe china is is is there as well.

But certain ly, not eur rope, certain ly not the other develop countries. I I don't think so fair, Chris. Yeah i'd ask you .

yeah not only in the infrastructure, but I think the innovators want .

to be yeah the companies are here yeah.

right? You're gna start an A I company. You're going to elephant.

You're going to U S. right? You're right.

Um find the talent here. You find infrastructure of environment that is favorable to you. So yeah, I think that's that's quite attractive, but let's stick around long term. I think that's a real risk. But I least .

for right, right. Don't anything else you want to bring up about this?

No, I think i've been skeptical enough if I feel like my my skeptic arguments get a little bit weaker. Every record ter that goes by, we get another strong productivity growth number. I think we will get a strong one next week.

Yeah, the strong G D P, parents, others, no reason. I think we won't. Another strong productivity growth number, uh, next week. So I still think there is room for simple back here over the next couple quarters, couple years. Uh, i'm becoming less convinced over time.

You know i'm in this very weird psychological place. I have to tell you, uh, you know because i'm with you with you, Chris ma on, uh, the potential for and and I think increasingly the likelihood they're gone to get some step up and productive v growth and that obviously that there's nothing Better than that. I mean, I mean, stronger growth, more income, more tax revenue, higher corporate profits, higher stock Prices.

I mean, it's like an alex a you this exactly know the secret sauce that drives, you know, standards of living. But the same time is this election IT really is make me things can change so fast. So I don't know, right? Are you feeling the same way? I know.

I mean, in the context of productivity like this will impact the long run our productivity growth.

I do indeed, I do indeed, if we get into a terrible or if we, Chris, talk to our immigration and if we go on their opposite action, you know, uh, you know, if we unwind some of the Chris was talking about some of the industrial policy, the, uh I know that's right work, but the policy to, uh you know support long good chips, uh, infrastructure legislation, inflation reduction act, that all feels like a potentially at risk, who knows? So yeah, I think the election can have, you know, depending on our plays out, have some impact on on long term growth, growth Price, also long to groth prospects. So um yeah you is in such a kind of a sketch of honey psychological places. I that day never is he so certain about everything i'm .

certain about that. I mean, I am concerned, no matter i'm quite as concerned as you, but I think there there is more uncertainty there than more use or used to.

But you know, good news is this, I guess is good news. We're gona find out here pretty soon. We're going to find out here pretty soon.

okay. Uh, anything else guys? Uh, on the job front, a kind of the manage the conversation pretty closely didn't let go of script any significant degree. But the downside of doing that because I the benefit that is we're gona finish relatively early friday and five thirty. Sorry, Chris really wants to go get his glasses king on to and check out is is uh is crypto portfolio uh, so I know that, but of course he does.

Every friday is day yeah it's a friday night .

tivy it's party night. They by by having been so scripted, I didn't allow for, you know, uh, unscripted thought. So anything anybody wants to say on the unscripted, but kind of side of things can be anything. I guess we looted IT.

but there was a lot of other data. There is a data rich week, right, and .

really stuck .

out to to no holding. And I I see the future you know election will be the election. But I I guess I A little bit more optimistic that OK.

你好， i'll take you make IT through right? Will take i'll we take IT.

So the next time we talk will be on the other side of the election.

Yeah I think i'll be in europe. I think yeah, all right.

I think you've in europe.

The last you are I said .

to this tradition.

I I want.

Um no, he said, I tend to go europe this time a year, every year. This this is when I go. Uh, so elections.

correlation.

disco, no causation, this coral lation, this correlation. yeah. okay. R I, well, a buckle in, uh, will be a fascinating week. And with that, dear listener, we're going to call this a podcast. Take care now.