Moody's Talks - Inside Economics - Giddy to Great

Episode Date: December 8, 2023

Inside Economics discusses the December jobs report, which left Mark feeling “giddy”, Cris “cheerful”, Dante “happy”, and Marisa “great”. The team considers the jobs numbers in the context of other recent labor market indicators which show a resilient but moderating job market. And they end with an assessment of whether the recently boomy labor supply and strong productivity growth are sustainable.Follow Mark Zandi @MarkZandi, Cris deRitis @MiddleWayEcon, and Marisa DiNatale on LinkedIn for additional insight. Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by a few of my colleagues, my two trusty co-host, Marissa D. Natalee, Chris D. Reuters. Hi, guys. Hi, Mark. And I'm absolutely giddy, but you'll know why in just a few minutes, but I'm feeling pretty good. Actually, feeling very good. And we also have Dante, Dante Di Antonio, and that might give you a clue as to why I'm so giddy. Hi, Mark.

How you doing? Because Dante's here. Yeah. I always like Jontay. Always like Dante on Jobs Friday. This is Jobs Friday, December the 8th. So we got the November employment report. So we're going to definitely dive into that.

Boy, was that, well, I'm not going to bias anyone's perspective on that. Boy, was that good. Can't help yourself. I can't help my Ziam getting. Contain his giddiness. Well, we've had a, you know, kind of a good week. We had a Moody's. kind of holiday event last night, right? Chris, you were there? How's everyone feeling today?

Chris is drinking like so much. I couldn't believe how much he was drinking. I'm not kidding. He tried to fool everyone by drinking cider. I don't know what that means, but I'm drinking cider. And then he was off and running, you know, all these weird Italian drinks. I never heard of them. I don't know. Maybe you, maybe you drank a little too much because I was stuck with the cider. Did you, you know, I couldn't get past the beer. I had Estella. I don't drink beer very often, but boy, did that taste good. That beer tastes good.

Dante, I didn't see you there. Were you there? I was there. Yeah, you were, there was a horde of people around you all the time. I figured I was going to get a chance to talk to you this morning. Right, right. Oh, good. Well, I'm glad you were there.

And of course, Marissa, you're in California. I was not there. Could not partake, even virtually. We even got to meet Alana and Franco in a person. Yeah. Yeah, right. Our producers here. Our producers here are silent producers that keep the train on the tracks.

Yeah. So that was good. And Alano was regaling us of her previous employer. We won't go into that. We should have a separate podcast just for that. Explore that a little bit with her. Yeah, absolutely. And I should say we have two podcasts for this week.

This one we're recording right now. Obviously, we're going to focus on the job numbers and the labor market more broadly. will play the game, of course. But we have a, let's call it a bonus podcast. We had, we taped that earlier in the week with Mark Donovan, who founded Denver Basic Income Project. I think I got to have that right. That was a really interesting conversation around basic, universal basic income or guaranteed income. He's got a program that he established in Denver and is now kind of scientifically designed and getting some results. Pretty cool conversation, I thought.

So you can avail yourselves with that as well. Okay. Can I give a shout out to Marissa as well? Because we also did a webinar yesterday about different risks. And I thought she was masterful in covering social and political risks to the economy. So any listeners who are interested in kind of not just the basis. line, but other potential risks, I'd encourage it to take a lesson there. But you walk that tightrope really well.

I concur, you know, I went when the risks, we did a survey of all the participants to the webinar and said, what is what are you most worried about? And then we took the top six responses. And, you know, it felt like those were the top six, you know. And the commercial, I said, okay, guys, which ones do you want to take? And of course, Chris raised his hand first and said, I want to do CRE in housing, which is absolutely positively the right thing. Makes sense. Yeah.

Makes total sense. And then I said to Mercia, well, what do you want to do? He goes, well, probably makes sense for you to do the Fed and the banking financial system. That makes perfect sense. But that left you with two really tough ones, geopolitical threats and social and political unrest. So I'm going, oh, whoa, that's going to be, I can't wait to see what she comes up with. But I thought you did a great job, really did. Masterful.

Yeah. And actually, that podcast, I thought it was, I mean, excuse me, that webinar. I thought that webinar was, it could have been the best we've ever done, I thought. Well, it'll be interesting to give feedback on it. Right. A little differently than we normally do. So I'm curious to see what people think. Really curious.

But I really, I actually enjoyed it, you know, so really a lot of fun. we had tons of questions. So it was really good. Okay, well, let's get to the mean of the matter. We got, as I said, the employment report from the Bureau of Labor Statistics today for the month of November. This is the morning of Friday, December 8th. Dante, you want to give us the rundown and give us a sense of how you're thinking about the numbers? Sure, yeah.

Maybe I'm not quite as giddy as you are, but I think it was a good report. I think there certainly are pieces of it that people could pick out to make a headline that makes it seem. not so favorable. I'm not going to do that, but I think there certainly are some pieces in a relationship that people could cherry pick and try to paint it in a more negative light. But sort of at a high level, added 199,000 jobs in November. If anything, that's a little bit overstated. You got the sort of the positive impact from the UAW strike ending, which is lifting that by somewhere between 30 and 40,000 relative to what the sort of underlying job growth was, It's just like we had sort of a downweight on October job growth for the same reason.

Private sector payrolls were up 150,000. The average over the last three months in the private sector is right around there. It's about 145K. It's definitely slowed quite a bit since the beginning of the year, although over the last three or four months, things have been largely stable in terms of a three-month average of growth. Public sector keeps cranking out jobs. It seems to be their turn to shine here after a slow initial recovery. Public sector added almost 50,000 jobs again.

It's averaging almost 60,000 over the last three months. So that's really propping up that headline jobs number quite a bit. Can I stop you just right there real quick? Because one of the kind of the, I mean, I followed the tweeting a little bit this morning. And one of the criticisms or blemishes, you know, people are trying to nitpick in my view. But, you know, they're focused on the fact that a lot of the job growth is in government and, of course, health care, those two sectors. and therefore somehow that's not quite as good as job growth in other parts of the economy. How do you think about that?

I don't think it's a problem that we're adding a lot of jobs in government and health care. I mean, obviously, you'd like to see job growth everywhere, but we didn't see big job losses in many industries. That would be more concerning to me. There were a couple pockets that looked a little bit weak, but I think sort of by design, we expect that job growth is going to be slowing across most industries if we expect overall job growth to be slowing here. So you're going to end up with some uncomfortable readings in some places, I think. You know, the fact that health care, there's still strong demand there.

I don't think that's a problem. Government, again, I think is really just a timing thing, right? There was, you know, really weak recovery in the public sector for the first two years. And so they're just sort of catching up now that some of that private sector demand has slowed down a little bit. So they're sort of taking advantage of that situation. I don't read it as a negative. I say health care too, same dynamic, right?

I mean, the health care sector was kind of boxed out because the rest of the So the economy was saying, I'm going to pay you whatever it takes to, you know, and the health care sector couldn't do that. And government couldn't do that, obviously, as well. So they had to wait their turn. And now's their turn. So they're adding to payrolls. And just kind of restoring the lost jobs during the pandemic. That's my interpretation of what's going on.

Yeah, I agree. And so, yeah, the strength there doesn't bother me. If we saw a lot of weakness everywhere else, that would be more concerning to me. But that's not how I read this report, at least, that there's not a ton of weakness all over the place. And you make another good point. And we all, we just get this on the radar screen. I mean, job growth, we need it to continue to at some point. It's got it slow.

It doesn't have to slow right now because we're getting tremendous labor force growth that I'm sure you're going to come back to. But, you know, it's got it. That's not going to, that's not sustainable, I don't think. And we will see slower job growth. And if we get job growth that's kind of where we think it's going to be, kind of around 100K per month, maybe a little south of that, that means some sectors can't experience job growth and may even experience some declines.

That's the point you're making. Agreed. Yeah. Yeah. Okay. All right. Sorry. I interrupted.

That's okay. Yeah. Construction was weaker than it's been. You know, it was only up 2000s, the weakest reading since March there again. I mean, it's been a lot stronger. I think it's held up a lot better than we expected it to. So seeing some weakness there is probably not all that surprising. You know, manufacturing was up 28,000.

That doesn't really mean a whole lot given the strike impact. It was, you know, probably the, you know, abstracting from that was probably slightly down. You know, the strike impact was probably a little over 30K. So manufacturing more broadly was probably down a little bit over the month. Transformation warehousing again has been weak recently. It was down another 5,000. I wouldn't, you know, sort of not a concerning development to me. Information was up 10,000.

I think there's a little bit of positive impact probably from the resolution of the SAG after a strike. Yeah, we had seen some weakness and information over the last couple of months as a result of that. And so I think we got a little bit of a payback there. Professional business services has been very, very weak. You know, sort of a surprising turn in the second half of the year. That's one where it had been pretty strong in the first half of 2020 and is really weakened.

Some of that is temp help services falls into there. And that's been weak over the last 12 or 18 months. So it's obviously causing some of that headwind. Healthcare, as you mentioned, incredibly strong over 90,000 jobs added, averaging over 80,000 jobs a month over the last three. Leisure hospitality is still doing pretty well, 40,000 jobs there, you know, averaging slightly better than that in the last three months. one of those data points I mentioned that somebody could cherry pick, you know, wage growth was up 0.4%. Before you go there, let me just ask on jobs. I mean, what do you, you know, think, you know, extracting from the vagaries of the monthly data, strike effects,

seasonality, everything else, what do you think the underlying rate of a monthly job growth is? I think very recently it's 175. 175. Yeah. And would you concur with what I said earlier that, you know, at some point we're here in the not too distant future, we're headed closer to 100K, maybe a little south. I think we have to be. I mean, to your point,

labor force growth has been strong, but it certainly doesn't seem like there's fundamental to support labor force growth remaining that strong for very long. Although I want to come back to that point. We can talk about that. But anyway, okay,

proceed. Go ahead. Yes, I think, you know, somebody could make a headline that wage growth was up 0.4%. That's,

you know, the strongest reading since the, the middle of the year. That could seem concerning. The reality is year-over-year growth is still down, right? The November reading from last year was even stronger than the one we got today. So, you know, year-over-year wage growth is still moderating. It's back right around 4%. You know, it hasn't moderated quickly here in recent months, but the trend has been, you know, pretty consistently down to a slow, slow degree. On the household survey side of things, again, here, I think you can obviously sort of paint whatever store you want to. If you just focus on this,

month, you could make it seem like the labor market is booming and that could be a problem. But if that's ignoring the overly weak reading we got in the household survey last month, so I think if you sort of take them in aggregate, you get a much more accurate and less concerning story about what's going on. The labor force expanded by over 500,000 this month. But again, that's against a big decline last month. The reality is it's averaging about 150,000 people added to the labor force over the last two months, which is pretty much in the ballpark that we've been in.

So there's really not a whole lot of new information there. Labor Force participation ticked back up to where it was after declining a little bit last month. So there again, if you sort of take the two months in total, there's not a whole lot to write home about. You know, the unemployment rate, again, there's one of those headlines. It dropped from 3-9 to 3-7. You can certainly, you know, get worked up about that if you want to and say, hey,

we want the unemployment rate to move in the other direction. We want it to be going up a little bit, if anything. We don't want it to be coming back down. But there again, it was at 3-7 pretty recently. It was, you know, as low as 3-5. in July, so it's still up off of that bottom over the last couple of months. Seems like it's steadfastly between three and a half and four. I mean, it's not, yeah.

Right. And we get month to month movements there that I don't, you know, no one should pay all that much attention to, I don't think. And so, again, not overly concerning to me. Employment in the household survey was up almost 750,000. Again, you could say, oh, my God, it's a huge gain. But over the last two months, it's averaging $200,000, which is exactly in line with the payroll survey, again, not a whole lot to write home about, I don't think.

So by and large, I'm in your camp. I think it's a positive report. I think it gives us most of what we were hoping to see. Could it have been slightly better? I think maybe you expect job growth to slow a little bit faster. Maybe you get wage growth that comes in a little bit more, although we might talk about how that might not be necessary anymore. So I read it as a good report.

Like I said, I think you can nitpick at it maybe a little bit more than some of the past ones that we've had, but I don't know that I buy into that. I can't, I'm really hard pressed to knit. I've, Chris, Chris's face tells me he's going to try in a minute. I mean, really, I mean, even the job growth, you're saying your, your knit is maybe it's too strong, right? That's your knit. But in the context of this labor force growth, I mean, it's actually just right, right? I mean, you're getting a lot of labor force growth with no wage, in wage growth continues to moderate. I mean, that's why wouldn't you want 175 or 200k why is that a knit that's what's the opposite of a knit you know is is there an opposite whatever it is knit times minus point one or nine minus one

that's what that's what that is yeah it anti knit anti knit there anti knit it's an anti knit i think we got a title for the podcast somehow we got to get that in there man anti knit is cool that's cool Chris is so good with that one will have any idea what the podcast is about. But they'll be intrigued. I got to listen to this. This sounds like artificial intelligence somehow. AI.

Yeah. And then they'll listen. Yeah. Anyway. Okay. Bottom line, you step back. You say what? I'm happy at the end of the day.

Yeah. I mean, I think it's not giddy. You're not giddy. I'm not giddy. I'm happy. You're happy. A forecast was good. So that makes me happy.

Okay. All right. We're going to go around the horn here. I'm giddy. We're going to do this, you know, as you each get a chance to talk. I'm giddy, and I haven't had a chance to talk, but I'm still giddy. And Dante is happy. Okay. All right. Now we move forward. Mercer. I think it's great. And kudos to Dante for nailing the forecast, almost to the number. That's a good point. I have nothing negative to say about it. I don't know. Yeah, I think it's great. I think it's exactly what we want to see.

Job growth is slowing, but it's not coming at the expense of layoffs, a bunch of people being laid off, right? It's coming from slower hiring. I don't know. I don't have anything bad to say about it. Yeah. You know, I know. What are the negative things you were reading about it?

that people think it's too strong. But the one I saw was this point about the composition of job growth. You excluded government in health care. Then, you know, the job growth is much weaker. And that's kind of the implication is you're getting to underlying job growth, which I just, you know, doesn't resonate with me at all. I mean, the composition even within government, it's, I mean, I don't know, is it bad to add jobs in those industries?

I mean, it's state and local government jobs, both in education and outside of education, that were added. Federal government was like zero, I think. And yeah, we got a huge gain in health care that was pretty broad-based, which we need, as we, Dante alluded to. And as you said, we want to see private employment growth slow. And we saw that. So I don't have anything negative to say. The big gain on the household side, if you adjust it for the payroll survey concept, it's much smaller. Still big.

It's about $480,000. But even that, that looks good to me too. Yeah. So bottom line, take a step back. Your adjective is great. Great. Yeah. Great.

Great. Great. Great with the emphasis on the GR. Yeah. Great. Okay. Got it. Okay.

I'm giddy. I'm telling you. This is what happened. I can tell. I can tell. Maybe it was that beer from last night too. Yeah, could be.

Anyway, Chris, what do you think? Cheerful. Cheerful. Okay. All right. Yeah.

Okay. You're giddy. I'm cheerful. Where does that land, though, in the spectrum from giddy to happy to great? I think it's between you and probably it's, uh,

you? Marissa, me, and then Dante. You, me. Okay, got it. Right. Okay. That's how I would think. Got it.

Cheerful. It's not quite as, it's not quite happy. Yeah. It's more than happy. That's what I'm saying. Well, you're right. It's not great. But it's not great.

Okay. Now that we got that as down. These are technical terms, by the way. Technical terms, right. It was all good. This is how we define recessions, by the way. Right. I think that's how the community operates.

That's how it operates. The secretive committee. Go ahead, Chris. If you want NITS, you can dig into the demographic data. But, you know, as we've said in the past, that's subject to some volatility because it is a smaller sample. So African American men saw an increase in their unemployment rate. Asian also saw an increase in their unemployment rate. Less in high school educated also saw some weakness.

there. So yeah, there are. Is that because of labor force or was that because it's a combination, right? You have people coming. You also, you did see on unemployment rise in those categories, but you saw a big increase in the labor force supply, right? So, yeah. So again, how do you? And then when you take a step back, not just the last month, but in the current, if you look kind of over the last year or two, is it still in the same bounds, the same boundary, you know? Yeah, exactly. It's not skyrocketing. It's not, you know, it's something to watch maybe, right, if the trend were to continue. But it's, yeah, again, really searching for the nits.

Right. And this whole idea of the composition, you know, I look at leisure hospitality as my example, that I looked it up today. It's still not leisure hospitality employment is still not back. It's getting close to where it was in 2019, but it's not all the way back to. to where it was. So we still have some gaps in the market to be filled here. So cheerful. Shearful.

Yeah. Feels pretty good. Well, let me just, let's just broaden out the camera a little bit. And there's a lot of labor market data that came out this week. We got the job opening labor turnover survey. That's where you get the open unfilled positions, quits, hires, that kind of thing. We've got unemployment insurance claims. We got Challenger report.

I'm not sure else what we could. Maybe other things. Anything in those other reports that color, you know, are thinking around what the message is in today's jobs numbers, Dante? Or is it all very consistent? I think it's pretty consistent. If you want a sort of unicorn positive report, it was the Joltz report earlier this week, right? I mean, basically everything held steady, but job openings fell by a lot to basically come back to the trend they were on a couple months ago, They had sort of jumped a few months ago for no real apparent reason.

And now they're sort of back to that moderating trend. But, you know, hires were basically unchanged. Quits were basically unchanged. Layoffs basically stayed the same, you know, sort of indications that the labor market is still healthy, but sort of labor demand keeps cooling, which is, I think, exactly what we hope to see, right? We're still adding jobs. Layoffs aren't picking up.

But it's clear that firms, you know, are reducing labor demand to some degree, which should help, you know, see that sort of moderating job growth moving forward. So I think, yeah, I read that as overall, almost entirely positive. And I think, again, still consistent with the claims data that shows layoffs are still low. You know, sort of everything is positive in the sense that it all points to layoffs holding steady, but job growth moderating anyway, which is, I think, the best we can hope for. Mercer, Chris, anything you saw on the other labor market data that came out this week, that was inconsistent or caught your eye or anything? No. Mercer?

No. I mean, yeah, it's all consistent. Yeah. And it's all good. It's showing what we want to, what we were hoping for, slowing job growth without rising layoffs. Yeah. I mean, it's just, it's just amazing to me. The job market is, I think, I'm gone from giddy to amazing.

It's just amazing, isn't it? Come on, think about it for a second. I mean, the job creation is gargantuan. win. And it's, you know, the labor force is keeping up with it. And unemployment is low, stable under 4%. Wage growth is moderating. You know, wage growth is at 4% year over year. And, you know, you might argue that that's too high for, you know, to be consistent with the fed's 2% inflation target. I would take umbrage with. Is umbra? Can I use the word umbrage with? I would take exception to that, yeah, that, uh, because productivity growth is picked up a lot and we're going to come

back to that. So, you know, 4% may be disinflationary. I don't know, given the current rate of productivity. So, obviously, we have to make sure that the productivity gains are sustainable, but, you know, nonetheless, I can't think of a single thing I'm looking at, not one thing I'm looking at. And I'm saying, oh, that bothers me. That's just really bizarre. I mean, it's unprecedented, I have to say. It's usually I can see. something in the day. Of course, maybe I have confirmation bias. I don't know. Maybe. Maybe. But I don't, I'm looking at this data and I'm going, wow, this is pretty darn incredible. I mean, we got we got to take a snapshot at this point in time. It's like this is a rip-roaring perfect labor market

when you get right down to it. No? I mean, really, it is. It's unbelievable. Unbelievable. I think for me, the rebound in the labor force after the pandemic that included all demographic groups has really been surprising and welcome, right? I mean, you've seen like women's prime age women's participation rate come back quickly. You know, we thought there may be a lot of people that just wouldn't come back into the labor force or participate to the, the same extent after the pandemic. And you really see it across all demographic groups. It's amazing that there's that much labor supply out there. I think I underestimated that.

Yeah. Yeah. Okay. Well, let's play the game. The statistics game. So we put forward a statistic. The rest of the group tries to figure that out with questions and clues, deductive reasoning. The best stat is one that's not so easy.

would get it immediately and one that sounds so hard we never get it. And if it's apropos to the topic at hand, bonus, but it doesn't have to be. So, Marissa, you want to go first? Sure. Oh, can I just say one more thing about the jobs report that you did? Sure. And you mentioned this morning we had a macro meeting. The growth in the labor force was either predominantly or almost all among foreign-born

workers last month. we talked about perhaps there's more immigration than is being measured. And a lot of the labor force growth of the past year has been among foreign-born workers. It doesn't mean they're new immigrants into the country. It means they weren't born in the United States. But that has been an enormous source of supply in the labor force. Yeah, I'm going to come back to the supply side after the game. Yeah.

Because I want to explore that. Oh, okay. All right. We're not done talking about it. No, no, no. No, no. We'll come back. Okay.

But let's play the game. So what's your stat? My stat is 3.1%. I know what that is. Yeah, we all. So that violated the first principle of, uh, wait, what did you say? I didn't hear what you said. University of Michigan inflation expectation.

No. I mean, Oh. Is it from today? Is it from the employment report? No, it's not. It's not. Oh, that's, well, okay.

Okay. So both Chris and I got head faked here. Yeah. Because we just got the University of. Michigan survey for the month of, I guess, December. And they published inflation expectations one month ahead. And it came in at a very low 3.1%. Okay. I didn't look at it. That's not what is it. Is it the quits rate? No. No. Is it from the Joltz report? No. Okay. Is it from the employment report today? No. Oh, geez, Louise. Okay. Is it related a job? It's not.

It's not. It's not. It's not related to you. Making us all hell. I am. What the heck? Yes, it's related to the economy. It's not related to the labor market, though.

Oh, it's not. No, which I know is I'm violating kind of a rule here. No, no. That's fine. That's fine. I kind of want to make it harder for you guys. Is it a release that came out this week? Yeah.

Oh, and it was a government statistic? No. Oh, oh, not a government statistic. Okay. Okay. ISM surveys came out that can't be yet. We had the Challenger report. It's not from that, is it?

Nope. Not job market really. Oh, not job market related, right. What else came out? Productivity. No, that's government, right? Yeah, that's government. That's government.

Wow. Okay. We thought I was about to berate for Marissa. This is too easy, but now I'm going to berate it because it's too goddamn, excuse me. It's hard. Okay. Geez, Louise. The roller coaster of emotions over here.

I know. It's right. Consumer related. Uh-huh. Yes. Consumer credit. Yes. The growth in consumer credit.

It doesn't government release. It's the year. It was. It's the Fed. You don't, okay. That's not part of the government? I'm just saying. Okay.

Quasi government. Oh, wow. I consider a part of the government. I don't know. An independent government agency. Okay. You're saying it's independent. Yeah.

Yeah. It's chartered by the, what, the 1913 Federal Reserve Act, right? I mean, there you're going to. Okay. All right. Fine. It doesn't matter. It doesn't matter.

That's fine. No worries. No worries. We wouldn't have gotten it anyway. We wouldn't have gotten it anyway. It's the year of her. year growth in consumer credit outstanding in October. This was much slower than we were expecting credit growth to expand by it, expanded by about $5 billion over the month. And this is the

slowest rate of growth that we've seen since April of 2021 in credit. So it's been coming in quite quickly, probably because credit has gotten a lot more expensive with rising rates. Demand is falling off for a lot of both revolving and non-revolving forms of credit. Chris, do you know is the Equifax, because we get all the credit files in country, and I view the Equifax data as being kind of the Bible, you know, for this data, and it's more timely. I think we got November data. Any chance you had to, we're able to look at that data?

No. I haven't seen it. Okay. Okay. But I think broadly, consistent with what the Merce is pointing to in the Fed data, the growth in a debt outstanding, consumer credit outstanding, is slowing, you know, pretty sharply here. I mean, last I looked for bank cards from the Equifax data. So this is, you know, credit cards issued by banks. We're down into the kind of the, I want to say 5%, 4, 5%, you know, something like that, year over a year, which means on a monthly three-month basis, six-month basis, secret.

It's in the low single digit, probably close to the rate of inflation, you know, something like that. I look at that and, you know, I think, okay, that's probably explained by the tightening and underwriting, in part by the tightening and underwriting in the wake of the banking crisis. It's partly demand side, I think, because inflation has moderated and people, the pressure on people to borrow because their real incomes are rising has abated. And also the interest rates on cards are like, they're like extraordinarily high. I don't know. I mean, record high. And that makes it very costly to borrow. And I think people respond to that to some degree.

Inflation's back in, so that plays a role. But I look at that and I feel, you know, I grow a little less nervous about what's going on with regard to consumer credit quality, which, you know, we all know, we've seen some erosion there. Dillinquency rates have started to rise. Chris, what do you, because you look at these data very carefully. Does that narrative I just laid out resonate with you? Are you consistent with the way you're thinking about things? It does in terms of the aggregate, right? We're thinking macro and broad economy.

If you look a little bit below the surface, you see some different trends by credit score. And also they're, you have the buy now, pay later, right? So you have some other alternative credit sources out there that we may not be capturing. But those are still relatively small in the grand scheme of things. They do cater, though, to kind of lower income, lower credit borrowers, though. So I think you'd want to be a little cautious there. You do see delinquency rates rising still. So that's something to watch.

But in terms of the broader economic impact, I agree, you don't see evidence of a wide swath of consumers over extending themselves or potentially getting into trouble here. So I think the moderation is a positive. Yeah. And I guess, you know, real credit outstanding is basically zero, right? If you account for inflation. Yeah, right. That 3.1% is the year over year.

Year over year in October. Yep. In October for all consumer credit revolving and non-revolving. Yes. Okay. And do you know offhand was the non-revolving? revolving, which is like auto and student loans, was that weaker or stronger? Than 3.1, which were they both about the same?

Oh, yeah. So they, well, non revolving was much weaker. Much weaker. Yeah, yeah. Yeah. That may go to the student loan, you know, debt, there's a lot of debt forgiveness. And there's also, you know, putting people in income driven repayment plans, although that wouldn't affect the amount outstanding, would it?

I guess it would. It might. There's some forgiveness attached to that, but that might be playing a role. Okay, that's interesting. And use cars. Oh, yeah. Use car prices. Use car prices.

All about balances. Yeah. Good point. Okay. Great. That was a great statistic. Very good, Marissa. Dante, you're up.

I'm going to go pretty deep in the weeds here. Just I'm giving you a forewarning. Minus 38.4,000. Was this an employment? It's an industry. It's in the employment report. Change. Payroll employment for a certain industry.

But I conveningly left out of the rundown at the beginning. Ah, okay. So what fell 38,400 jobs? Wow. That is a big number. It's one of those things that somebody could call a blemish, right? Yeah. Or a data problem, you know, depending on your perspective,

especially one who's giddy. You know, this is this cognitive, don't throw cognitive, cognitive dissonance my way. We're, I think I'm using that word correctly. You said you left it out of the rundown? I don't think I mentioned it now because I knew I was going to use it. Is it in the service side of the economy? Yes. Okay.

Is it the retail part? Oh, that's right. Retail trade. Department stores? Over, it's overall retail trade. Oh, overall retail trade. Okay. Yeah.

Okay. And I brought this up because I think it would actually make your case. stronger because I think that's that was the biggest single decline of any industry obviously. But I think it's almost purely a seasonal adjustment problem. It's not an actual decline. If you look last November, it actually declined by over 45,000. And it's just there's been a shift in the seasonal pattern, right? The ramp up in hiring and retail is much lower in November than it used to be. And so you're getting these big negative prints in November that aren't real, right? We still added lots of jobs in retail, a couple hundred thousand jobs. But that gain is smaller than it had been

in prior years. And so it's reading as a negative in retail trade. Again, so that's, you know, a pretty big weight on that top line job number. You know, if you erase that, private sector gains are closer to 200K instead of 150. So again, I think if somebody's, you know, headlining that as a problem with the report, it's, you know, not really a problem at all. It's just a quirk. also, I, talk me if I'm wrong, but I believe if you go back pre-pendemic, retail trade employment was consistently declining, right? Because I think that goes to online. e-tailing. So you were seeing a shift in jobs away from straight up retail into wholesaling and transportation and distribution, you know, UPS, you know, FedEx, that kind of thing. Yeah. And I think

if anything over the last couple years, I think retail has recovered better than I think maybe we expected it would when the pandemic first happens. I think it's actually been a more positive story than we might have thought it would be. So yeah, yeah. Okay, good one. Chris, you're up. All right. Mine is deep in the bowels of the employment report and required a calculation. Okay. That's all helpful. Thank you. 59.3%. But it makes a point. So 59.3%. So it's a ratio of two things. Is it household or payroll side of the report? It is household. Oh, interesting. Has it related to part-time full-time employment?

No. No. Is it related to some, some composition of unemployed? No. Is it an employment to population ratio for some demographic group? That's interesting. It is not employment, but it is a ratio. The population is in the denominator for a demographic group. Participation.

What's that? Labor Force participation. No. No? Oh, you said population. of non-participation. Non-participation? Oh.

Oh, really? It's the percentage, you give up? Yeah, go ahead. A percentage of people, over the age of 55, who are not in the labor force, don't want a job. It's 59.4%. 59.3%. 3%. Okay.

Oh, interesting. Okay. Yeah. So. And why didn't you just look at the labor force? Why did you do the non-participation rate as opposed to the participation rate? Just to mess with us. You know, got to get a-in with us.

Just messing with us. Okay. Go ahead. All right. Okay. Fair enough. Go ahead. You can have you, you know, constantly giddy.

Yeah, no, you're right. You're right. It's a good point. It's good point. The reason why I chose this is I'm trying to understand the supply. Where are all these people coming from? Where's the supply? coming from, right? So Marissa mentioned immigrants, certainly, but maybe there's some untapped,

you know, folks on the sideline as well. So this number is up from what it was prior to the pandemic. Prior to the pandemic, we had 58% of the people over the age of 55, not looking for a job. So this has gone up. So you've seen some people stepping out, right? But the number got as high as 60.5% earlier this year. So you've seen some of these older folks coming back in. So they have been providing some of the supply. If we went all the way back down to 58%, so we returned to the pre-pendemic rate here, that's another 1.3 million people that could rejoin the labor force from that 55 plus cohort. So this could go on for a while, right? There's still other folks out there that could still be pulled in off the sidelines. So what do you think the explanation is for why?

the participation rate is lower, the non-participation rate is higher in the post-pandemic period. What's going on here, do you think? I think you saw a lot of older folks stepping out of labor market because they saw their house value rise, stock portfolio is increased, right? So they may have had certainly some stimulus on the lower end of the spectrum. So I think that certainly allowed people to step out. But you do see some coming back in. I suspect you'll see some more coming back in.

So mostly financial. Yeah, that's my guess. Yeah, everyone's, well, net worth increased quite dramatically in the pandemic, since the pandemic hit. Stock prices are up, housing values are up, and you're saying they just don't need to work. So therefore, yeah. But now with time passing, they may need to do so. and or I guess lifestyle or want to. That's right.

They took a bit of a break and they said, you know, I got to get back. I got to do something here. I don't. Yeah. Is there a reason to think that'll normalize though? I mean,

because isn't there some demographic shift within that group too? I mean, like the 55 and older group has gotten older over time and that's going to continue to happen. Right. So you would think that would put downward pressure on the share of people who are going to be looking for work right as that group as a whole starts to age. So do you think there's a reason it will get back to where it was? before? Well, that assumes that their finances are in shape, right? I'm not convinced that that's the

case. So, yeah, it'll be older, but I think you'll still need money. People under pressure. Okay. We'll have to come back in. But I agree. I don't know that it goes all the way back to 58 percent. Maybe it's 58 and a half or something. But even there, it still leaves room for more people to come back. Yeah. Yeah. I'm just trying to understand where all these people are coming from who continue to join the labor force, continue to take jobs. Well, it could be significant. If you go from 59 to 58, that's one percentage point. If I do my arithmetic right, that's like 1.6 million, 1.7 million people into the labor force. That's consequential, you know, if that were to happen.

Okay, I got one. I'm not sure if it's too easy or too hard. Probably, I always think it's too hard, but you guys are so good at this, particularly Marissa. She gets like, every time I think it's hard, she gets it right away. Well, here it goes. No pressure. No pressure. And this is, do you see how I'm playing a little bit of a mind game here?

Yeah. Yeah. Yeah. I'm messing with me. I'm getting into her mind. Yeah. And now she looks like she's got a bit of a headache. Yeah.

Shut up, Mark. Just tell me this. Two years. Two years. Dante, I can't hear you. That's a stat. Two years. That's it.

Two years. That's my stat. I stand by it. The time since December 8th, 2021. Is that the, it's, oh. God, you should think about it in that context. That's a good way of doing it. Yeah.

Yeah. In that context. This is job market related? Job market related. It goes to the amazing job market. Two years of continuous job growth. No. We've had more than that, right?

Two years that the unemployment rate has been below 4%. Yeah. Basically where it is. Very good. See, I told you. Yeah. That's amazing. He's great at this.

Yeah, two years. We dip below 4% December of 2021. And now we are here in November, 2023, two years of sub 4% unemployment. That is amazing, right? Good reason to be getting, you know, pretty, pretty incredible. And it's rock solid. It's rock solid.

Here's another interesting statistic. I'll ask you this. What do you think real GDP growth per annum has been over those two years, that two-year period, with stable unemployment, unemployment rock solid between three and a half and four. Which, by the way, just the reason I ask is that would probably be a pretty good guesstimate of the underlying potential growth rate of the economy, right? During that period, during this period.

What do you think it is? Somewhere between 2 and 2.5%. Yeah, exactly. 2.35% per annum. That feels like, to me, the underlying potential growth rate of the economy. And actually, over the last year, unemployment has been stable. You know, I think it was 3.6 November of 2022. It's 3.7 November of 2020.

So basically unchanged. And over that period, real GDP growth has been 3% on the nose. It just feels like the underlying potential growth of the economy is, you know, that's, we talk, economists talk about the real potential growth of the economy as if it's a constant. It's not. It goes up and down and all around. And, you know, it just feels like in the current context, I'm not saying this is underlying long run real potential growth. I'm not saying that, but I'm saying in the recent period, recent year, recent two years, it's not 2%. It's higher than that.

It's higher than that. You know, it's closer to 2.5% and even more, even stronger that over the past year. Does that make sense? Am I making sense or am I missing something? So do you think that the full? employment unemployment rate is 3.6% or something? What do you think Nehru is? Yeah, it's between three and a half and four. Yeah, I do. Yeah, and if you had asked me in 2019 before the pandemic, what's the full employment unemployment unemployment rate? I'd say between

three and a half and four. It's somehow, some way the people's thinking around this changed and they said, oh, it's four to four and a half. Of course, that's what the Federal Reserve is saying in their forecast that that's underlying full employment unemployment. But I just think it's three and a half to four, you know, consistent with, you know, what we're observing with everything that's going to the living market, wage growth and everything else. I mean, if three and a half to four percent was below full employment, meaning we're operating beyond full employment, wage growth would be accelerating.

It wouldn't be decelerating. It wouldn't be decelerating. So I just think the economy has, you know, we're at full employment. We're not beyond. and we have a lot more, we have more room to run than we think we have because the underlying potential growth of the economy is stronger. And that goes to the point you are making worse about labor force in immigration. I suspect, and of course, Chris made another good point I didn't even think about.

We may have a lot more juice coming from folks that are above the age of 55. We might see more further increase in participation or decline in non-participation in that group. But if you look at the, see how you remember. me up, Chris. Now I got to say non-participation. I got in your mind. You got in my mind. It's like I got to say both of those things now. But on immigration, it looked, there's growing evidence that there's a lot more immigrants coming into the country. And that is really, you know, that creates all kinds of issues. You can see that, you know, in the crowded hotels

in New York City. But it's also, it feels like it's, they're finding jobs and they're starting to it's helping with the labor force, the strong labor force growth. And then on the productivity side, I just want to bring this up, and maybe we can talk about it a little bit because I know both Chris and Dante have done a lot of work in this area.

The productivity growth feels like it's got some life to it. Again, you know, it ebbs and it flows and maybe this recent flow turns into an ebb. I'm not sure. But it does feel like we've got some, real underlying juice here. Dante, what do you think about that? I'm going to answer with a question to you, right?

I mean, so what do you expect GDP to grow by in the fourth quarter of this year? We obviously had a huge, you know, outsized gain in Q3, which is part of what's fueling that big productivity number. So what do you expect GDP growth to be in the fourth quarter? One and a half, two percent, you know, something like that, below potential. Right. So if you get below potential GDP growth in the fourth quarter, we know the labor market is still strong.

We're still adding lots of jobs. So, I mean, it's almost certain that. productivity is going to slow dramatically in the fourth quarter, right? I mean, it's, it's, arithmetic tells us that it's got to slow a lot. Yeah. Okay. Maybe go back below where we, so yeah, I don't know. I mean, it's, obviously it's great to have strong productivity growth in the third quarter. I'm just not sure that it's one of those. I think we need. No, but you're over a year. At least a two year average to really smooth out the, you know, it's one of the more volatile things that we see and it's only quarterly. Right. I'm not buying it yet, I guess is my answer. I like to see the

strong number. Yeah, I don't want to see weak productivity growth, but I want to be wrong, ultimately. Yeah. Right. I mean, year over year, it's 2.4%. Non-farm business productivity growth is 2. Right, which would be great. If that holds up, you know, over the next couple years. Well, that's, that would be spectacular, spectacular, right? Because, you know, between World War II and the financial crisis, it was two. Right. Between the financial crisis and now I think it's, what, one and a half? Maybe a little lower than that. Yeah, probably even a little lower. A little lower than that. Yeah. So if you get, I take two, you know, going back to two would be pretty good.

Two, two, two is over than that, it would be spectacular. What do you think, Chris? Is there you think something fundamentals going on here with productivity? Or are we just reading too much into these quarterly movements? No, I do think something is happening, but I agree with Dante. I think, you know, one quarter doesn't make a trend. So I expect things will moderate here. But I'm convinced it'll be stronger than it was prior to the pandemic in that great recession to 2019 period.

I think there have been some innovations, even just in terms of organization, right, the remote work and just how we are working. I think there are lots of organizational improvements. And then you throw on top of that some of the technological changes with the potential of AI and other technologies. He's like, I think there's going to be some lift here. Yeah. Okay. I'm going to end on that positive note, I think, right? Should we, because we started off giddy, we got to end up positive, even though Dante's

trying to bring us down. Can I ask you on trivia question based on your stat? So you said it's been two years since the unemployment rate's below 4%. Do you think that's the longest stretch that's ever been below 4%? I want to say no. I want to say in the late 60s, maybe it was longer than two years. It was definitely longer than late. It was almost, I'm just eyeball on the Detroit.

It looks like about four years straight in the late 60s. In the late 60s, depending on how you measure it right before the pandemic. If it's at or below 4%, we basically had exactly two years, you know, from March of 2018 to February of 2020. That was, you know, at or below 4%. And yeah, the late 60s. It was right before the pandemic.

Right before the pandemic, we had two years? Yeah, it wasn't below 4% for two years, but it was at or below 4%. percent for two years. That doesn't count. That doesn't count. I wasn't sure how I wasn't sure if you're including four percent in your two years. You got to be below four percent. Maybe it's three point nine five. That's right. I didn't look at the unrounded number. Yeah. Yeah, very good. Oh, that's interesting. So yeah, well, you know, I do think the late 60s, though, you might argue that that was unsustainable, that that was beyond full employment,

because that really was the beginning of that, uh, period. of out of control inflation, right? And that was a period of very, I'm speaking from memory, so I think I've got this right, may not. It's like my wife's adage, you know, I don't know what I'm talking about, but I could be right, you know, that adage, that during that period, it was tremendous fiscal stimulus, right, because you had the Vietnam War, a lot of defense spending, and then you had the great society, a lot of non-defense spending. So the government was really juicing stuff up. And actually, there was a, you know, think, if I recall correctly, a lot of evidence that the Federal Reserve was accommodating

all this stimulus. It wasn't raising interest rates probably should have been, but had been somewhat politicized. I think that's the history of that period. And that laid the foundation for the rapid inflation that ensued in the 1970s and into the 80s. Of course, other things happen like the oil embargo and the fact that the Fed didn't completely understand inflation expectation dynamics and we got into a wage price spiral. So there's a lot of stuff going on. But I think that period probably we were too juiced for too long. I don't, I don't sense that at all in the current period. But anyway, okay. Anything else folks want to bring up before we call this a podcast? I think that was pretty informative. And no, Chris? Listen to

the bonus episode. Listen to the bonus episode. Yeah. Okay. Marissa? No. No. I heard it.

Mr. De Antonio? Dr. De Antonio? No, I'll let you end on a positive note. I won't try to bring you down anymore. Yeah. Well, I hope everyone has a great weekend.

Go Eagles. And I'm just saying, go Eagles. And we'll call this a podcast. Take care, everyone.