Moody's Talks - Inside Economics - Relaxing Report, Squiggly Data

Episode Date: July 7, 2023

Mark, Cris & Marisa are joined by Jobs Day regular Dante DeAntonio to discuss the June employment report. Job growth is slowing to script but wage growth is still stubbornly high. The group discusses full employment, the probabilities of recession in the next year and what this all means for the Fed’s upcoming meetings.For the full transcript, click hereFollow 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 Zandi, the chief economist of Moody's Analytics, and today is Jobs Friday, July 7th, and we're going to run down the June employment report. And to help do that, we've got a bunch of colleagues, my two co-host, Chris De Rides, who's hailing from somewhere in Italy. Are you, where are you in Italy, Chris? I'm in Abruzzo, which is the province opposite coast from Rome. The opposite. Oh, I see. Okay, very cool. Yeah. And you were there last summer, too, as I recall. Yeah, yeah. I'm at my mother-in-law's house. So that's, this is where I go. Yeah, you look very relaxed. Well, maybe it was labor market report. I feel pretty good about that report, but a lot to talk about there and we'll come back to it. But hey, Marissa, good to see you. Hi, nice to see you. Our other co-host, you're on Inside Economics. Good to see you. You're early in the morning there on the West Coast, but you look, you look, Marissa.

I mean, thank you. Yeah. That's really good. Now, Dante, on the other hand, oh my gosh. Same time, Zamb, we can't get it together. It's like me. I can barely comb my hair, my three hairs, but, you know. But we got Dante, of course, you know, here to run down the living market data key to this jobs market analysis. So, okay, we're going to dive right into it because I got a wedding to go to. Chris got has wine to drink. God knows what Mercer and Dante have planned here. We've got to get going. And we'll keep this short and sweet. But Dante, give us the rundown on the June 20, 23 employment report. Sure.

I'm going to steal Chris is where I think it was a relaxing report to read. There's not a lot in there to stress anyone out, I don't think. Topline job growth came in at 209,000. Private payrolls only grew by 149,000. The three-month moving average of job growth is still a little, over 240,000, but that's down pretty substantially from last month, given some down to prior months' data. By industry, there was some weakness, certainly. Healthcare contributed almost half of all private sector payroll gains, you know, adding just over 65,000 jobs. I think construction,

probably a little bit of a surprise, adding another 23,000 jobs after adding the same last month. manufacturing turned positive after a couple of declines in recent months. Most of the real weakness in terms of declines were concentrated in retail and transportation and warehousing. And not huge declines in those industries have been sort of flat to down a bit in recent months. So not really a new story there. I think the one blemish potentially or the one thing people will focus on is growth in average hourly earnings was up 0.4% in June. A little bit stronger than expectations leaves year-over-year wage growth at about 4.4%, which, again, is still higher than we would like to see. Certainly higher than the Fed would like to see moving forward, but it's basically where it's been stuck for most of this year.

So it hasn't re-accelerated. It's just sort of been stuck right around 4.5% here for a few months now. Average weekly hours ticked a little bit higher, which was the first time that has moved up since January. Again, not a huge movement. It's only a 10th, 10th of an hour. So not a big deal there. I don't think on the household survey side, again, I think things were sort of back to normal this month. Unemployment rate actually ticked a little bit lower. But that was coming off of the big jump last month. And it ticked lower for the right reasons, right? The labor force is still growing. Employment just outpaced labor force growth by a little bit. So I don't think there's any sort of worry there on the unemployment rate side. We still expect it to soften a little bit throughout the rest of the year, and I think it's still sort of on track to do that. So let me ask you, what do you think under what I'll call underlying average monthly job growth is that abstracting from the vagaries of the data, the ups and downs and all around, seasonal adjustment, measurement, whatever, where do you think we are?

225. 225. Okay. Right. What do you think labor force growth is right now? It's probably about the same. I think over the last 12 months, it's been actually a little closer to 250 than 225. Right. And that's the stable unemployment rate, low and stable. It isn't really budged in over a year, I think, right?

35, three, six, somewhere in there. It's been in that tight range, yeah. Yeah. So bottom line, it sounds like you feel pretty good. The report feels pretty good to you. Yeah, it does. I mean, we want job growth to slow, which it seems like it's doing. I think the wage growth story is the only thing that's maybe of any concern to people. And even that's not a, you know, a horrible story. It's just that it hasn't really budged going down yet. And could that be mixed, too? Because you had a lot of construction manufacturing, as you pointed out, and they're high paying. And that affects this average hourly earnings estimate. It certainly could be. I mean, growth in leisure hospitality is much weaker than it's been, which obviously is a lower paying industry. You've had some declines in retail, which is also lower paying. So you've got a stronger amount of job growth coming from, you know, at least mid to high wage industries, which could certainly be propping it up a little bit. Yeah. Okay. Hey, Marissa, what do you think? Anything, any gaps there? Anything you want to. push back on? No, I mean, I think it's what we want to see. You know, it's, job market is clearly slowing, but not cratering. Yeah, I think underlying job growth is somewhere in the range of 200,000. We're going to get benchmark revisions, the preliminary

benchmark revision, a peek at that in the next couple of months. So actually next month, I think, when they released the July figures. So we saw those downward revisions for the past two months, which we've been talking about, right, some expectation that that, might be the case that the data have been overstated a bit, and that seems to be the trajectory that this is moving. So I think it's a good report. Yeah. What about the average hourly earnings? The one blemish that Dante Pallel. Yeah, I do think that there could be a mixed issue going on, so I don't put that much stock into this, but other measures of earnings have also been kind of hung up there, too, right?

I don't know when we get the ECI again. End of the month. It's going to be, yeah, next month. So we'll see what happens there. End of this month. End of this month. Yeah, it's in a few weeks. In a few weeks.

Yeah, the employment cost index, which is a broader, more rigorous measure of wage growth because it controls for a mix of occupation and industry. So it's a quarterly series, though. So we have to wait for it. The Atlanta, there's the Atlanta Fed's wage tracker that's been moving lower slowly, but lower as well. Yeah. Okay.

So relaxed sound feels like the right word? Yeah, to describe those? I think it's good. I think we're coming close to the title for this podcast. I think relaxed probably will be in the title, just to get, just my thing. But, you know, we'll see. And it's apropos with Chris in Italy. Yeah, look at him.

So relaxed, man. Yeah, that white linen shirt, you know, it's very abruzzo. Are you actually in the wine cellar, Chris? Are you actually in the wine cell? I'm not in the wine cellar. There is no wine cellar here. Oh. I thought you weren't the last, wasn't he in the wine cellar last year somewhere?

I think that was your imagination. Oh. You know, you romanticized by my trip. You would like me to be in the wine cell. I'd like you're the wine cellar playing botchy. Bocci ball. Yeah. Do you play Bocci ball?

I forgot. Oh, yeah, you're like really good at Bocciball. Tough competition here. Tough competition here. Yeah. Yeah. So what do you think, Chris? I mean, and I'm going to ask you at some point, what's the probability of recession?

But I mean, come. I mean, when I saw that, well, I'll stop. I'm not going to be. I was going to give you my view. But what do you think? What do you think of that report? All good. Okay.

You're right. I really can't push back. All I would say is that the revisions, right? We're pretty substantial for April and May. So this 209 number probably isn't going to stand. It's probably closer to. 170, 180, if you take some type of average there, which I think is kind of in line with the type of job growth that the Fed would want to see. So I think we'll see the one hike in July,

because that's already baked in, but September, I mean, a lot of script to be written still between now and September, but if this is the pace we're on, then this does comport with the slow session narrative. Right, right. Slow session. being no recession, but an economy that's kind of going nowhere fast. Yeah, yeah, definitely feeling uncomfortable. Uncomfortable. Right. And risk of tipping into recession, but narrowly avoiding it.

Yeah. Okay. In any blemishes in your mind in the report, nothing you can point to? Again, the average hourly earnings, maybe. Maybe. Yeah. How much stock do you want to put in that? But, yeah, still, even if you account for those mixed issues, still what, 4%?

That's still too high. So, you know, the Fed is going to be on guard here until that number comes in more aggressively. But I don't think this changes their outlook at this point. Right, right. Okay. Yeah, I think this report, do you care what I think, by the way? I'm going to tell you anyway. Of course.

Of course. I already know what you think, but maybe you could tell us. Yeah, I like the word relaxed. But I was, I get pumped, you know, when I get reports like this. I mean, I, it's, I'm so weird. Like, I get nervous about nothing except for two data points that come out every month. One is the jobs number and the other is the CPI number, which is going to happen next week, which we, you know, I actually think that could be a really great number in part because of reality and inflation is moderating, but also because of measurement, you know, issue, seasonal adjustment issues.

So maybe we'll come back to that. But regardless, when I got the number today, I said, okay, that's about as perfect as it could be. Not too hot, not too cold. In fact, if it was over 300K, I think the market might lose their minds, you know, thinking, you know, the economy's going to overheat, a lot more fed rate hikes, which would ultimately mean recession risks would be higher. but, you know, sub 300, closer to 200, you know, that's right down, I'm going to use every metaphor I've got, you know, right down the strike zone, you know, down the fairway. It felt really, if you wanted to pick a number, that would be, you know, the number that you would pick. So it felt pretty good there.

Yeah, the ADP numbers spook me this week, right? Yeah, but. Dante and I were going back and forth on that a little bit yesterday via email. we don't pay any attention. I mean, I don't pay any attention to that. Do you, Dante? I haven't. I hadn't even looked at it until you mentioned it yesterday.

I just don't know. It's not even in my mind. Yeah, so I will, you know, just given what happened here. So explain what happened. Explain ADP and what happened here, you know, with ADP and the markets. Chris, go ahead because you brought it up. I won't. No, it was, I don't remember.

It was a big number. 500K. Almost 500K. Yeah, yeah. Yeah. Yeah. And the market, so the market, we may not react much to it, but the market. markets clearly did.

They may not in the future, given what happened. Could be, could be. So just a little bit of a head fake, right? And that is a private number based on payroll data that ADP, the human resources company collects and tries to estimate. Well, are they still estimating the BLS number or is that? It's supposed to be just an independent estimate. I think it's just an independent estimate, I think.

Yeah. Okay. I mean, the industry mix is just bizarre, too. I mean, the top line number is sort of bizarre enough, but, you know, the industry mix to get to that just doesn't make any sense. You know, expecting 100,000 construction jobs to be added, you know, 70,000 jobs in mining. I mean, it just, yeah, yeah, makes sense. Yeah. Yeah, so I, you know, for me, it was a wonderful report.

The average hourly earnings, you know, but, yeah, it's. the peak in average hourly earnings growth was back in March of 2022, just about 6% year-over-year. We're now at 4-4. And the bogey, I think, is 3.5% year-over-year growth because that's pretty consistent with where it was pre-pandemic. And that's also consistent with 2% inflation plus 1.5% underlying productivity growth. So that 3.5% wage growth would be non-inflationary because it's consistent with that productivity growth number.

And, you know, it's kind of underlying productivity growth. You know, that's where we've been since the pandemic hit in a few years before that. So we're not quite there yet, but, you know, it feels like if the job market is going to continue to moderate in unemployment, probably will notch a bit higher here. That's going to take some steam out and we'll get wage growth back in. I did the other one blemish, and hopefully I don't take anyone's statistic, you know, for the game. Oh, maybe I won't say it because I might need this statistic. I'm not going to say it. I'm going to keep that statistic.

I did, I did want to, so I felt, I felt pretty, I mean, not pretty good. I felt very good about the number. I think this is consistent with the idea that the economy is, you know, grace, reasonably gracefully throttling back. Inflation is going to come in. Fed doesn't need to raise, they're going to raise rates, you know, because they're hell bent on doing it later this month. But if, you know, if that's not the end of it, we're pretty. aren't close to the end of the rate hikes. And if that's the case, then I think, you know, we're in good shape. The economy is going to come in here without experiencing an economic,

an outright economic downturn. So this all felt, you know, good in that context. I did want to dig a little deeper. Here, we're going to get a little nerdy into something Marissa brought up around revisions. And I'm going to turn to you, Dante, because these revisions are going to become important. They already are. So describe why we have revisions to the data and, you know, when do the revisions occur, both in terms of the monthly revisions and the so-called benchmark revisions that Marissa talked about. And just give us a lay of the land there. So people understand, you know, what's going on with the revisions. Sure. So the monthly revisions happen. You know, when we get a new number like we did for June, you get revisions to the prior two months. Those monthly revisions are just due to

additional sample data coming in, right? So when they produce the June employment report, they have some data in for June, but they're still getting data in beyond today. And as that additional data comes in from survey respondents, that obviously changes the estimate of employment growth for June or for the prior months like we saw. So those monthly revisions are purely due to additional sample that's coming in. The annual benchmark revisions that we get are due to a couple of different factors, right? One, they're benchmarking, they're tying the level of employment back to the quarterly census of employment wages once a year. So they're taking the March level from the prior year from the QCW data and they're saying, okay, this is the new level. So that obviously affects

some of the historical data as that tieback, that benchmark is done to the QCW data. And then from that new level that's set in March, they then reestimate the changes for the year. So So, you know, we'll get sort of that benchmark level, which will affect some of the data, and then you'll get a reestimation of the data coming off of that level. And then in addition to that, you get revisions to the seasonal adjustment factors. You get revisions to the birth, death model, which estimates, you know, how many firms are, you know, being created and dying. So you do get other things that affected as well in that annual revision, but the, you know,

sort of the tying back of data to the QCW is the biggest factor. And Mercer mentioned that Is it next month, Marissa, that the Bureau of Labor Statistics will release a kind of a preview of what the benchmark revisions will show as of March of 2023, right?

Okay. So we'll get a better sense of whether the state is going to hold up. My sense is, and I'm curious in what you guys think, my sense is we will get some downward revision with the benchmarks, that if you look at the QCEW data, as you mentioned, the quarterly census of employment wages, the unemployment insurance record data. And if you look at household employment, that's employment as measured by the household survey. What we've been talking about here is the employment as measured by the payroll survey services. But the household employment

numbers have been much weaker, the employment gains have been much weaker than the payroll employment gains, that those two pieces of evidence suggest hard to know how to what degree, but they would be suggestive of some meaningful downward revision in the employment growth that we've been getting over the past 12, 18 months. Would you concur with that, Mercer, or not? Yeah, I think particularly if you look at job growth from the QCEW, particularly like starting last summer, it looks like it's significantly weaker than payroll employment growth. So I think we'll start to see revisions, you know, back mid to late 2020 that are probably going to be downward. Also, let's not forget that jobless claims have been trending up now pretty much all year,

and they're significantly above where they were at the start of the year. So that also suggests that job growth is measured by the payroll survey is likely weaker, I think, than it's been showing in the past few months. Hey, that reminds me, one more thing, and then we'll go to the game, and then we'll come back and then the conversation. Again, we're going to keep this short and sweet. And this goes to the UI claims. Dante, you published this in the economic view. You published this concept of break-even UI claims.

So it's the level of weekly initial claims for unemployment insurance that's consistent with no job growth, I believe. And, you know, right now weekly UI claims, it feels like we're somewhere around 200. 140,000, 250,000 per week, kind of in that ballpark. Historically, I've thought of that as kind of a normalized level of claims. You know, that is consistent with, you know, a well-functioning labor market, one where you're getting job growth, you know, consistent with labor force growth. Everything is kind of hanging together reasonably well. Is that right?

Are we at 240, 250 pretty consistent with the well-functioning economy? And what is your current estimate of break-even U.I claims? Yeah, I think the 240 to 250 is a reasonable sort of healthy level. You know, you can still have decent job growth, you know, consistent with labor force growth. If you have, you know, claims that are at 240,000 range. Break-even level is somewhere between 265 and 270 right now. It fluctuates a little bit month to month. Yeah, so there's obviously never a whole lot of space between sort of what is good and stable and what is no job growth, right?

I mean, if you're getting, you know, 20 or 30,000 more jobless claims every week, that adds up over the course of a month. And that eats away that, you know, sort of employment growth buffer that would be that well-functioning labor market. So it doesn't take a lot of increase there to go from, you know, 150, 200,000 jobs being added a month to no jobs. I think the thing that's important to realize is that that break-even level, you know, that's, that means sort of a steady state of jobless claims that are at that 265 to 270,000 level. it's not, you know, if it hits that for a single week, that doesn't mean we're going to get no job growth. I think you've got to see that pretty consistently over, you know, four, six, eight weeks before you'd really believe that, you know, job growth is going to go somewhere close to zero. Yeah, it just strikes me as low, you know, 265, 270 is pretty, me consistent with zero job growth. Here we are at 240, 250 with job growth at a couple, although maybe we're not at 200K because with downward revision, we may be at, 100K or 150K.

And that's probably what you're saying, right? Right. I think, yeah, it seems like the gap that we have now between, you know, jobless claims and that break-even level would be more consistent with something like job growth of 125, 150, which maybe is where we are and we just don't know it yet. That's right. That's my intuition. That's my intuition.

And that reminds me, someone mentioned to me, and I haven't had that chance to look, maybe you guys have, on tax withholding data, because, of course, tax withholding. I think we can get daily estimates from Treasury on, I think. And, of course, that's a window into what's going on in the labor market wage growth. And that's been weak. Is that gotten on your radar screen at all, Dante or anybody, Chris, Marissa? No. Maybe someone can take a look at that.

We could just, just, I was talking to a client, and they brought that up as something to look at. But worth looking at. Okay. Anything else on the job numbers before we move on to the statistics? And then we'll come back and kind of talk about it in the context of monetary policy and the outlook for for the economy recession risks. Anything? Do you miss anything? Okay.

Okay, very good. Let's play the game, the statistics game. We each pick a statistic. The rest of us try to figure that out through questions and clues and deductive reasoning. The best statistic is one that's not so easy. We get it immediately, one that's not so hard that we never get it. and if it's apropos to the topic at hand or the data that came out this week, all the better. Okay, tradition is we go with Marissa.

Marissa, you're up. And Marissa is like lighten it up on this statistics game recently. It's almost embarrassing for Chris. We'll see. I'm a little tired. Embarrassing. Okay. My statistic is 6% in June.

Okay. 6%. Yes. In today's employment report? Yes. In the household survey. Yes. Unemployment rate.

Yeah. It is an unemployment rate, yeah. For some demographic. Mm-hmm. Black unemployment rate. No. Less than high school. What?

Chris? Less than high school. Yep, you got it. Ah, very good. The unemployment rate for people that are. Less than a high school diploma. So this is, this was 6% in June that was up three times of a percentage point from May. It's the only educational demographic where the unemployment rate increased over the month.

And it's been on a pretty clear upward trend since the start of the year, unlike other demographic groups. So it's actually now a bit above where it was going into the pandemic. Of course, it spiked very high in early 2020 when we, went into the pandemic, but it's above where it was now in like 2018, 2019, slightly. Other demographic groups are faring much better in terms of the unemployment rate. And I should also mention the labor force participation rate for this group, just to give some context. It's about back to where it was prior to the pandemic, but it's actually slightly below, again,

unlike other demographic groups that have done a bit better. What do you think is going on? What's behind that? I mean, there could be industry mix issues, right? There's been weakness in manufacturing lately. There's been weakness in retail trade, some other service sectors that are more likely to employ people with less than a high school education. This has been sort of the way that this is stacked up now for a long time, right? If you look at the unemployment rates, people with less than a high school education have had a higher unemployment rate for quite some time.

So despite the fact that the job market is really strong, there's still matching issues, right? And we saw actually in the, I hope this isn't somebody's statistic. Well, I'm not going to say a statistic, but the ISM service sector ISM came out this past week. And some of the comments about the labor market were not being able to find qualified labor or not being able to match. job openings with qualified labor. So in some industries, there's still a matching problem. At leisure hospitality is still down in terms of payrolls, right,

from 2019 levels. So despite all the demand, the growth, yeah, hiring, yeah. Yeah, maybe that's it. Maybe it's the retail, because retail was down in the month. Yeah.

Yeah. Also. Interesting. Okay, that was a great statistic. Chris, you want to go next? Yeah, 2.6%. 2.6% labor market data

not today's report that the quit rate yes wow I forgot I forgot Don't pay's on here we're getting too good at this game boy you guys are getting too good at this game 2.6% is the quit rate

okay from the Joltz report the job opening labor return of survey so you explain two points yeah so you explain the definition that is up right so about 4 million people quit their job last month or what is it May in the month of May. That had been on a downward trajectory, not collapsing, but it was declining, which we were interpreting as a positive for some of that wage growth, right?

So there's a strong correlation between quitting folks quitting their jobs and wage gains, right? Typically when you quit your job, you move to another job, you do get maybe what, 10, 15% bump up in wages. So we had been forecasting that that quit rate would continue to come in nicely, and that would help to bring the wage gains down as well. So this is maybe a movement in the other direction here, something clearly to watch. If the quits are jumping up again, people are feeling confident enough to quit their job and move to another one. It could be a signal of some of that persistence in the wage growth that the Fed would have to address. I'm going to use a technical term. I think that's a squiggle.

Squiggle. Is that a word, by the way, squiggle? Yeah. Is it a word? Squiggle? Sure. I think so. Okay, good. Yeah, that's a squiggle. Correct. I also read somewhere that there... You know what I mean by that, right?

I mean, it feels like a squiggle. It's an aberration. It goes down and, you know... Well, it's been going down. Okay. Then it comes back back up. Let's not forget the survey response rate on the... Oh, and I was going to ask about that.

What is it? It's about a third now. the 30s, I think. And it was above 50% prior to the pandemic. So there's a big margin of error around some of these numbers. So I don't know. We can look at the report and see if it's within the statistical significance. You're saying that the response rate to the Joltz survey, which is the basis for the quit rate, has steadily declined. Now, only a third of those canvests are responding, and that's way, way down. And therefore, it might be biasing kind of what we're looking at here.

It creates more volatility, more squiggles. Yes, more squiggles. More squiggles. More squiggles. Data squiggles. Boy, that feels like that should be in the title, too, somehow, in this podcast. Relaxed and squiggles, but we've got to think about. You have no idea what the hell they're about to listen to. Yeah, exactly.

It's all about relax squiggles. There you go. I love that word. I can't stop saying it. Okay, okay, stop, I gotta stop saying that.

Okay. Okay, that was a good one. Dante, were you going to say something about the quit? I read somewhere. I didn't get a chance to look into it.

I also think seasonal adjustment might play an issue. I think if you look at the unadjusted quits date, it was basically flat and it was the seasonal adjustment that picked it up. And there could be a little bit of shifting seasonal pattern around quits, you know, sort of in the last couple years that maybe he's playing a role there too. So all that is, I think I support the squiggle argument is probably not a whole lot to read into on a one-month basis.

Yeah. And of course, the squiggles have gotten worse because of seasonal adjustments gotten a lot harder because the pandemic really messed stuff up, you know, in terms of trying to tease out seasonal patterns. Okay, Dante, you're up. What's your statistic? It's 379,000. Well, sounds like in employment numbers, it is jobs numbers. Yeah. Payrolls. Maybe it's a, it's not directly reported. It's a sum over the last. six months. So it's not a number directly from the report today. Some through the last six months, 379,000. Positive or negative? Positive, 379,000. Dante always gets his pluses and minuses, right? Ever had a problem there, Marissa? Just saying. Got to go back to podcast number 58 or 25.

Number one. Podcast number one, to understand what's laughing at that one. Okay, is it employment? So employment in some sector, gain in some sector. Okay. Is that construction jobs over the last? No. Manufacturing job, no. Hemp help?

No. Are we on the right track? It is an industry. It's job growth in an industry. Oh, okay. Over the last six months. Since the beginning of the year. Yeah.

Okay. So construction feels like it's 379, but okay. It might also be. Oh, no, is it government? It is government. I'm just going to guess every industry. Oh, government. There's a reason for this, bringing that up.

So why did you bring that up? Yeah, so, I mean, it's substantially higher than it's been, right? We added 275,000 public sector jobs in all of 2022. We've already added 379,000 in the first half of the year. It's distorting, I think, a little bit, the trend in job growth, right? you look at just private sector payrolls, they've been under 200,000 and four of the last five months, right? We've had this big, you know, sort of swing in government jobs since the beginning of the year, which I think is masking a little bit of the weakness in private sector payrolls.

And I don't think any of us believe that, you know, government job growth is going to drive growth, you know, over the long term. I think you got a little bit of buyback from some weakness last year. But, yeah, I think it, looking at private sector, I think it's more clear that the labor market has slowed and maybe slowed more aggressively. and that's before we even take into account what sort of future revisions might look like. So I think, you know, certainly job growth is weaker than the top line might suggest. Yeah, my kind of thought there on, I saw I noticed the big increase in government is that the government had a hard time hiring a year ago because land market was really tight. Businesses were really aggressive and pay to try to get workers on board.

Now the private sector, as you say, is more relaxed. You know, it's not, you know, trying it's hard, it doesn't need to. And that allows government to kind of start hiring people that the labor pool is now freed up for them a bit and so they can hire more. Does that, does that sound right to you? Health care is the same way, kind of the same thing. Right. Yeah, I think the public's, they're playing catch up a little bit in terms of hiring that they would have liked to do 18 months ago that they couldn't and now they're sort of fulfilling those needs. And there's long, it's just, you know, obviously more difficult for government in the healthcare sector to change their pay scales to kind of compete. It takes time for them to do that given, you know, it's just the bureaucracy of it all. And they really couldn't, you know, match the kind of the pay that the private sector was coming forward with and kind of left out. But now they're catching up. That's kind of sort of how it feels. So it's still strength.

It's just. It's strength, but I don't think it's strength that we can. can expect, you know, they're adding over 60,000 jobs a month in the first half of year. I don't think that continues for a long period of time, right? I mean, eventually they're going to catch up and be done and, you know, that will go back to, you know, 20, 25,000 jobs a month, probably. Yeah. Yeah, that's, that's a good one. Okay, I got, my statistic is 2.9 million, 2.9 million. Is it from the jolts? Not from Joltz. It's from today's report. From today's report.

Household survey. Is it labor force? growth over the last year. Ding, ding, ding, ding, ding, ding, ding. Way to go. 2.9 million. That 2.9 million people added to the labor force over the past year. That's a lot of people.

You know, that goes to, I think, what you said, 225, $250,000 per month. And that is allowing businesses to hire 200, $250,000 and keep unemployment. at 3.5, 3.6%. And I just don't see how anyone could square that number with we're at full employment. You know, if we were at full employment, how's that possible? How's that possible? That's just a boatload of people coming into the workforce. So it doesn't feel like we're at full employment.

Does anyone, am I missing something in that conclusion? No? Where do we go from here, though? Does that? Where do we go from here? Right? Oh, it's got, eventually it's got a, yeah, I mean, yeah, eventually it's got a slow. I'm just saying it's not, you know, there's a lot of handwringing over there out, out there

in the world. 3.6% unemployment is we're never going to get wage growth back in. We're never going to get inflation back in because we're well beyond full employment. And it just doesn't resonate with me. It doesn't resonate that we're full employment for lots of reasons. And this is one of them. The other is, you know, we were at 3.6% unemployment before the pandemic. Yeah.

And wage growth and inflation wasn't the issue. In fact, the issue is inflation is too low, not too high. So I just, I'm having such a hard time with this idea. And you can look at the Federal Reserve's forecast for long term for the unemployment rate in the long run, kind of their, you know, what they think the full employment unemployment rate is. And it's, I think it's over four percent plus. It's not, not 3.6 percent. And I don't get that. I just don't get it in the context of all this.

But I've ranted about this before, and I will continue. to rent about this, you know, going forward. Okay, very good. That was great. We're getting, we're getting pretty good at, you know, nailing down these statistics. Pretty amazing. Okay. Let's end it this way. Maybe Chris, you know, I'm putting you on the spot, but has market expectations shifted with regard to what the Fed's going to do here at the end of the month in, in September as a result of today's report. I know coming into this, there was pretty strong expectations that the Fed's going another quarter point at the end of the month, probably in September again.

Have you taken a look at that? Do you know by any chance? Yeah, I looked earlier today. Yeah, the July 25 basis point hike is almost a lock. Well, from the markets perspective, I think it was something like 80%, 90% of participants. And then for September, also a majority, certainly. Well, actually, I take that back. For September, it was still mostly a hold.

Oh, right? There was about a quarter of the population suggesting an additional hike. So I don't know, but that was before this report came out. So it's actually up to 95% now for July. So yeah, like Chris. Okay. Yeah. It wants to slam dunk in terms of expectations that we get a hike in July.

September, yeah, it's still about, only about 20% expect two consecutive hikes in July and September. Oh, interesting. Strong support for two hikes in a row. Oh, that's interesting. Okay, so still less than 50-50. Okay, that's consistent with our forecast, right? We did add a rate hike, quarter point increase in the funds rate for late this month, and that is now the terminal rate.

And the other change we made in our forecast baseline was to extend out when the Fed starts easing again. We previously had that in March of next year, and now we push that out to, I think June, early July, something like that. I can't remember when the meeting is at that point. So almost a year of rates at the terminal rate, the highest the rate will get in this cycle. Okay, let's end the conversation, again, talking about probability of recession. And I did, we had a macro meeting yesterday. This is all the economists get together and talk about the U.S. economy and talk about the assumptions that go into our forecast or baseline forecast. And we run a poll.

Marissa, do you want to go over those results? Last I looked, well, tell us what the poll said among our economists in terms of recession. Yeah, we have 42 people respond. And the question was about the probability of recession in the over the next 12 months. So we're looking through the middle of next year now. 48% said their probability of recession was between 40 and 50%. Okay. 24% said the probability of recession is 30 to 40%.

Oh. 17% said between 50 and 60%, 7% said between 20 and 30%, and one person said between 60% and 70%. That's got to be Chris. That was not me. It's an anonymous poll, so we don't know. Yeah. So it sounds like the distribution. So we're still in that 40 to 50.

Yeah. Yeah. Like right below 50. Kind of skewed a little bit lower, just a little bit lower. Yeah, it's moved a bit to the left since the start of the year. Okay. Okay. That's a good benchmark.

So let's go around the horn here. Marissa, what's your probability of recession over the next 12 months? It's about 45%. I would say. Yeah. And has that changed at all? No. No.

Okay. But Dante? Yeah, I mean, that 40 to 50% camp as well. I would say, if anything, it's trending towards the lower end of that range now. closer to 40 than 50. Yeah. And has that changed? I guess.

I mean, probably down a little bit, but still within that range over the last few months. Yeah. Okay. Chris, where are you at?

Ooh, deed, deed, I need some music. Through July of 2024, 50%. Okay. Okay.

All right. Does that come in a little bit? It feels like it's going to a lot. Yeah. It has. Okay. I'm at 60% through the end of the end of next year. Okay.

Okay. I'm still worried, but where were you on that? I was at 65. Okay, so you brought it in a little bit. Okay. Coming in. Yeah, I'm at 40% over the next 12 months, and I'd say 50% through the end of next year, but 40%. And I'm increasingly more confident in no recession.

This feels, well, we talked about it. I just feel like we're on script here. But, okay, very good. Well, I said this is going to be short and sweet. about 45 minutes, maybe a little less than that, but I think we've all got stuff to do this Friday afternoon. And hopefully, anything else, guys, you want to bring up before I call it a podcast?

No, we're good. Okay, very good. CPI next week, I guess. Yeah, CPI next week. And I'm feeling really good about the CPI. Even the super core? Even super core. Yeah.

The seasonality here, I think we've got something good. Well, we'll talk about that next week. All right. Yeah. Anyway, dear listener, I hope you enjoyed this. We'll catch you next week. Take care now.