Moody's Talks - Inside Economics - Noisy Data and New Variants

Episode Date: December 3, 2021

Mark, Ryan, and Cris welcome back Dante DeAntonio, Senior Economist at Moodys Analytics, to breakdown the November U.S. employment report. They find plenty of reasons for optimism even though job growth fell short of expectations. They also touch on the latest variant, Omicron, and how it may impact the economy.Full episode transcript here. 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 Zandi, Chief Economist of Moody's Analytics, and I'm joined by three of my colleagues today. Of course, there's Ryan Sweet, director of real-time economics, looking dapper. Not as dapper as Chris DeReedy's. Chris is the Deputy Chief Economist. No one looks, but even, you know, I've got my hair.

You got your tie on. My tie on, and I still don't look as dapper. Oh, come on, come on. And then Dante duss off the old tablecloth shirt. And that's our third colleague, Dante D. Antonio, joining us for the, how many times we've been on this podcast, Dante? My third time. Third time. And, yeah, are you going to take that from Ryan?

Geez, that's, you know, he is my boss. Oh, he is. Oh, I didn't realize that. I think you look great, Dante. Thank you, Chris. I was trying to match you. Yeah, I wear those shirts all the time. Yeah, I don't think he looks that good.

Tell you the truth. Thank you. Appreciate that. not as good as Chris. Look at Chris. I mean, he's got a green hoodie thing going on now, I think. Is that a hoodie there?

That is a hoodie, yes. Just in case he gets cold. He's good. I think they turned out of the, I'm in the office. I think you're keeping the heat a little low here, Mark. Well, are you, is that right? Is that right?

That's me and Gail. There's two of us here. Right. Well, suck it up. Hence the hoodie. Hey, we're going to talk about jobs, obviously. This is Jobs Friday. We're going to take a deep dive into the November employment report, see what it tells us about the economy more broadly and about labor market issues.

And no better person to have here to do that than Dante. Dante, can you just remind us of your background? I think your Bureau of Labor Statistics, right? Do I have that right? Right out of college, I worked at the Bureau of Labor Statistics doing state and metro employment estimates. Then I went to grad school. And then I came here. And what did you do with the state and Metro?

Did you actually put those data together? Yeah, we put the data together. You know, put the press releases together, answered client questions and things. Did I ever tell you guys the very first thing I did as an economist? Well, you know, I called myself an economist. When I started calling myself an economist was to marry. the different data sets

that had employment at a state metro area level because each data set covers kind of a different part of the labor

market, there's disclosure holes, things don't add up, you know, so I work to try to bring all those data sets together and try to make sense

out of them make one grand data set. That was the very first thing I did coming out of school. I learned a lot about the

about the data, about programming. I mean, it was a pretty cool project, actually. You know, the really weird thing is, I think we're still doing that, aren't we? I mean, a lot of the work is trying to glean information from these various data sets that we collect from the government agencies, including the Bureau of Labor Statistics. Yeah. Are you impressed, Dante? Did you know I was doing that with your data?

I had no idea. I did not know that, no. Yeah, it was. Before my time. Yeah. Well, it's good to have everyone. And it feels like we just did a podcast because we just did one, I believe, on a Wednesday. Our podcast for the week of Christmas, we talked about economic threats and opportunities. And so that's going to err. We didn't go over any statistics in, but that's going to error the week of Christmas. But this is our weekly podcast, and we are going to do the statistics, and we are going to focus on the job market. So who wants to kind of lead the way here on interpreting the job numbers that we got today for the monthly number? Dante, you want to do that or do Ryan to do that? Or maybe you go first, Dante, and let Ryan fill in the holes.

I'll let Ryan go first three months. I have a few in my pocket, so he can take the first step on it. All right. Can we start with ADP? I do have a fun stat about that if you want. I'm putting the blame on you, Mark. Whenever you ask me to be on the podcast, you set in motion a trail of bad. bad things happening. But you want to explain what for the typical listener who doesn't know what

we're talking about? Sure. So this is my third appearance on the podcast, right? And the three times that I've been on, the average miss for ADP, the National Employment Report, is 386,000. Whoa. We have missed very large, all three times when you've asked me to be on the podcast. So what we do is we get, we have this relationship with ADP, the human resource company that has, does payroll records for companies, we get their data for 23 million employees every month, something around those that were magnitude. And then based on that data,

we construct our own estimate of what we think the Bureau of Labor Statistics is going to report for that month. And we do this a few days before BLS actually reports. And this month, we came in at, what, 530,000, I think, for the month. 534, yeah. 534.

And the actual BLS number was? 235 for private. So that's a pretty big miss. And you're right. Every time we come on, we have, last month, for example, you weren't on for some reason you weren't. It was my fault last month. I had to bail. And that was actually a good one.

So I guess I'd take the blame for that. Yeah, right. And ADP was like on the nose, I believe. It was, yeah. $5,000, pretty much on the nose. Yeah, so maybe we shouldn't have you on. It's a way to ask me until after Friday morning. You know, he's just asked me the very last minute maybe.

Exactly, exactly. Okay, so, Ryan, why don't you give us a sense of the numbers and, you know, what they said about where we are in the recovery? So job growth clearly disappointed. So I don't want to give a lot of numbers because we may use some of them in the game. But I think the key takeaway is it's not as bad as it looks. even at a little over 200,000 increase in non-farm payrolls, that's faster than the average growth that we saw during the last expansion, which was like about 175. So over 200 is not a bad number.

It was just well short of expectation. So I think there was a little bit of a letdown. If you look at the household survey, unemployment rate fell. It fell across demographics, race. It was a clear improvement across the board. Participation was up, which I ignore. but prime age employment's population jumped. So there is plenty of reason for optimism.

I mean, it's essentially a tail of two surveys. Established an survey, very, very disappointing. Household surveys suggest the economy's booming, which is collaborative with a lot of the other economic data that came out this week. I think you need to explain the difference between establishment survey and household survey. You know, geeks like us know what that means, but I'm not sure.

I think we have gone over another podcast, but we should go over again. So what's the difference here between those two surveys? So the establishment survey is, that's where the non-farm payroll number comes out. It's estimated from. And that is a survey that's sent out to businesses asking how many people are on their payrolls. The household survey is a survey in Dante, correct me if we're wrong, 60,000 households. And they ask a bunch of questions like, are you unemployed?

Are you actively looking for work? So you have two different ways of measuring employment, asking establishments, and asking households. And they both come out in the same report every month. And we as economists and media, policymakers, tend to focus on the non-farm employment number that comes from the establishment survey,

the surveyed businesses. It's a lot less volatile. So if you look at over time, the volatility in the establishment survey measure of employment versus household is substantially lower. So we think there's more information, less noise in, when you look month to month in the establishment survey,

than the household survey. As a survey, because as you said, is it Dante? Is it 60,000 households? Is that what it is? Between 60 and 70,000, yeah. Yeah, something like that.

That feels like a, and there's, what, a hundred and 25 million households in the United States. I'm making that number up, but something like that. Yeah, it's a small sample size. So it feels small. And the establishment survey,

that is somewhere around, what, 25, surveys, businesses, establishments that are, that employ roughly, what, 25 million employees, something like that? Yeah, it's about 400,000 establishments that usually cover somewhere in the 25 million worker neighborhood. And there's 150 million, is it 150 million? Yeah, and out there working roughly, you know, something like that. So it's a, it's a bigger survey. It's just a bigger survey. Yeah, each one has like their positives and their negative. Like the household

survey will have double counting. So Dante and I will be, or the establishment survey, I'm sorry, we'll have double counting because Dante and I both teach at Westchester, so we're on their payroll, but we're also on Moody's. So there's a little bit of double counting. What? Hold on. I don't think that's right. Isn't that that's right? No, no, no, no, no. Yes, the establishment survey. If they ask, Dante, that that's not right. Well, no, in the establishment survey where they're asking businesses. So we just report that Ryan and I are employed and Westchester would also report that Ryan and I are on payrolls. In the household survey, they just ask, do you have a job? Are you working? So we would just say yes.

be counted as a person who's working. The payroll surveys counting jobs. I misunderstood. So, but we're counted, we have one job. You're not moonlighting, are you, Ryan? You're not, you don't have another job out there that I don't know about. Yeah, Dante and I are both teaching at Westchester University. Oh, that's about it.

You know about it. You know about it. I think you have to approve it every year. Oh, yeah, yeah, yeah. Oh, I didn't, yeah, that's right. You guys getting paid for that? We do. Oh, you are moonlighting.

I didn't connect the dots. So those are two jobs. Yeah, you are. Yeah, there you are. But you're only one job in the household survey. Correct. Yeah, got it. Oh, my, you scared me for a minute.

I thought I was teaching employment to undergrad for 11 years. Well, that still could be true, but not in this case. Not in this case. All right. I don't believe it. Believe what? I don't believe he's been teaching properly. Come on.

Oh, no, of course. No, I just. That's all unjust. Okay. So what you're saying, Ryan, is, okay, a little over 200,000 gain in the establishment survey. It's on the soft side. You had been expecting, I think, 600K. I was expecting something even higher than that. Chris, you were expecting something higher, too. And the reason, but you're not really, you know, really disappointed in the miss. in part because all these other data in the report on the household side, a household from the household employment survey, which by the way, employment by that survey was up over a million, I believe, in the months. A really big increase. Big decline in unemployment, 4-6 to 4-2, 4.2 is a low unemployment rate. And I know you don't like the number, but labor force participation rate increased, you know, hours worked increased, which is another sign of strength. It all felt pretty good except that top line established from survey number. Yeah, and that top line number is inconsistent with jobless claims, home-based data, ISM surveys.

So when things like that happened, that's when I dig in and see, like, is there an explanation? The response rate, so what percent of surveys were responded to? First print for this number for November was the lowest since 2008. Oh, that's interesting. Wow. What explains that, do you think? I don't know. You usually get really low response rates in August because of vacations and everything.

But November, it's a little odd. Because of the, I think the survey was done early in the month. It was. Could that possibly play a role here? These are phone surveys, right? Is that the primary? Are they made? It's actually online now.

Online. Okay. Yeah. Maybe people typically feel like they do it later in the month. They forgot. Or they just didn't get around to it. Maybe. Yeah, maybe.

But that brings up another point. That is revisions, right, to data. So you want to explain that? What's going on with the revisions to the data? So with each report, the prior few months are revised. And on average, the upper revision to employment this year has average 107,000. We got a little bit smaller revisions per month, a little bit smaller this time around. but they're still quite substantial, though Dante would probably disagree.

No, they're big. And I mean, with response rates being as low as they were in November, it's just ripe for a big revision. Yeah. So you're more likely to see a big revision after a low response rate. So you wouldn't be surprised if next month when we get the December data that the November, 200,000 job gain is revised up to 300,000 or 350,000. Yeah, we're not surprised at all. Yeah, either would I. I agree with you, totally.

And that's why you don't want to get, you know, up in arms about one number, one month of employment data. It bounces around. It's very volatile. And we know that number's wrong. It's going to get revised. Right. And I think if I asked you, you know, abstracting from the vagaries of the monthly data, the ups and downs and all around, survey issues, seasonal adjustment, whatever, early survey work, what do you think under actual reality is? What is like underlying monthly job growth?

What would you say it was? 550,000. Which is the average since the beginning of the year. Yeah. Dante, would you agree with that? Yeah, I was going to say 500,000. I think you're somewhere in that ballpark. 500K.

Chris, are you in the same? Yeah, yeah, that's there. Yeah. Kind of go a little higher. What about you, Mark? Exactly. You know, I'll, you know, 525. I'll do a Chris, you know.

So right, right down. A little 575 now. Okay, there you got. Now we're getting, you know, like, the price is right. Yeah, exactly. So, but, but, but, that's the reality of the labor market that we're creating 500,000-ish jobs per month. And that's a lot of jobs.

That's a lot of jobs. We're still down, I think, 3.9 million jobs from the pre-pandemic peak back in February of 2020. And if you kind of do the arithmetic, we'll get those jobs. If we stick at 500K, which we've got to definitely talk about, you know, in the context of Ammocron and everything else. We've got to talk about that. But if assuming we do, then we'll get these jobs. back pretty soon and and then some yeah but if you add in the trend like what job growth would have been pre-pandemic if you extended throughout the pandemic because we would have kept adding jobs

if we didn't have a recession that shortfalls five million not not a big issue I mean just maybe delays where we would you know how long it gets us back to where we should have been say it's five million and say we're averaging we continue to average 500,000 jobs per month next year we're there by the end of the year October right by the end of excuse me the end of end of 2022 are there. Yeah. Okay. That's,

and that's our forecast, actually. That's what we're saying. Yeah. Dante, anything that Ryan missed or you want to highlight, call out that you think is important in the number? Yeah. I think the biggest point is that it really was a,

you know, two completely stories. I mean, a lot of times the two surveys don't completely align, but these were, you know, sort of polar opposites, you know,

I think it's hard to find anything negative about the household survey this time around, you know, if anything, it was much stronger than expectation. And then you obviously have the payroll survey, which was a disappointment. And I think there are reasons for that that revisions are one, response rates are one, seasonal adjustment we can talk about.

It might have been a little bit odd this month. A little? Very. I don't want to give it away too much. Save it for my number. That's the other technical. We've talked about a lot of technical things here. One is the low response rate.

Two is when the BLS conducted the survey, that landed a little earlier in the month. The third is now seasonal adjustment. That's what you're referring to. Right. And where do you see that showing up in the number, the seasonal adjustment issues? So if you look at the unadjusted gain in November, it was actually pretty strong relative to prior years in November. But the seasonal adjustment process brought that number down by a lot more than you would have expected based on previous November.

You can see it in retail. I mean, retail employment fell. If you look at it, unadjusted, it was decent. So, you know, for some reason, well, I mean, we're getting up for the holiday shopping seasons, so the seasonal adjustment may have been a little bit too aggressive. Yeah. And the early reference week and hurt retail, too,

because you're, you know, you're missing out on some of that ramp up and hiring that would happen a little bit later in November. So you're not catching all of that early ramp in hiring. So retail was weak, leisure and hospitality was. That was very weak. Very weak. I think health care was weak. Government and again back to schools, education, I think that was weak.

You know, weak relative to expectations. And do you think all of those were casualties of problematic seasonal adjustment or roughly so? I think it certainly played a role. I don't know if it's the only factor, but I think it certainly played a part in all of those. Right. Well, you think anything fundamental was going on? It couldn't have been Amacron. That came way too late for that to affect the number.

Yeah, it came after the reference period. Way after the reference period. Which is for everyone, it's the 12th of the month. The week that includes the 12th is the reference period. Meaning that's the week they conduct the survey, the Bureau of course. Yeah, so that can't be it. So it feels, it felt like immediately to me, my instinct was it was the seasonal adjustment issue, which, by the way, if that's the case, we could have some pretty outsized job gains in December.

when we get the December number or the January number, right? Because if it's bias lower because of seasonal adjustment this month, you've got to get it back seasonally in another month, right? Correct. We could get a surprise to the upside next month or the month after. Okay. Okay, Dante, anything, are there things in the report that kind of, you're landing the same place as Ryan is, right?

This is more a glass half full than half empty, it sounds like. Yeah, I mean, would you have like to see 500,000 jobs again this month, yes, but I think this is sort of best case scenario. For the top line of 210, I think everything else is sort of his best case scenario in terms of making you feel less bad about that. Okay. And Chris, what about your take on this? Anything to add here? I certainly agree that the seasonals are what stick out in my mind. I think there's some other reasons, though, that may be impacting the data. So I just think about the churn, like all the quits that are going on and people quitting and taking new jobs. I think that,

that can affect how the payrolls are reported or even, and even who says they're unemployed at any given point in time. So there could be some of that as well. We have so much churn, much higher than typical. Explain that. So how would that work? So we know quits, the number of people who are leaving their jobs, a great resignation, so-called record resignation, is that a record higher?

Or at least it was in the month of, what's the latest data point, September, I think, we have a record high. That's right. Job opening, Liberty Tour and Survey from the BLS. So how would that impact or bias lower

or push lower the measured gain in jobs? Just timing, right? So someone quits a job and takes a job, but it doesn't start right away. It might start a few weeks out. So the payroll,

so they may fall off the payroll on one employer, but they don't get added to the payroll of the new employer right away. It takes some time. There's some delay there. So there could be some of that behavior that is impacting the numbers.

Right. So, I mean, bottom line, the pandemic is just creating havoc with everything, including the way we're measuring things. And our instinct is looking through the noise, the measurement issues at the Bureau of 6-7 here, that fundamentally the labor market's strong, that we're 500,000. jobs and jobs, at that pace of unemployment's falling in pretty quickly here, 4.2%.

You know, we are coming along here at a pretty rapid clip. That's the bottom line. Anyone disagree with that? No, the other thing I would point out is just a small business, entrepreneurship as well. We see that at a high level. That would impact potentially the payroll survey, right? People starting a business, you might not pick it up in the payrolls. They're not part of the sample.

But it should turn up in the household survey. People would report that they're working. So that could be a potential difference. That would be consistent with what we're seeing in the data. So that gives me some optimism around the numbers here. Yeah. Some more optimism. Yeah.

Yeah. Yeah. So has anyone looked at the over time, let's say since the pandemic hit, the difference between the household in the payroll survey, are they close to each other or is there a gap between them? Do you know? If you look over like the course of the year, they're pretty close, but they definitely diverge month to months. There's actually a similarly large divergence in the other direction in June, I believe, where the household survey was much, much weaker than the establishment survey. And so they sort of net out over time, but they can be quite different month to month.

Oh, go ahead, Ryan. I'm going to say that if you do the cumulative increase since the end of the year, they're both $6.1 million. Oh, okay. So it knows. I mean, they diverge for a period of time, but now that gap is closed. So they're saying the same thing. They're saying underlying job growth is 500,000, 550,000 per month, something like that. Correct.

Okay. Okay. Okay. All right. We're going to come back to the labor market, but before we do, let's play the game, right? Let's play the statistics game. And everyone knows how to play this game. It's pretty simple.

you name a statistic. Hopefully it's one that is not too easy, that it's a slam dunk, not too hard that we'll never get, and is hopefully relevant to the conversation. We do have a debate about the last rule and whether that has to be a statistics that was released in the last week. Everybody has to follow that rule,

but me. I'm allowed to break that rule regularly. But that's another rule. Okay, with that, as, and of course, all the rest of us try to, you got the cowbell? Yeah, I see the cowbell in the background there. And, oh, it's up front now.

Okay. Yeah, we get two of them. Cowbells? Yeah, well, I have one for you and one for Chris. Oh, I didn't. Yeah, I got to drop them off at the office. Yeah, I didn't know that. So, who wants to go first?

You want to let Chris go first? I feel bad for Chris. Yeah. Okay. Oh, you feel bad. All right. because he never know he really needs help with this game i absolutely do i'm i cannot by the way guys i i really i've been very busy i don't have a statistic but i will come up one by the time one with

by the really good one by the way by the time it comes around to me all right chris what so what housing number is chris going to pick oh no oh that it's just rude it's just rude it is rude what is the back normal in it. Anyway, um, talk about data problems. I don't know if you say. No, never mind. Let's not go down that. Yeah, yeah, yeah. 5.7%. 5.7%. 5.7%. 5.5. Is this wages? Wages? Somewhere. It's not wages. Okay. It is employment related. Is it the unemployment rate for some demographic? Oh, yes. Wow. Okay. Is it the unemployment rate for black Americans. No.

Less than high school. Yes. Less than high school. You got it. You see, that's why he's the chance. Hold, no, wait a second. Should Ryan get credit? We should both get awarded.

Half a point each. Yeah, there you go. I'll be the arbiter. Yeah, okay. Very good. So 5.7 for less than high school. So what's the deal? What's the story there?

So why it chose it, why it stuck out, is that That was down 1.7% over the month. It was 7.4% the month before. So we talked about all the data issues, so maybe there's something there. But assuming that's real, that is certainly the greatest increase or the greatest improvement, I should say, in unemployment across the different education groups. And also would suggest that there are more opportunities being extended to folks with lower education. And certainly from the Fed's point of view, that's one of their mandate. one of their desires is to create more employment opportunities across the distribution.

So that is certainly positive news. 5.7% is the unemployment rate that this group had in January of 2020 right before the pandemic as well. So they have fully recovered versus the other groups are still a bit higher. Wow, that is really interesting. So the 5.7% for folks with less than a high school degree is where it was pre-pandemic. In January, that's right. Oh, goodness. And you talked about the elevated level of churn.

That's actually the group where most of that elevated churn is coming from. If you look at job switching rates by educational attainments, you know, most of the other groups are sort of just back to where they were pre-pandemic. But that less than high school group is well above where they were pre-pandemic in terms of. of the rate of job switching. And they're seeing some of the, yeah. Go ahead. Sorry, go ahead, Chris. I was going to say.

Yeah, that's where some of the largest wage gains are coming from as well. And we know that from the Atlanta wage tracker, the Atlanta Fed wage tracker. They had this really great tracker where they follow the same workers and look at their wages over time. So it helps account for mix effects, you know, changing occupation. changing industries. And so I think almost all of the acceleration, correct me if I'm wrong, Chris, but I think almost all of the acceleration and wage growth that we've observed in the pandemic, recently, has been in that group, low-skilled workers, less than high school education. Yeah. Is that right? Yeah. Largest gains. I'm not misstating that, right? I'm not misstating

that, right? I don't want to just lead your students or anything. Yeah, okay. Yeah. Only Ryan does. that it's fine. So Chris, can I ask you this? It sounds like you looked at the unemployment race across various demographics. Did anything else stand out across race or any other age

or anything else that you noticed? This was the one that stood out the most to me. Women in terms of participants that were still lagging in terms of their improvement, right? Compared to men, but still

they are making improvement. It's not that they're stalling. But yeah, everything else kind of fit. I don't know, Dante or Ryan, if you saw anything. Anything else in the unemployment rate across the demographic that you noticed? No. Okay. Nothing overly surprising.

Yeah. Yeah. Okay. Okay, let's go to Ryan. Ryan, what is your statistic of the week? All right. Well, Dante, did you try to use that one, Dante? You can.

I'll abstain. I won't guess. It's fun. Because I emailed. Were you guys concluding? No, I emailed a colleague. Hey,

well, that's the other rule. The fifth rule, I thought it was unspoken. You know, it is unspoken. No collusion. I emailed one of our colleagues.

I was like, this really- You emailed them. That's collusion. No, not him. I emailed her. I was like, this really jumped out.

And then she replied and C.C. Dante on it. And I was like, oh, got it. Okay. All right.

Inadvertant collusion. Yes, he would still be after you, by the way. All right. You ready? Yeah. 1.9 million.

1.9 million. Is that the number of people said that they weren't working because they were ill? No. But that's over a million. In fact, there was 1.2 million people that were unable to look for work in November because of the pandemic, which is a little change from October. Oh, is that right? Yeah.

there's still a lot of people I can't vote for work. What has that come, did it come down from like September when Delta was at its page? Yeah, it's down a little bit, but. Oh, okay. So it was, it was high in September. It came down 1.2 million in October and did not improve in November. Correct. The number of people that said, I'm not working, I'm not working because.

No, I'm unable to look for work because of the pandemic. I'm unable to look for work. Okay. Oh, interesting. This is that. $1.9 million. Okay, but I'm assuming I'm in, we're in the ballpark, right? This is a job-related.

I'll give you clear to it. You know you're going to call that. This is impossible, Ryan. There's no way anyone's going to go. I look at this every single month. Now the gauntlet has been laid down, Chris. Wow. I feel safe in saying that that you are not going to get to.

Listener are buckling because we're going to be at this for a long time. No, it's in the household survey. And I look at this every single month. Oh, it's in the household survey and you look at it every single month. And it's impossible for us to guess. Correct. So, yeah. But it's a very telling number.

It's a very, and you've never talked about it before? You have talked about it. No, I haven't talked about it. But this gap is enormous. Oh, really? Look at Dante just chuckling over there. Are you like marginally attached or part-time? It's an household survey.

Think about our earlier discussion about the differences between the household survey and the establishment survey. Oh, is that the number of part-time? timers that are... You're on the right track. We take those out, right? I don't want you guys to suffer. Two jobs.

I'm not going to let you suffer. What's happening here is we're getting close enough that you don't want us to get it. You can let them flail for another two minutes if you want. I'll let you guys... No, go ahead. It's getting very awkward now. Yes. So, 1.9 million.

That's the increase in the adjusted household employment. An adjusted household employment is a better apples to apples comparison to the establishment survey. So they strip out, you know, ag. That's a good one. What is it? Self-employed. Self-employed, yeah. Private household workers, things like that.

So, you know, when we get these big misses like this or big discrepancies between the household survey and the establishment, I always go to the adjusted household number. Oh, you're saying, you're saying, okay, I take the household employment survey. We know that it's conceptually there's some differences with the establishment survey. let's make changes adjustments to the household survey to be comparable conceptually to the employment survey. Correct. And if I do that for the data in the month of November, employment increased by $1.9 million.

Correct. Whereas the actual establishment survey was up $200,000. Correct. So the adjusted household employment number had been lagging behind the establishment number, but now they've caught up. So I think there was some catch up in November. I don't think we created 1.9 million jobs, but I mean, the discrepancy or the difference is just, it's enormous. Has it ever been that large?

That sounds like that. What is it typically? Yeah, what's it typically? I have to look it up. But I don't know. I can't remember her time. It was this big. Maybe during the pandemic, but, you know, it's pre-pendemic.

I don't think it was this big. There was a big swing in self-employed workers. Mark, you and I talked about, you know, there had been a big increase in self-employed, and that actually fell quite a bit. November, which is contributing to why that adjust the number is so high. There's definitely some statistical noise in this. There's no doubt. Oh, yeah, yeah. What is the sampler in the survey?

They're both surveys, right? Yeah, they think that might be useful for the listener just to know on the establishment, I believe, is plus or minus 100,000. Household survey, I don't know. Maybe Dante knows. I think for, I don't know what it is for the employment number out of the household survey. I think the unemployment rate, it's a tenth of four percent, I think, in terms of significant change.

Yeah. Yeah. But what's nice is the BOS puts out these tables, which tell you if a change in the components of the household survey are statistically significant. So that's kind of helpful. Hey, Ryan, do we, is that data in a data bank that I can get at? Yeah, I can send you the mnemonic, yep. Can you send me the mnemonic?

Of course. All right. The mnemonic being the code. that I would use to print it out. Because I might want to tweet this, actually. I don't mind if I tweet it to you. Oh, by the way, at Mark Zandi, hat Mark Zandi.

That's my Twitter handle. I usually quicker on the draw there. Yeah, 39 minutes. 39 minutes in. It took me 39 minutes. Are you tracking that week to week, Chris? Are you? But on all fairness.

It's got to be on the data buffet. Go look at the Twitter feed. I'm now plugging the podcast. So, you know, it goes in both directions. It goes in both directions. All right. I'm working hard on both sides here. Okay, very good.

That, Ryan, kudos. Yeah, kudos. See how it's done, Dante? There it is. Chris has a big shift cowbell. I got it. That's like a dinner bell. Yeah.

I like a cowbell. Come to dinner, Chris. The wine is on. on. All right. All right. Dante. That was great. Dante. Yes. Yeah, Dante. I mean, that, oh, now you guys, you were concluding with Ryan on this one. Yeah, Ryan, you may have seen this. You weren't responding to the conversation. I was also having conversation with a former colleague. I did not look at this number. And I don't think Ryan actually was paying attention to the threads. Okay. The sheer amount of emails that they had going back and forth,

I was like, you have a flop. So the number is $568,000. And this is also a continuation of our sort of initial conversation. Around the household

payroll survey. The different discrepancies between the two. The issues with the number of this month. Oh, this isn't, this would be,

this will not be right. It's not to self-employed, back to the self-employed, is it? No. Okay. That wasn't, Is that just the difference between non-seasoning adjusted and seasonally adjusted?

It is. Very good. There you. A ring the bell. Here, you get the real cowbell. That's nice. Yeah, so I mentioned it was unusually large. That is by far the largest difference in the non-seasonally adjusted versus seasonally adjusted

in a November in the whole history of the series. You know, compared to recent years, that's, you know, about 200,000 higher in terms of the negative adjustment in November. So if that... I missed something. I miss something. So this is the, in the household survey you're saying now?

No, in the establishment survey. Oh, in the establishment survey. So the unadjusted number was 778,000 adjusted was 210. So in November, the adjustment's always negative. But this adjustment was particularly large for some reason, much, much larger than it has been in recent years. Oh, okay. So that's the largest you said in history?

In November, yeah. In November. November. The largest. difference between seasonally adjusted and unadjusted employment gain in the month of November in history this month? Right. If the seasonal adjustment had been similar to the last few years, the top line number would have been like $4.50 instead of $2.10.

Oh, okay. Well, all right. There's got a lot. Yeah. Yeah. That's why don't get hung up on this number. Really don't get hung up on this number. Yeah, just ignore it. Just ignore it. Say something else, Ryan. Just turn off the podcast is that we're doing. podcast.

No, don't just run off the podcast. All right. I guess I got to go, man. I'm just not up to it. I just,

I'm going to fail. Somehow I feel inadequate here. All right. I got to go. But you know, you always got one. Huh?

You always got something. You can always go to copper prices. No. I got one. I got one. Related. It's related, but it's not,

um, it's not it's not in the employment survey or in the employment data we got 69.1%. Oh, that's the ISM non-man. Yeah, I-SM non-man. That record high.

We had to say it, right? Yeah, I mean, that is a record high. I mean, how could we not say the ISM non-mans? Well, just for everyone knows. ISM Institute for Supply Management, non-manufacturing. These are, you know, kind of purchasing manager folks,

and they get surveyed every month and asked a range of questions about everything from, you know, orders for what they produce, output, employment, pricing. Oh, there's also supplier deliveries. That's a good window into supply chain issues. And the overall index came in at 69.1% for the month of November. That came out today with same just a little bit after the employment report. And that was an all-time record high, all-time, never higher. And it goes, well, I mean, it's a little, that survey is not quite as long as the manufacturing

survey, right? No, I think it goes back to early 2000s. Is it, it doesn't go back for, I thought it did. Maybe it was a little bit like. It doesn't go back, you know, ISM, man goes way back. Well, goes way back. Obviously, everything was strong. On the supplier deliveries, that was, the index was 75.7.

That is roughly what it was the month before, and it's still, that's high. You know, it's not the highest it has been in recent months, but it is very high. It does indicate that the supply chain still remain quite muddled. They're moving in the right direction, getting, they're improving shipping rates are down from China to the U.S. And a number of ships in L.A. Long Beach port that need to get offloaded. That's come way in. I noticed that has come way in. But this would suggest.

suggest that the supplier supply chains remain, you know, still a little bit scrambled. Anything else on that survey, Ryan, because I know you look at that very carefully. Anything else there? Well, the employment index was up. You mentioned the employment index went on. Employment index was up. And I think, just to keep in mind, like the ISM non-manufacturing in the manufacturing surveys, they measure the breadth of improvement.

So it suggests that, you know, the improvement across non-manufacturing is broadening out, which is a good thing for the outlook. Yeah, yeah. And it's kind of sort of like a sentiment index to some degree, right? I mean, I mean, folks that are filling this out base it on what they're observing in their business. Correct. But, you know, it's not all numbers. It's, you know, they're kind of giving you a sense of how things are going.

And so it's part actual data, part actual sentiment, I think. Yeah, for the manufacturing survey, you can tease out the sentiment component by mapping the hard data on, like, factory orders, manufacturing employment to the components. I haven't looked at it recently, but I can send you that chart, too. Yeah, that'd be great. How about that gasoline chart I sent you? That was fantastic. By the way, I tweeted that. People loved it.

Yeah. People loved it. I was actually on CNN earlier today, and they called that out. So, you know, it went viral. Thank you. I appreciate that, though. Anything I can do to get you to do viral. Yeah. And it's just for the listener, I mean, this is pretty amazing. Why don't you describe it, Ryan? What was that? What are you referring to?

So the charge I sent you and Chris is wholesale gasoline prices, a two-week lead. And there's a very strong relationship between that and retail gasoline prices. And so because wholesale leads retail, we have an idea of where prices at the pump are going. And just based on the drop in wholesale prices in the last two weeks, We could get down to $3 per gallon in, you know, a couple weeks. Yeah. It dropped again today. It did. The wholesale prices dropped again today? Or retail? Yeah, $195.

Okay. Very good. And, of course, this is really, you know, we were spending, it feels like this might be an esoteric number, but it really isn't. I mean, my sense is that gasoline prices may be the single most important variable people are focused on when trying to gauge the health of their finances and the broader economy. If they see gas prices are high and rising, no matter what else is, no matter what else is going on, it doesn't matter. You know, the unemployment could be low, wage growth could be

strong, stock prices are record high, housing values. By the way, that sounds like the current time, doesn't it? They don't care. It's like, I'm depressed because I'm spending this amount of money to fill up my gasoline time. So if it heads south, if it starts declining and goes below three, if that characterization of how people think is right, then we should start to see people start feeling a little bit better about things here pretty soon. And then kind of wrapping up the whole disappointing November employment number, our GDP tracking model,

which takes all the source data that's released that goes into GDP, increased this week to 8.7% at an annualized rate for Q4. Yeah, I mean, boom. We're likely not going to get that number. because Omar Fraum will likely take a little bit a bite out of it, but, you know, we're still, it's, the economy's booming. Yeah, we also put a monthly GDP number together. You know, the GDP is released quarterly by the Bureau of Economic Analysis, but we have the underlying data that goes into the construction of GDP. And based on that, we can estimate what we think GDP did in the month. And I noticed in the month of October, that increased 2.2% not annualized. You know, if you analyze that, just, That's a big number, you know, close to a double-digit number. So it gives you a sense of how strong.

And that was the month of October. In November, you know, it feels like that's going to be strong. I mean, pretty solid. Yeah, despite the job number. Yeah. Okay. Very good. You know, I do think we need to talk about the elephant in the room.

And that's this Omicron variant. You know, I have a frame for thinking about it. I'm curious how you guys are thinking about this. You know, how should people kind of, how would you put this into perspective for people? Did you guys want to, anybody got a view on that? You know, how are you thinking about it in terms of what it means for the economy and the outlook? Ryan, you want to go, you want to get you guys? I would like Chris go first.

I mean, he's been the epidemiologist. He has. He has. He's a pretty good job. Yeah. How are you thinking about this, Chris? Yeah, well, you know, it will come back to psychology again. So I use Delta as the benchmark, right?

So what happened under the Delta wave, except that I think we do continue to adapt. And therefore, while I do expect to see a jumping case, we already see a jumping cases due to Omicron. The severity is unknown, but so far indications seem to be that it's at least not substantially worse than what we see for Delta, but that is to be determined. So my sense is that it certainly has an impact on the various sectors that we saw impacted under Delta. So travel, each hospitality, certainly. But then overall, I'm not expecting to see much of a dramatic impact.

And I think the impacts that we saw under Delta become even lessened here as people adapt and adjust to this wave. And I think we're continuously doing that. There will be future waves and will continue to adjust. So I'm cautiously optimistic, I guess you would say. say. Certainly there is some impact. There's some cause for concern, but at least right now, I'm not overly concerned that the numbers are going to be impacted materially. Let me ask you this, just to put this, kind of get a little bit more context around what you're saying. If I go back and I look at the peak of the delta wave, I think that was early September.

In early September, if you look at the seven-day kind of moving average of case, confirmed cases of infection, it peaked out at around 175,000. I think that's roughly right. Yeah, I think that's right. Yeah, we then fell, you know, through perhaps mid, early mid-November, bottomed out around 75,000 per day on a seven-day week moving basis. And then now, more recently, I think we're back up to 100K. And this is really, well, maybe that does reflect the monochrom, and we don't even know.

It could be, we thought that was Delta, but maybe also Amicron's kicking in here. If we get back to, say, 175K, like early January, and the virulence of Amicron is similar to the virulence of Delta. Let's say the next wave, the Amicron wave is very similar to Delta. Do you think the impact on the economy will be the same? And again, Delta, in my view, did a lot of damage. You know, GDP growth in Q3 in the U.S. was 2%, and that was all inventories. It spiked inflation. It scrambled supply chains.

It messed up the job market. It hurt consumer confidence. It caused people to shift. Again, they're spending away from travel and restaurants to stuff, you know, goods. Do you think we're looking at the same kind of impacting Q1 that because of Omicron, Q1 of 2022, that we saw in the Q3 of 2021 because of Delta? I don't. I think it's less than that.

Certainly, and I think about it in two ways. One is the direct impact within the United States. And I think the US consumer has adapted and will continue to adapt, as I said. So I think that the impact in terms of their behavior actually is lessened. The real, a bit of a wild card is what happens in Southeast Asia because of the supply chain issues. There too, I think they've adapted, but the tolerance levels in some of the countries is much lower, right? So China shuts down the first sign of infection. So there I could certainly make a story around the supply chain issues getting impacted once again,

and there could be some of the knock-on effects around that. My working assumption, though, is even their countries are adapting, or at least they have a playbook now based on what they experienced. in Delta. So the impact should be lessened. Yeah. That's my take. I don't know. Yeah. Yeah. What do you think about that? Are you in the same camp as? Yeah, my biggest concern is back to Chris's point about supply chains and the potential inflationary implications. In Europe, Germany's tightening their social distancing requirements. There's vaccine mandates rolling out across Europe. So, you know, it all depends on how governments respond to this. So I'm not worried about it.

the domestic economy, it's more, you know, it's the knock-on effects in APEC, in Europe, in Latin America. So what you're saying is you think there's a possibility. In my scenario where Onocron is similar in contagion and virulence to Delta, the concern would be that countries overseas get hit really hard and they lock down to more significant degree, which reverberates around the world through supply chains and all kinds of ways that reverber. rates back on us. Trade and trade flows or trade deficit would widen out again, probably, that kind of thing. Right. And the other thing I'm worried about is the stock market and an investor

sentiment. You know, they're fickle. They're a fickle bunch. And when you get these news about, you know, the Delta variant and now Omicron, you know, that could be a catalyst for, you know, a drop in stock prices. By the way, that reminds me, and this is a pod. We may want to do this next week for the podcast, if we don't have a guest, is bubbles in asset markets again. I think our first podcast was around bubbles. We all concluded no big deal. I don't know. We should come back because there was another chart you sent to us last night, right?

Yeah, that one's going to give me nightmares. Yeah, just describe that. All right. This is, listen, we're taking a bit of a quick tangent here. We'll come back. Don't worry. No, it's all tied to. We want to call this out.

Yeah. So if you look at, and this is data from the Federal Reserve, the margins, margin accounts at brokers and broker dealers. So the value of margin accounts is $595 billion, which is twice what it was pre-pandemic. I just say that's margin debt. That's what people are borrowing to finance purchases of stock. Right. So I'm worried that if you get a garden variety correction, which is inevitable, it's going to happen, happens roughly every two years since 1970, that this one is, is on steroids and turns into something worse because there's going to be margin calls.

And if you don't have the cash to put up for the margin call, you're going to have to sell your assets. So this reinforcing cycle kicks in. Yeah. Okay. That's how Dante's buying all his meme stocks. Really? Dante is a speculator?

I'm very much not a speculator now. No, you don't speculate. I leave that to Chris. I love Chris. He shifted crypto, right? They're more secure. Well, anyway, that's a big deal. That looks like a big deal.

So we're going to come back to that, maybe in the next podcast, and talk about all asset, Marcus, because everything feels like it's somewhat more frothy than it was just not too long ago, a few months ago. And the Fed releases a semi-annual financial stability report, and they're calling out all these assets as being of concern. They've released that report? I missed that. a couple weeks ago. Oh, really? I missed it. I've got to go take a look. Dante, going back to the question around Omokron

and how to think about it in terms of its economic consequence, what do you say? Do you think if Omicron is similar in contagion and contagious, you know, get the same number of infections and we get the same kind of virulence,

we are, the economy will navigate through more gracefully or not? I think so. I mean, to your point about the outlook, I think, you know, thinking about the labor market, I don't know that it changes my expectation of where it will be a year from now. I think maybe it reshuffles how that plays out. You know, maybe we get weaker job gains over the next few months and then you get slightly stronger job growth, you know, in mid second half of 2022 versus sort of a steady 500,000 pace or something. I think maybe it resorts, you know, the magnitudes a little bit, but I don't know that it changes where we are a year from now. Yeah, okay. That's the way I think about it. I mean, my sense is that we're going to have waves. Amicron may in fact be obviously the next wave, even if it's not, there's another one coming, you know, almost we need to count on it, polyanish not too, and that each wave, new wave will be less disruptive to the health care system in the economy than the previous wave.

That on the health care side, you know, we've got vaccines, we're better at engineering the vaccines to address the variance that are forming quickly with MRNA technology. We've got the COVID, excuse me, the antiviral COVID drugs. We come up different ways of mitigating the risks. We're getting more coordinated globally and trying to, you know, cordon off where the infections are located. And then on the economic side, I think we're just going to get increasingly more inert to all of this.

Certainly here in the United States, I can't see a scenario unless things really go off the rails with this pandemic with the amicron that we we shut things down again. I just or shut even to significant degree, ask businesses to curtail their operations. You know, healthcare hospitals will have to be significantly overwhelmed for that to happen, I think. Yeah. Okay. All right. So we're kind of on the same page.

But obviously, who knows, right? I mean, who knows? Absolutely. And I think a big difference, you know, even though the waves are pretty close together, potential waves pretty close together is, you know, vaccines for kids, right? I mean, when Delta came, we didn't have really any kids under 12 vaccinated. The impact to school age children should be much smaller, even if we do get, you know, sort of a full-blown wave here because you do have, you know, all those kids vaccine eligible. And so, you know, the knock-on

effect to parents should be much smaller than we saw with Delta. Right. Okay. Great point. I want to talk about a few labor market issues that we've been discussing, debating now since the pandemic hit. I want to this state of position on each of these debates and then see if anybody wants to push back or disagree or add color. Okay. And this is in no particular order. first on why we have this disconnect between the number of unfilled job positions.

We've got a number of businesses that put up a lot of help wanted signs. They're coming in. The peak was back a couple of months ago, but they're still very elevated. And we still have a fair number of people who are unemployed and, more importantly, they've stepped out of the workforce and are not looking for work. So there's this kind of Allison Wonderland situation where he got a lot of unfilled positions and what seemingly looks like, you know, a relatively high level of unemployed under-employed people. There's a lot of reasons, I think, that are behind that. But I want to

throw out one that I think is most fundamental, and that is policy. And that goes to, in the, and this is hearkening to the difference between how we here in the U.S. address the pandemic from a labor market perspective and how Europe and Japan did. We, basically said, other than the PPP program, the paycheck protection program for small business, which, you know, expired a long time ago, let workers lose their jobs and go on to unemployment insurance and will help them out there. Whereas in Europe, in Japan, I think a couple of other Asian countries, they decided to pay employers, businesses to hold on to their workers and not lay them off. And so instead of pushing them into unemployment insurance,

they remain on payroll. And this is a massive difference in policy with huge implications back to the Alice in Wonderland situation we're in. Because in the United States, since we push those folks off payroll and put them in unemployment insurance, the workers link to their employer got severed and they became, the workers became disenfranchised from their previous employer and getting them back into their seats, so to speak, has been very hard. But in Europe and Japan, because they had these labor market.

retention schemes, that never happened. The worker is still there. The relationship with employers intact and unemployment, you know, even as the schemes have come off, have remained relatively low. What do you guys think of that argument? I mean, do you buy into that perspective or how big a deal do you think that is in terms of explaining, you know, what we're observing here? I'll give you a number to support that. Yeah. So in today's November employment report, 3.6 million people reported that they were unable to work because their employer closed or lost business due to the pandemic. 3.6 million.

That's down a little bit from 3.8 million in October. That's a good point. That's a lot of people. Yeah. So I bet you if you add up the increase in the number of unemployed today compared to pre-pandemic and the increase in the number of people stepped out of the workforce compared to to pre-pandemic, it's probably four or five million, right? And so you're saying in the data, 3.6 million are saying, I'm not working because my employer is no longer with us or they

laid me off. Yeah, it makes sense. What do you think, Dante, about that theory or that, that explanation for, you know, what's going on here, partial explanation for what's going on here? Yeah, I think that makes sense. My question is, what would have happened, you know, if we would have used a scheme or you keep workers sort of attached to their employer. I don't know what happens with, you know, go back to the parent dynamic, you know, all the kids that were out of school and people that are sort of, you know, hesitating or delaying coming back to the workforce. What would that look like now as, you know, firms are reopening and expecting workers back? You know, if you remain detached and a firm says, okay, we're back open for business, but you're,

you know, you're not ready to go back yet. So would you still have those detachments happening just later down the road? You know, a firm eventually is going to want those people, you know, actually back in their seats. And if people are, you know, staying out for health reasons, child care reasons, whatever the case may be, would that still cause those detachments to happen just later on than they did? So you're saying right now it looks like the Europeans and Japanese did the right thing, but maybe, maybe not, down the road. I'm just not sure how much, you know, I assume by now, if you had used a scheme like that here, you know,

firms would have expected workers to be back in large part by now, right? And there's, as we see, there's still several million people that are out of the labor force, you know, that aren't looking for jobs for one reason or another. And so what would have happened to those people, you know, if they had remained attached to their firm, would they have decided to go back or would they have still decided to ultimately leave their job anyway? But why would Americans, workers behave differently than European workers? I mean, that doesn't appear to be happening in Europe, right? They appear to be going back, right? And I don't know that it would be different, but I think there's a risk to how well that I've worked here.

Who knows? Yeah. And Americans are different. So who knows? Yeah. Possibly. Yeah. What about you, Chris?

What do you think of that? Let me push back a little. We did have a PPP program, paycheck protection program. So we did support a lot of businesses through the pandemic to maintain their payrolls. Right. So there was support. Are you arguing there just wasn't as much support? Yeah.

Well, the PPP programmers were small business. You had to be fewer than 500 employees, which is about half the labor force. And in fact, if you look at the ADP data, because we have ADP employment by size class, you know, business company size, it actually seems to have worked. If you look early on in the pandemic when the PPP program was in place, small businesses laid off many fewer workers than the big guys, you know, particularly companies with over a thousand employees. It was actually quite linear, you know, meaning the small businesses laid off fewest and then the mid-sized the next and the small, the big guys laid off the most.

And, of course, then the second thing is PPP expired, right, kind of early on. There was two tranches of PPP, but, you know, it has expired, you know, expired well before we've gotten through the pandemic, you know, and, you know, it hasn't been a consistent source of support in all the way through. But you're right. We tried it. We partially tried to do it. We just didn't do it to the same degree as in Europe or in Japan. Actually, I proposed an employee retention tax credit. You remember this?

The employee retention tax credit, that was part of the small part of the CARES Act. And I think there's a small expansion of it in the American Rescue Plan. That, in my view, would have been very similar to the retention schemes in Europe and Japan. It would have made a big difference here. Sorry, Chris, you were going to say something. The other point I would make is, I guess it's the perennial question between Europe and the U.S. in terms of creative destruction and the dynamism of the U.S. economy versus would these firms, you know, there have been structural changes. Would firms have gone out of business anyway? So we were just delaying, you know, keeping zombie firms alive for a while. And is it better, are people actually better off to, you know, be forced to innovate and change? versus being kept, having firms that are kept alive for a long. I think that actually is a good point.

I agree with that. So what I'm saying is not wrong, but we were saying there is a downside to it, and the downside potentially to it. And that downside might be you perpetuate bad business models, business models that are no longer relevant in a post-pandemic world. Think Carnival, well, I shouldn't say Carnival. Say, cruise lines.

Think cruise lines, you know, something like that. Or also, you know, when you, it's the creative destruction part, if people lose jobs, they go start other ones. And as you point out, you can see Americans are starting companies at a very prodigious rate. So, you know, you might not have gotten that same kind of, you know, let's go try something new here if they had been on payroll and not, you know, pushed out into the wilds. But so there's a potential downside to it. I think that's right. So I think you need to strike a balance, right?

String it about ultimately, right? I think the other thing that perhaps limited the impact or the benefit of PPP is that you had this dual track of benefits, right? You created PPP, but at the same time, you also enhanced unemployment insurance benefits, right? Which can could have created mixed incentives for a lot of workers where we know that, you know, when unemployment insurance benefits were enhanced at their highest level, there were a lot of workers who would get paid more on unemployment insurance than they were getting paid by their employer.

So if you're one of those people and your employer is getting PPP to retain you, you have an incentive, you know, in a lot of cases, to have them not retain you, right, to actually lay you off. So you can collect benefits and maybe go back later, maybe not. But I think not to say that having the unemployment insurance benefits was a bad thing, but I think it did probably weigh against some of the benefit of PPP. Yeah, right. Okay.

That's a good point. Okay. Here's another one that we've been discussing debating. and that is around wage growth. And we talked a little bit about this earlier. There's this sense out there that we've seen this very significant acceleration in wage growth and that this is one of the sources of the higher rates of inflation that we're observing right now. You know, the simple idea that if businesses have to pay workers more,

then they've got to pass that through to their customers in the form of higher prices. And that's one of the contributing factors to the high rates of inflation we're observing now. My sense is that, you know, again, you know, that that narrative isn't necessarily wrong. You know, there might be, it might be playing something of a role. But in the grand scheme of things in terms of explaining the high rates of inflation, that's really on the margin, that the wage growth that we've observed is really among a small group of workers, particularly at the low part of the wage distribution, lower skill, lower educated workers, that middle wage workers, high wage workers have not seen the same type of acceleration.

So it's not been broad-based. And then moreover, that we have seen some improvement in productivity that should help to offset the effects of the higher wage growth, at least in terms of what it means for business margins, profitability, and ultimately prices, you know what they charge for their goods and services. That's the way I'm thinking about the wage growth. and what it means for inflation. Does anyone want to push back on that one? Do they have anything you want to add to that?

Anything else to say about that? I think to date, I would say I 100% agree with that. I think the question is what happens six months from now, a year from now. Do we see continued strong wage growth? And is that matched by stronger productivity growth? If you see productivity growth come back in, I know I'm pessimistic. and you see wage growth sort of accelerating at the same time, does that eventually lead to a little more pressure on prices?

I don't think that's happening today, but could it build to more pressure down the road? Yeah. I guess I get to another question, and that is full employment. I mean, we're at 4.2% unemployment rate. We're at 61.8% participation. That's still a point in a half off its pre-pandemic level,

but that's never going to go back, right? But did you see prime age employment to population ratio? And I was going to say, yeah, you pointed that out. The employment to population ratio for 25 to 54-year-olds, prime-age workers, that's what? 78.4 percent? I thought it was 78.8. 78.8? Oh, no, really?

78.8. Okay. Yeah, Don, did you go up half a percent of point? I think so. I think it was a pretty big jump this month, yeah. Yeah, 78.8. Wow. We're 1.2. What do we think of full employment? At least historically, it's 80%.

80%. So we're, as you said, we're 1.2 percentage points away, and that's rising pretty quickly. So are we getting the full employment here pretty quickly? End of next year? I mean, why do you think the Fed's starting to panic? The Fed is starting to panic. Yeah.

That's why the, the, the, the, the, PayPal and this week's testimony told everyone we may, we are going to taper, wind down our bond buying quicker than we said earlier. Which opens the door for earlier rate height. Right. So you guys think we are, we're not at full employment, but we're getting within spitting distance of full employment? And we're getting there pretty fast, it feels like. No? Yes.

I don't know. I mean, what happens if we get to? 80% prime age employment to population ratio, but there's still, you know, one, a million people that are unable to work because of the pandemic. Yeah, right. Which is still possible. Yeah. Like, is that full employment? I would probably say no. Right. Yeah, I think there's still a way to go. I mean, you know, it doesn't mean a whole lot right now. You know, if you account for all the people that are still out of the labor force, you know, it's significantly higher than that. So, I mean, there's, there's quite a bit of room to run yet, I think. You're,

By this time next year, I think you might be talking about approaching full employment, but certainly I don't think we're there yet. Consumers think we're close. If you look at the conference boards, labor market differential, which is the difference between those that say jobs are plenty full versus jobs are hard to get. That's at a record high. Yeah, keep setting new records month after month. Yep, month after month.

What do you think, Chris? Are we within spitting distance of full employment or are we got a ways to go here? within the next year. So by this time next year, so yeah, I don't think it's next quarter, next six months. I don't think the Fed's going to react very quickly here for that reason,

but we're certainly making good progress. So it's closer than what we thought, where we thought we would be at this point. Early on, yeah. Yeah. Of course, again,

there's a lot between now and the finish line. And that is Omicron and the next wave and the next wave after that. So, yeah, another reason to be, if you're the Fed, to be cautious here in pushing us down the path to normalization until we're pretty clear we're on the other side of this pandemic. That's right. They're more concerned about the next wave being further inflationary rather than in the hit to growth.

I mean, they're really, wait until you get the CPI next week. Really? Yeah, they're going to be year over year. It's got to be coming in here pretty soon. right? The energy prices not November. Okay.

You got a forecast for us? Up again in November, right? Year over year, we will be just a hair south of 7%. Oh, really? Okay, I didn't realize it was going to be that bad.

Because it's still base effects, I guess, going back to last November. Yeah. Yeah. Okay. Meaning last November prices were still very weak in business slash prices.

So, you know, relative to that, it's up a lot. But that chart that we have that separates out what's driving inflation, so energy's contribution, supply chains, the reopening, even in November, it's going to be mostly energy and supply chains. Yeah. What about vehicle prices?

Have they come in at all? Not yet. Not yet. They've plateaued, though, right? They're not still rising. Yeah. They're not accelerating. They're probably up.

They're up. Yeah. Production was weak. We got one really bad. I think November is going to be another, you're right, ugly. number and that hopefully will be the end of it. Hopefully. What's the change in prices relative to pre-pandemic?

Do you know that right on so? Yeah, Mark did it on one of our pocket, what didn't you say it was like three and a half percent over the last years? Yeah, if you could look at the core consumer price index, I'm speaking from memory, but I think I got this right. Core CPI, I just looked at that. October this year compared to October last year, October this year being the last data point, 4.6%. you look at October this year compared to October of 2019, so two years, and you annualize 3.1 percent. So, you know, 3.1 is higher than what I would consider to be the Fed's target of two and a half,

but, you know, that's not, no one would be talking about it if it was 3-1. Right. Okay, one more. One more, because we are getting a little long in the tooth here, as I want to say. And, you know, this is like red meat to the group. Productivity growth. So, good thing. I know Dante was growing a little bit with that Q3 number.

GDP was weak. Jobs were strong. But hey, Dante, looks like Q4 is going to be just the opposite, my friend. So where are we on this productivity debate? Are you sticking to your guns, Chris? Absolutely. Absolutely. You are.

You feel pretty good about it. Any other data points that you want to throw into the mix that supports your view that productivity growth is improving on trend basis, on a secular basis? Anything else you've observed out there? No? Not yet. Yeah. Not yet.

Okay. I mean, it's still early days, but. Yeah. And Dante, you're still on the other side here, right? You're still a pessimist. Any of the data points to support your view? Not a data point, but I think there's still a bit of compositional effect here to be played out, right? I mean, the jobs that we're going to get back, you know, in larger numbers are

still tending to be lower productivity jobs, right? So, I mean, I think once you get sort of the full, you know, this time next year, when you're back to sort of a more normal labor market mix, I think that is going to be some headwind on productivity, you know, how big that is relative to gains because of investment is, you know, that's up for debate, but I think there is still some headwind from that. I saw Christy raised your finger out. Do you have a debate? He's going to scold me. No, okay. I was just recalling my data point is Wawa-related.

So you'll appreciate this. I went to the Wawa. A Wawa-W-related. Yes. Yes. Wawa over Thanksgiving. Favorite convenience store here in PA. That's right.

Self-serve kiosks. Mm-hmm. So there you go. Really? I missed this. I know. Shocking. So.

Wait a second. Serve kiosk, really. Yes. I go in, I get a coffee. I get a receipt for it. I don't have to wait in this long line to check out. I go to the self-serve kiosk. barcode flash it, play with the credit card, I'm up.

Right? So, you know what? I see that as a productivity. Yeah, that's huge. Dante, Dante, I have a game changer. I'm not sweating over one machine. Chris is Wawa. I'm not sweating yet.

Wawa is the predictor as we've come to see. That is huge, man. I know we were going to make a field trip to the first Federal Reserve Bank in Philadelphia. him. Well, someone was telling me about it. And on the way, I think we got to stop in Wawa. Oh, no. I was going to say we should, we should take the podcast to Wawa since we talk about so much. We should. We should. They're just on the road. Headquarters. Yeah, maybe I'll send them an email. Yeah, I spoke at one of a function where their CEO and CFO was. And I didn't know they were in the audience. And I was raving about Wawa. And I got a bag full of Wawa Chatskis, you know, and for Moody's compliance, well below 50. bucks. You know, I'm not even sure you could put them on eBay, but they, from my perspective, it was, it was huge. You know, very nice, very nice, I got a hat, I got a, I think I got a mug,

you know, that kind of thing. A wah-wistle, I think. Nice. There you go. I think Ryan's got some questions about their gas, too. Good, good field trip. Yeah. Test that out. All right. Okay. I think we've played this one out. Any other issues that you want to bring up on the labor market? Anything we missed? Dante, you know, I know you're a critic of these podcasts, so any anything you want to bring up here? You mentioned that we had a little bit of improvement in labor force participation. I know Ryan disowns it entirely, but we'll say most of that improvement was in 16 to 24-year-olds, right? There was very little improvement anywhere else in the spectrum of age cohort. So it's certainly good that it's rising, but it'd be better to see it

rising across a broad spectrum of people, not just among young workers. Boy, that had to be a pretty big, I didn't notice that. It had be a pretty big increase to give you two-tenths of a percent, though. It had to be broader than that. It was up about four-tenths in the young group, and it was only up, you know, 55 and over was basically flat. It was up one-tenth in the prime age group. Oh, okay. And that was really, you know, that's still only getting back, Prime age is now back to where it was a couple months ago, whereas the young workers are, you know, almost fully back to where they were pre-pendemic. So, thank you for that, Dante. Yeah, but you're right.

We always try to end on a positive note. We do. That's true. We always try to end on a positive note, Dante. So here's a positive note. If you look at the labor income proxy, so average hourly earnings for times like hours worth, that points to very strong wage growth in November. Oh, okay. Very good.

So we're going to get a lot of income in November from the labor market. Excellent. Good, excellent. Well, this was a really good podcast. You know, one of my favorites each month. You know, we get a real window into what's going on in the job market. And, of course, by extension, the broader economy. And thanks, Dante and guys, until next week.

You know, we have to think about what we want to do for next week. But that reminds the listener. That sounds like inflation, right? Yeah. Yeah, and listener, that reminds me. If you've got suggestions, you know what to do. Go to, where should they go, Ryan? Can't remember.

Economy.com. And then you'll see the banner right there for podcast suggestions. Yeah, please. That would be very powerful. Yep. Thank you so much. Take care now. Bye, everyone.