Bloomberg Talks
00:00:02 · Claudia Sahm, Paul Sweeney, Tom Keene
[00:00:02] S0: Bloomberg Audio Studios. [00:00:04] S1: Podcasts. [00:00:05] S0: Radio. [00:00:06] S1: News. [00:00:07] S2: We begin our coverage as always in honor. with Claudia Sahm, her work at the Federal Reserve System over the years, definitive on the measurement of different recession statistics. And of course, she has been wonderful in talking about the American labor economy. You know, Claudia, my favorite is the ECI Wages and Benefits Index. We ballooned out of COVID to 5% year over year. We've come back but we haven't come back enough, but inflation's high. Are we getting ahead every month in our wages and benefits? [00:00:45] S0: Not in an inflation-adjusted sense, particularly this year once. And that's really about inflation having picked back up again after the conflict in the Middle East began. And we've seen on the wages side some slowing. particularly in what goes home to people's paychecks. I thought what was really notable out of the employment cost index last week was that, unlike today's data, average hourly earnings, the ECI also brings in the cost employers pay for benefits, including health insurance, and those are rising pretty considerably, the health insurance costs. So That's one where, you know, if employers have got to put those costs into the benefits, they're not going to pass on in the wages. And you just don't see the, you know, the wage improvements. So I think given the backdrop of inflation has picked back up and wages just aren't rising, like it is not a recipe of getting ahead here.
00:00:45 · Claudia Sahm, Tom Keene, Paul Sweeney
[00:00:45] S0: Not in an inflation-adjusted sense, particularly this year once. And that's really about inflation having picked back up again after the conflict in the Middle East began. And we've seen on the wages side some slowing. particularly in what goes home to people's paychecks. I thought what was really notable out of the employment cost index last week was that, unlike today's data, average hourly earnings, the ECI also brings in the cost employers pay for benefits, including health insurance, and those are rising pretty considerably, the health insurance costs. So That's one where, you know, if employers have got to put those costs into the benefits, they're not going to pass on in the wages. And you just don't see the, you know, the wage improvements. So I think given the backdrop of inflation has picked back up and wages just aren't rising, like it is not a recipe of getting ahead here. [00:01:38] S2: I would suggest, Paul, on this jobs moment, that health care costs, housing insurance costs, line up the list of costs is just a huge story. [00:01:49] S1: Huge story. And I think we kind of saw that in the midterms here. Affordability is the broader number. So, Claudia, is. [00:01:57] S0: A $ 70, 000. [00:01:58] S1: Change in on-farm payrolls, is that kind of the new normal? Because there was a time we were all used to something $ 100, 000, $ 200, 000. Is sub- $ 100, 000 the new world here?
00:01:58 · Paul Sweeney, Claudia Sahm, Tom Keene
[00:01:58] S1: Change in on-farm payrolls, is that kind of the new normal? Because there was a time we were all used to something $ 100, 000, $ 200, 000. Is sub- $ 100, 000 the new world here? [00:02:08] S0: So, yes, I think so, at least for now. And it's true. Since the beginning of the year, payrolls have averaged a little under 70,000. Now we've had some times where we've got some upside surprise on that and saw some in the hundreds of thousands and some good months, but that didn't hold. And we've seen some pretty weak months. Last month was just a little under 30,000, but it has been really pretty stable around that average of about 70,000, which is a big improvement over last year. Like we ended the year with some really like scary payroll numbers. But if you go back a few years from that, 100,000, 200,000. These are the averages. And the thread that ties this kind of average moving around so much is we have had really big shifts in labor force growth in the U.S. And a lot of that ties back to big shifts in immigration policy. And we've also see, you know, an aging of the workforce. We've got, you know, so demographics are kind of pulling that average down. So yeah, we might get a good month today, but it's going to take a lot to pull that average up to numbers like the 200,000s we've been used to for some time. [00:03:11] S2: Claudia, I see two Americas. I see a boom with revisions, 249,000, boom number on nonfarm payrolls. And I see the green span underemployment rate going from a 7.6% up to 7.9%. Is this a fully employed America?
00:03:11 · Tom Keene, Claudia Sahm, Paul Sweeney
[00:03:11] S2: Claudia, I see two Americas. I see a boom with revisions, 249,000, boom number on nonfarm payrolls. And I see the green span underemployment rate going from a 7.6% up to 7.9%. Is this a fully employed America? [00:03:33] S0: The labor market has had this really uncomfortable, curious balance of the low hiring, but the low firing, right? So it really still is a difficult environment if you are looking for a job or a better job to get that. But people are holding on to their jobs, which is a good thing, right? The layoff rate is low. It's very unusual. So I think it does give this view of like there's two sides two Americas in the labor market. And there's some truth to that. But we do like to see, I mean, the payroll numbers, surprise to the upside. You know, as I said before, we've seen some big surprises like this earlier in the year, and then they ebb away. You know, so I've got to see some months of this before I'm really convinced we're seeing an acceleration of the labor market. But, you know, good news is good news. And the unemployment rate, the overall unemployment rate did tick down with participation going up. So, like, that's a good setup. So we're going to take the good where we have it. But we have been head faked by this labor market in terms of acceleration several times this year. [00:04:36] S2: Paul, am I right? Kevin Hassett of the White House will be with Bloomberg? [00:04:40] S1: Yes. [00:04:40] S0: Nine-ish? Yes. [00:04:41] S1: We're going to have him and we'll get his thoughts here. [00:04:43] S2: Paul Sweeney with Claudia Sahm.
00:04:43 · Tom Keene, Paul Sweeney, Claudia Sahm
[00:04:43] S2: Paul Sweeney with Claudia Sahm. [00:04:45] S1: Average hourly earnings on a year-over-year basis, Claudia Sahm, came in a little bit better than expected at 3.1%. Are you surprised that number's not even higher given how tight The labor market is, why can't I walk into my boss and say, I need 10% increase if you want. [00:04:58] S0: To keep me? Well, I think the boss will be like, good luck. Find that job. I mean, that's the thing right now. And I watch really carefully the quit rate. So we did get an update on Jolt's this week. And there was a little tick up, but it's still pretty low. And that's a good sign of the bargaining power. If workers are out there quitting to get better jobs, that's when they have the leverage for the higher wages. It just does, it's just not there right now. If you don't have hiring being strong, the workers just don't have that ability to bargain. [00:05:27] S2: Can we like do like, there's no recession talk, but can we do like Claudia Sahm wheelhouse here? [00:05:33] S1: Sure. [00:05:34] S2: Claudia Sahm wheelhouse, folks. She's famed for looking at how an economy slows. Let's go to the opposite way, Claudia Sahm. When you studied at Michigan, you never, never thought about a sustained 6%. or more nominal GDP. How do you presume with our new politics that we will bring in this boom economy constructively?
00:05:34 · Tom Keene, Claudia Sahm, Paul Sweeney
[00:05:34] S2: Claudia Sahm wheelhouse, folks. She's famed for looking at how an economy slows. Let's go to the opposite way, Claudia Sahm. When you studied at Michigan, you never, never thought about a sustained 6%. or more nominal GDP. How do you presume with our new politics that we will bring in this boom economy constructively? [00:06:01] S0: So, you know, there's a lot of pieces to that. I do think going back to the question about immigration policy, labor force policy, like I'm less looking at, you know, the downturn in the labor market, but I am worried about some of the structural pieces of the labor market. And I think without a growing labor force, it's going to be hard to really consistently have those GDP gains. I mean, I am optimistic about some of our technology improvements on the horizon, but But that is really tough to string together quarter after quarter, year after year, improvements in productivity growth, right? And so I think you've got to have a multi-pronged approach in terms of the policy. Hanging our hats on AI is not the way to go in terms of really wanting to keep those strong growth numbers. I think there are some structural pieces on the labor market that deserve attention and may very well get some attention given the election results this week. [00:06:54] S1: Labor force participation rate, again, a little bit better, 61.9%. Where's a healthy number? Like, what should we be looking for? Is that a good number, 61.9? Should it be higher or lower?