Moody's Talks - Inside Economics - Storms, Strikes and Startups

Episode Date: November 1, 2024

Dante joins the podcast to discuss the October employment report. The impact of recent strikes and hurricanes weighed on the headline jobs figure, but everyone agrees that underlying job growth remains strong. Cris and Mark debate the reasons why productivity growth in the U.S. has outpaced the rest of the world, but Dante remains skeptical that recent productivity success is sustainable.Guest: Dante DeAntonio, Se nior Director of Economic Research, Moody's AnalyticsHosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn 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 I'm joined by my colleagues here on Jobs Friday. Got the job numbers for the month of October. And that includes Chris DeReedies. Chris, how are you? I'm doing well. It's late on Jobs Friday, though. It is.

It is indeed late on the Friday afternoon. Are you low energy as a result? No, no, no. I just had more time to digest the plethora of data that we received this month. this week. Oh, good, because I feel a little low energy, so you're going to have to pick me up. Oh, right. All right. Yeah, okay. But we got Marissa, always high energy, Marissa. Hi. And how are you, Marissa? You're doing okay? I'm great. Yeah, I'm doing great. Thank you. Did you vote yet? No, I think I'm going to do it tomorrow. I can vote early in person.

I'm going to screwed up my mail and ballot, so I'm going to do an in-person vote. Well, those mail on ballots, it's a big hullabaloo here in Pennsylvania. They're fighting over every, right? Right now, is that right, Chris? There's a battle over if you don't put the right date on the front and it has nothing to do with anything. Yeah, it's everything. Everything, everything is an issue. It brings a battle.

Did you vote yet, Chris? No, no, I want to go in person that day. Going in person? Oh, yeah. They talked about that. Yeah. Look the election worker in the eye. Yeah, exactly.

Right. Make sure it's not a bot. or anything. That's right. That's right. And Dante, Dr. De Antonio. How are you, Dante? I'm good, Mark. How are you? I'm okay. Did you vote yet? I did vote by mail. Yeah, I didn't. I'm not going to get a chance to look anybody in the eye, but I think I filled it out correctly, so hope for the best. Yeah, you want that vote to count for sure. Uh, I did, what about you, Mark? Oh, yeah, oh yeah, mail in ballot some time ago. Yeah. It was very, you know, I debated, would it be okay to put it into the?

mailbox. Am I worried about the mail? Should I go over to the county? You know, if you go to the county, they have a drop box, but that's 25 minutes away. Do I really do that? I mean, am I being paranoid? Yes, you are, Mark. You're being paranoid. So I stuck it in the mailbox. And, you know, the great thing is you can go up to the PA site. I guess it's the, I don't know, the Pennsylvania State department, I guess, and you can actually see where your ballot is, and whether it's been recorded, and it was, it has been. So I'm satisfied. Yeah, my vote will count.

Yep. I did my run today. Did the lawn sign count? Okay. How's it looking? 50-50 on the nose. Really? Yeah.

I'm not kidding. I'm not kidding. Yeah. No one pulled the sign? No, no, everyone's been civil. Okay, okay. As far as I can tell. Yeah.

Any punched signs or? No. Desecrated in any way? No, desecrated signs. Red paint or no red paint. No, it looks like everyone's, you know, letting the other folks express their views. So, which is a good thing.

Yeah, that's good. That's great. Well, we got a jobs report today. You know, you would think it might be a bit of a problem for, for VP hair. because it was pretty weak, but it looks like there's a lot of ifs ands or buts with this report, right, Dante? That's right. It was a messy one for sure, but I think my headline was one that can be ignored pretty

safely, just given all the one-off effects that are baked into there that are hard to untangle. Yeah, well, tell us more. Sure. So the headline job number was 12,000 jobs added. Not a stellar showing. That's the weakest monthly read. since December of 2021, I believe, where we had a negative print. So it's the worst reading we've had in a while, but that's obviously sort of convoluted by not only the Boeing strike,

but also the impact of two hurricanes, right? We had Hurricane Helene, which hits Florida, Georgia, North Carolina, just before the reference week in October. And then we had Hurricane Milton that went across the state of Florida during the reference week in October. all three of those things combined. Certainly weighed on that headline gain. My estimate is it probably at least 100,000 jobs taken off the top line number as a result of those three things in combination.

Weakness was pretty concentrated in a couple of spots, which makes sense. Manufacturing had a huge decline, obviously, mostly strike related. You also had declines in temp help services of almost 50,000. You had a small decline in leisure and hospitality, which again, I think makes some sense given...

Would the temp help decline be related to the hurricanes in any way? Probably more the strike, I think, manufacturing-related than the hurricanes. A lot of temp help employment is related to production process. So that could also be the hurricanes a little bit, but I think manufacturing probably more so. You also had small declines in retail trade and transportation and warehousing, so industries that had been adding jobs pretty reliably. pulled back a little bit in October. Not a whole lot of bright spots industry-wise.

Healthcare kept adding the biggest winner, probably in October. Public sector is still adding jobs. But pretty weak across the board outside of that. Unsurprisingly, private sector payrolls declined by $28,000 in October. But again, I don't think there's much to read into there other than we have to sort of wait and see what the bounce back effect looks like in November and December as hopefully the strike ends and the. hurricane effects dissipate here over time?

Yeah, I'd say it's no surprise at all. I mean, I think I tweeted out what right after Milton hit that we could get a negative number. It was conceivable that we'd get a negative number because of the temporary effects of the hurricane because it was pretty disruptive. I mean, it was right in the middle of the survey week, right? Bureau of Labor Statistics conducts its payroll survey, the survey of businesses and households in the week that includes the 12th of the month.

included the week that Milton hit. And, you know, people were obviously were evacuating well in advance. So it's highly disruptive. So it's not, not surprising. I don't think that it came in as weak as it did. Agreed. And on top, yeah, agreed on top of that very low response rate to yeah. What was that all about? Yeah, I mean, what was going on there? Yeah, same. Mostly hurricane related, obviously. Oh, it is? Okay. Shut down power outages. You know, if you just, and the The collection period was also very short. We got a very early jobs report on November 1st. And so you get a shorter than normal collection period or the actual amount of time where BLS has to gather data from businesses.

So that short collection period combined with the effects of the hurricane, mentioned you had a response rate that was below 50% for this first job. Was that short collection period, just a calendar quirk? Or was there anything else going on? Calendar quirk. Yeah, it's just calendar timing and how many business days do you? you have because they obviously have to sort of close the collection period. They need time to produce the numbers, right? So they're not collecting new data. They're not incorporating new data right up

until the release. They're sort of closing that off about a week ahead of time to give them time to actually calculate the estimates based on a fixed set of data. So we don't know what the bias that create. The fact that they had a short collection period, meaning they had therefore fewer responses. And Beelas called it out in their report. But you don't know for sure whether it biased the estimate the payroll employment gain down or up. It's just by it's in all likelihood, though, feels like it biased it down. We'll see. There's no, there's no guarantee, right? It adds variability, volatility. It makes it more likely that you get a bigger revision in the next couple of months. But yeah, it doesn't necessarily sort of predict one direction or the other.

Okay, so I ask you this every month, I think. What is underlying, what I call underlying monthly job growth? You know, extracting from the vagaries, these temporary things due to hurricanes and strikes and measurement issue, you know, if you abstract from the bakeries of the data, the noise and the data, what's the signal? What's the kind of the underlying average monthly job growth right now? I think I give you the same answer every month, but what was I think 100, okay. Well, at least probably for the last six months. Well, you tell me the number, I'll tell you if it's right. Go ahead. 150 to 175. Okay. That's exactly right. Okay. You must, yeah, yeah. Perfect. So you must have told that to me. Yeah. Yeah. Yeah. Hey, Chris and Maris,

Chris, is that kind of in line with your thinking, 150 to 175K? It is, maybe on the lower end of that, but yeah. Yeah. There was also a downward revision to August, too, right? Yes, a pretty big one. And September. In September? Yeah.

And despite that, I think the three-month moving average of job growth was almost 150K on the nose, right? Up to this month, up to... Yeah, it was like 148 through... last month before we got this month's data, right? Right. And that August downward revision is kind of weird, right? Because historically, that's the month where you get these big upward revisions, right? I mean, just when you think you understand the data, they do this to you.

You know, they violate 20 years of history, you know, so, right? Yeah. But Mercer is the same, 150 to 175? Yeah, I would say 150. I'd be on the lower end of that. Yeah. Okay. Okay. Anything else stand out in terms of employment? What I want to do here is take a look at each of the indicators that give you a sense of what's going on in the labor market to get an overall sense of the labor market, number one being the change in payroll employment, establishment employment.

Anything else on that that you would call out, Dante? I don't think so. I mean, like I said, I think you mostly just have to ignore it and wait for better data to come. I don't think we should read much into it. Okay. Mercer, anything else on that? The only other thing I would call out in terms of the industries is the construction industry, which obviously is very sensitive to weather, had a gain, but it was very small compared to what it's been in the past several months. It was only $8,000 compared to $27,000 the month prior, $28,000 the month before that. So that clearly was affected by weather as well. Okay. All right.

Okay, let's the other, there's a bunch of really important statistics that come out with the jobs report each month. The other being the unemployment rate, and that held steady at 4.1%. Now, Dante, did you go look and see what the fourth significant digit is? I didn't, I did, yeah. I mean, the unemployment was actually up a little bit. Oh. We got a rounded up. It actually almost increased by a full tenth of a percent between last month and this month.

even though it was 4.1 both times. Yeah, it was 4.05 last month. And this month, it was 4.145, I think. So you did actually increase. I mean, granted, there's noise there on the household survey side as well. So I'm not, you know, I don't think there's much to worry about, but it is moving. I just want to stop for a second and say, hey, listener, dear listener, do you hear the expertise that we have here? I mean, this guy, this is amazing.

him. I thought I was going to get, trump him. I thought I was going to stymie him, but no, he got you're always asking about the unrounded unemployment rates. I got to make sure I'm prepared. Oh, so you were ready. You were, you knew I was coming with you. Yeah, with this, okay. And how did we get there in terms of household employment and the labor force? How did what happened there? Yeah, so the things sort of balanced out, right? You had a decline in the labor force. You had a decline in household survey employment, and then you had an increase in unemployment. So that decline in the labor force and increase in unemployment essentially offset each other to a large degree and kept the unemployment rate stable. I might take someone's statistic, but isn't there a question in the household survey about if you're not working because of a weather event?

Isn't there something like that in the report? There is. Mercer's rate. Oh, Marissa, do you know what that? Am I taking your number? I do because that was my statistic. That was your stat. Oh, damn.

Okay. All right. What did it say? So, okay, so I'll find a new statistic, I guess. Sorry. Oh, you thought I was going to move on without getting the number. I thought you were, but it's all right. I had like three because I figured this may come up, right?

Yeah. So the number of people that were not at work for the entire week of the household survey was $512,000 in October, which is the highest of any October since BLS has been keeping records, right? So this is not seasonally adjusted, obviously, because it's weather. So if you go back to any October since the early 80s, that's the highest it's ever been. So over half a million people. Did I get the question right? The BLA, and this is a certain now that we've turned to the survey of households. That's right. So they ask, yeah. Do you usually, you know, are you usually working?

Do you have a job? And were you not working last week? Someone says, no, I wasn't. Why weren't you working? They can say because of bad weather. So that was the number of people who said they have a job, but they weren't at work for the entire week because of bad weather. And then there's a related statistic which asks,

were you working less than you normally would have? So these were people that were working part-time, but they have a full-time job. And there were 1.4 million people who said that they would have been working part full time, if not for the weather. And that's also the highest it's ever been back to the 70s of any October. So it was really very impactful on the employment report. Going back to that 500K, what is it typically in the, do you, do you know, just roughly speaking?

Is it half that? Like in September, it was 52,000. Oh, okay. Okay. Okay. I mean, again, like, so the numbers in like January are always really high because of weather, right? So like you get these big spikes usually in January. For example, January of 2024, it was $58,000. Right. So you would expect to see that in a January when you have snowstorms battering, you know, the East Coast and the Midwest. But for October, that is like almost double any number we've seen in a number. in October before. Okay, so that feels like proof positive the hurricanes play. We're a big deal here. Yeah.

A big deal. Yeah, yeah. Yeah. Right. Okay. Okay. And also, I guess on the unemployment front, still no layoffs, right? I mean, if you look at initial claims for unemployment insurance or if you go to the

Joltz report, the job opening labor turnover survey report, where they break down what's going on in the labor market, no layoffs there. Challenger, I think, came in. That's the Challenger report on announced corporate layoffs. They were pretty low. No sign of any pickup in layoffs at all. Am I right, Dante? Yeah, that's right.

I mean, outside, you know, we got an uptick in claims in sort of the first two weeks of October as a direct result of the strike and the hurricanes, but they're actually now lower than they were, you know, at the end of September. So they've come down actually back past their sort of, you know, pre-October level. already. Okay. All right. Okay. I was going to ask, oh, before we, how, the other indicator, we don't spend a whole lot of time on, but I just to round out the indicators in this report that are important. Hours work per week. What did, what did they do, Dante? Unchanged. Unchanged.

And the aggregate measure was also unchanged as well. So, yeah, I mean, looks like there wasn't a huge impact. Because that's usually where you see weather effects, right? Because people, all they have to do is work one hour in the survey week and their counted as employed. I have that correct, right? On the payroll survey, yeah. On the payroll, back now, back on the payroll survey.

And so they could be counted as employed, but their hours generally are cut back because they're evacuating or they were just unable to go to work because there was no power, so forth and so on. But we didn't see that in the data. It did not show up. My only assumption is that given the timing that you just had more people who were out the whole time. And so that didn't weigh on, you just had people that were away from work entirely. And so it didn't weigh on average hours quite as much.

There was less part-time working and more just people that were gone completely. Okay. Okay. I want to talk about wages and productivity. But before we do that, Chris, what was the market reaction to all this? I mean, we're at the end of the day, the market's, equity markets closed. I didn't even have a chance to look. What's going on?

What happened? Yeah, equity market was up. The stock market was up 300 points. Okay. So they kind of look through this. Yeah. Yeah. The expectation for a rate cut, Fed, Federal Reserve rate cut next week is like 95, 98%.

So, you know, almost guaranteed, according to the market at this point. 10-year rows as well, right? pretty significantly about 10 basis, well, is 10 basis points significant anymore? Maybe, maybe not, but you know, pretty significant. It's, we're closing it on 4.4% for the 10 year. So, right, despite the week job number. Yeah. You went up on the equity market, up on yield. So something else, it's not the employment report that's, yeah, there's some cross-dines, perhaps here going on, better expectations for federal debt increases based on the election outcome, right? There could be all sorts of things going on here.

We'll take, we're going to come back to the labor market in a second, but since I have you brought this up, let's explore that a little bit more. So if I go back a few weeks ago in my mind's eye, I recall the 10-year treasury yield, and this now might be four, six weeks ago, the 10-year treasury yield was 3.7, something like that. I think the fixed mortgage rate was closing in on six. It was, you know, yeah, right? North of six percent. Now here we are four, six weeks later. And you said the 10-year treasury yields at 4.3 percent. So 4.39. Oh, 4.4. So we're up 70 basis points, 0.7 percentage points. And I think the 30-year fix is now over 7 percent, isn't it? Last I looked.

Last I looked. Yeah. So I'll put up. almost a point. And so what's what that's a, you know, I know the, as you, as you were just alluding to, the bond market is very volatile for lots of different reasons. So we get these big moves. That's a pretty substantive move in six weeks. What do you think is going on there? Yeah, I think it's, you think it's tough.

You think it's the election? You think the election may be playing a big role here, expectations for, again, debt issuance. Well, can I throw one other piece of information out there? You know, this swing in 10-year yields happened at the same time that the probability that former President Trump will win the election started to rise in a significant way. He gained on Harris in the polls and in the prediction markets he's now leading her. I think he was losing to her, I think, in the prediction market six weeks ago. And now he's winning in those markets pretty handily. And could it be that markets, investors are nervous about tariffs and other things that might

lead to higher inflation, which obviously is bad for bonds and means higher interest rates? And also, as you point out, you know, he's talking about tax cuts that will be unfunded, the largely deficit finance. And that also means higher real long-term interest rates. So, you know, is it safe to connect those dots? That's my sense. That's your sense. It's policy related, right?

There is an implecent assumption here. And I guess consistent with that, the equity market has basically gone flat over that six weeks. You know, stock prices, they're high, but they've gone nowhere. So that would be gone up and down kind of. Yeah, you could have, if both the equity market and bond yields were rising, that would be consistent with a stronger economy. But the fact that the equity market's flat and bond yields are up is consistent with, oh, this is inflation and debt. That's what it feels like. Yeah.

Yes. You're shaking your head. Yep. I agree. Yeah. Up and down. Not sideways. You're up and sideways.

Okay. All right. Any to add on that, Marissa? No? No, I was going to ask Chris what the crypto market's doing. Yeah, he should know. Oh, let me check. What do you mean?

I really don't follow the crypto market. He's making that up. You don't follow the crypto market. Oh, it's down. Oh, it's down. It's down a thousand, over a thousand dollar. per Bitcoin, right? I don't know.

$69,000 will get you a Bitcoin these days. Oh, really? 69,000. Okay. You know, there too. I think it's been up quite substantially. Yeah. Again, I think that's a,

presumably that's inflation related or a friendlier, you know, crypto environment, post-election. Yeah. Who knows? Right. Yep.

Yep. Okay, back to the labor market. Wage growth. Oh, Dante. What? Of course, a job report now back to the establishment business survey gives us a read on average hourly earnings, a measure of wages. What did they do during the month? I was up 0.4% in October.

I kept the year-over-year growth rate at 4%. So no change from September. Again, I mean, that job or wage growth measure can be a little bit affected here by the same weather effects. You've got a different composition of job growth happening. So, you know, it's always subject to revision, but I would say even more so, you know, could be moving a little bit more in one direction or the other come next month. But it's not a whole lot to write home about on the wage growth front in my mind. I mean, we got the ECI data yesterday and it sort of confirmed a similar story that wage growth is somewhere in the 4% neighborhood, which feels like a perfectly fine place for it to be given relatively strong productivity growth that we've had in the last several quarters. The ECI employment cost index. And it's a different measure of wages than the average hourly earnings in a better measure in the sense that it controls for the mix of jobs, occupations, and industry so that you get a much cleaner read on underlying wage dynamics. And you're saying that came in close to 4% as well.

Yeah, it's just under 4%. Yeah, it feels like all the wage numbers and there's a bunch of them are all coalescing around 4%, doesn't it? Yeah, yeah. Okay. Which is a good thing, right? Because inflation, it depends on the inflation measure, that's somewhere between two and two and a half percent. So that, you know, take the four minus the two or two and a half percent.

That's so-called real wage growth after inflation. And that goes to purchasing power. That means people have more purchasing power. Their dollar is going further, which obviously is very important in terms of people's perceptions about how well they're doing or the reality of how well they're doing. Yeah. Yeah. Okay.

And you don't think that I think if we had, if you go back a couple years ago, when we were having these discussions, we were saying wage growth that was above three and a half would be deemed to be inflationary because that was, you know, above underlying productivity growth and inflation, the 2% inflation target. So didn't, any, we would, people would feel uncomfortable if we got numbers above three and a half. But I don't sense that anymore, right? Because I think to what you said, pretty TV growth is picked up and people feel comfortable that the economy can generate 4% wage growth without generating inflationary pressures. Yeah, I think that's true.

I mean, right, but sort of before we were relying on that productivity growth average of about 1.5% that we had sort of in the lead up to the pandemic. And that's where that 3.5% wage growth number came from. But now we've got a fair amount of productivity growth data here, sort of post-pandemic. and that's been averaging at least 2% at least over the last year or so. So, yeah, I think that makes people a little more comfortable with where wage growth is right now. Okay.

Chris, anything on that? Do you want to say? Well, we're going to come back and talk about productivity, but, you know, because I know you can't wait. I'm itching. I'm itching. You're itching. Yeah. Yeah.

All makes sense. I'll make sense. Okay. Okay. According to script, I would say. According to script. Yeah. I couldn't say any better than that, Chris, according to the script.

I know you couldn't. Yeah. Okay, before we talk about productivity growth, let's play the game, the stats game. We each put forward a stat. The rest of the group tries to figure it out with clues, deductive reasoning, questioning. The best stat 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, which is the labor market, but it doesn't have to be.

all the better. And we always begin with Marissa. Marissa, what's your stat? Okay. This is a last minute stat, sort of. So it's not that great. You're probably going to tell me it's not that great. 3.8%. Well, that's the ECI wave. Yeah. Oh, come on. Oh, geez. Well, that was my backup to my backup. So that was third in line. And then you guys started talking about the ECI. So, yeah, it's the- What did you say I was going to say? What did you say? think I was going to say that that's a bad statistic yeah right yeah it's a bad statistic yeah thank you I know what I said it first my first statistic was the number of people not at work I know I know was the other one I said then I had the survey response rate was my third so now we're down to this

oh what was sorry you didn't say what is a survey response rate well it was 47.4 percent but Dante had said No, it was under 50%. So then I abandoned that. And typically what it is, I know it's been kind of steadily falling. In the 60s, it's been in this, yeah, I mean, it's been above 50. It's been like 55 to 60. So that was really low. And I think that's the lowest since like 1985 or something like that.

Okay. Yeah. I almost use that as my stat. I mean, that was so. Oh, really? No, I was, it was on the list. We're good. But yeah, it's the lowest first print for October since 1985.

Yeah. It's a long, long. way away. Well, that was that was so easy. I thought it was a head fake, you know, like, I was scared to say it because how could it be that easy? Yeah. Sorry. No, I'm only joking. It's the first reading below 4%. This is for private sector workers. Right. The year-over-year growth rate of wages, particularly for private sector workers, excluding benefits. And it's the lowest since lowest in over three years since 2021 and the first time under 4% since then. Do you recall prior to the pandemic, kind of what was the underlying growth in the

employment cost index? I want to say it was like in the threes. I thought it was like twos. Oh, really? I think it depends how far back you go. I mean, if you're looking at like right before the period, I think it had gotten up to three and a half, maybe like three and a half, but it had been pretty low for a while and then sort of creep back up in 2019. Well, let me put it this way. The last time we were at full employment,

you know, in that period before the pandemic, we were back up to three and a half, roughly? It was three. It was like two point. Yeah. I mean, again, if we look at private sector wages, it was 2.9%. Yeah. Okay. Wow. Okay. So that, this is impressive. I mean, we're getting close to four pretty consistently now. And prior to the pandemic, we were getting closer to three. Yeah. Yeah. All right. Okay.

Dante, you're up. I managed to avoid giving this one away earlier, so I'm feeling pretty good about it. 4,000. Is it a gain in employment in some sector of the economy? It's not a sector, no. A demographic? No. No.

But it is getting in jobs. It is jobs, yeah. Geography? It's not a geography. It's jobs. 4,000 jobs, 4,000, 4,000 jobs. Is it in the household survey? It's not.

It's in the establishment survey. Is it related to manufacturing? It is not, no. Do you want me to give you a hint? Yeah, I can think you better. It's related to revivation. So we talked about there being these big downware revisions to August and September. Something got revised down 4,000.

Some sector got revised down 4,000 jobs? Was up positive 4,000. Oh, so I'm sorry, yeah, got revised up 4,000. So what sector is like top of mind that it can't be some esoteric, you're not doing that to us, are you? It's not esoteric, I don't think it's not. Non-bank financial institutions. No, no. It's the actual revision or was this the actual revision or was this the net job gain after the revision in this industry?

It was the actual revision, not a specific industry, though. I have a feeling this is going to be a very boring stat. I just have this feeling. Oh, is it the average revision for August? What? Historically. Oh. No, no, no.

Oh. No. I feel like I really stumped the credit. out here today? I say we give because the listeners, yeah, the listener's getting annoyed. Yeah, go ahead. So I would keep going, but the listener does, is telling me, I can hear it.

I hear you. Go ahead. Yeah, go ahead. If you look at non-seasonally adjusted, it's the combined revision for August and September. It was actually plus 4,000, even though the revision seasonally adjusted was minus 112,000. Wait, wait, wait, wait. Not seasonally adjusted. the net revision.

What is your point? Orissa gives us a softball traveling 30 miles and out. I gave you a fastball. He gave us a curveball slider, you know, at 103 on the left. You know,

I've got, you know, I'm not that good with baseball metaphors, but, you know, you get my drift. I want to hear the relevance. What's the point,

right? So everyone's pointing to the, everyone's pointing to the big downward revision. as a sign that there's more weakness in August and September than we thought before, but the entire revision was just updated seasonal adjustment factors, right? The actual underlying data shows essentially no change to job growth in August and September, but DLS updates the seasonal adjustment factors every month. And given the volatility that we had in recent months and with October,

there was a big swing in seasonal adjustments. You had mentioned August, right, in the fact that it's almost never revised down, August by itself, the unadjusted data was actually revised up by 14,000. And it was revised down by 81,000 because of seasonal adjustment. Okay. So you don't want to give your, you would have said that when that came up in the I was going to, yeah, I was going to say it at the top. But you don't want to give up your stat is what you were. See, Dante has an advantage by doing the, when you have him do the jobs report breakdown

because he can strategically avoid his own statistic. Yes, yes. While mentioning four of mine. Yes, exactly. That's a good point. For the record. For the record. So just to clarify, what you're saying is we saw these big down revision in August

in a pretty solid one in September. But all that was was a revision to the seasonal factors that the Bureau of Labor Statistics use. The actual number of people wasn't revised down to any significant. a degree net between those two months. Yeah, okay. That's right. So, yeah, I mean, it changed, but yeah, I wouldn't read it as a new week.

So don't read anything into those. Don't read anything into those revisions is what you're saying. Yeah, pretty much. I mean, I would push back on that a little bit. I mean, we seasonally adjust the data for a reason. And it does mean, it does mean, we're comparing it to previous August, previous July's. If you want to be able to do a month-over-month comparison, you need C.

seasonal adjustment. So I wouldn't totally discount the big revisions. The not seasonally adjusted wasn't really revised. It was it was the season. Yeah. But it's the world we live in. We seasonally adjust the data. We have to. Right. So I mean, I look at those revisions as saying, yes, the job market, job market is slowing. The pace at which we're creating jobs is slowing. it's not, you know, it's not nearly as slow as this past month would suggest, given what we just talked about. But I think even coming into this month, it's pretty clear that the pace of job growth is slowing. Yeah.

Yeah. Okay. All right. Chris, you want to go next? Sure. 1.09. 1.09. It's a ratio of something to something?

Yes. Number of unemployed people per job opening? Number of jobs per unemployed. Oh, other way around. Yeah. Another number of jobs per unemployed. Oh. Yeah.

Okay. So, yeah. Yeah. Number of open job positions per unemployed. Correct. Right. Okay. Okay.

The job openings. So V over you, as they would say. That's right. Yeah. Exactly. Exactly. That's Larry Ball's stat. Right, right.

Yeah. 1.09 is down. It's been trending down. It's the lowest level outside of the pandemic since 2018. It just points to, again, a narrowing of that supply demand imbalance in the job market. So the fears of kind of wage price spiral or, you know, labor demand really driving wages upward are diminishing, right? As the number of job openings falls, I think it was $7.4 million in September. That number came out this week.

Just to use a little jargon, the so-called beverage curve is normalizing. Yes. Yeah. Okay. And what is it the ratio equal to one mean, would that be perfection? Or are we pretty close to perfection? Meaning the labor market's balanced at this point. I think it's balanced.

This number has moved over time, right? It used to be the opposite. There used to be more job seekers than job openings. Right. I think structurally things have shifted. But if you had to pick a number to say this is. Yeah, I'd say one. You'd say one.

You'd say one. And we're there. We're within spitting distance. We're right there, yeah. Yeah. Okay. And it feels like everything is like right there, right? The unemployment rate, the employment rate, the employment.

I didn't look at the employment to population ratio. Did anyone look at that for prime age workers? I mean, that's been very consistent. But, I mean, I think that's just some of the messiness of this month. It was down three-tenths of a percent. But it's still high. I mean, it's still in line with its pre-pandemic peak. Right.

participation rate came in a little bit, but again, very consistent with the labor market that's right where it should be. It feels like all the stats are showing, giving us the picture of a labor market that is, let's call it more jargon in equilibrium. It's like supply is equal to demand. Everything is where it should be. This happens once every 15 years, you know, regenerate, right? I mean, how often do we get a labor market that is?

It feels almost picture perfect, doesn't it? I know it sounds weird to say on today when we got that weak job number because of those factors. But the reality is it's just an amazingly, but it's exactly where you want the labor market to be, right? We wanted to stay right here. If you could pick a labor market that you'd want for us going forward, this would be it, wouldn't it? Right? Yeah. Anyone who disagree?

Librium, full employment. Yeah. I mean, it feels inflation. We didn't even mention in PCE, but that looked good too. Well, that was the other thing, right? That was the other, because we've been focused on jobs. I mean, the other big report that came out this week was on the consumer expenditure deflator, the so-called PCE deflator, which is the measure of inflation the Fed looks at.

And that's now 2.1%, I believe, you're over here. So, you know, the targets, too, were check, we're there, we're there. Okay. Okay, let's move on. Let's talk about productivity. I want to bring this up because I am going to be traveling a bit here. I'm going to Europe visiting different countries. And I just came back from Canada.

And it seems like everywhere in the world that I go, now that we're out of recession and we're kind of recovered from the pandemic, the focus is on longer-term growth. And countries are coming to the to the to the, to the, to, coming to notice that the U.S. economy has been able to generate very solid growth, particularly productivity growth. The productivity growth has been extraordinary. And the gap that exists between the productivity performance here and overseas continues to, is pretty wide and is now starting to widen. But there's something going on in the U.S. or, you know, alternately something in these other countries that's allowing the U.S. to kind of lead the way here

in terms of productivity gains. Let me go to, because Chris, you're the productivity bull here, and Dante's a bit of the productivity skeptic, which I want to come back to. But let me turn to you first. Did I characterize things correctly? And if you had to pick one, two, or three things that might explain this gap. You see, you're helping me because I'm going to be giving a speech next week. This would be very helpful to me.

This is prep. Yeah, this is prep work. What would they be? First of all, did I get it right? And second of all, you know, what's the secret sauce here for us or what's holding these other countries back? You certainly got it right. Productivity growth in the U.S. is undoubtedly faster than most countries, certainly most developed countries. Things I would point to include just our very, we have a very dynamic business environment in the U.S.

Right. Small business formations. We've talked about this on the podcast before, but that's a really significant portion of the job market, of the of the industry overall. Small business formations have been remarkably strong in the U.S. throughout this post-pandemic period. So we saw the spike in 2020. We thought, well, maybe that's short-lived, but no, it's been very sustained. We have people starting up businesses all across the country and all across different industries. So it's not just tech or high tech where you see, you know, those startups, but you see entrepreneurship everywhere. And I do attribute quite a bit of the success in terms of productivity growth to that because small businesses are more innovative typically. They're looking for new businesses, new goods, new services. They're either going to get copied by the bigger businesses or they'll get acquired. Those small businesses will get acquired.

And so that DNA of innovation, kind of spreads out from the small businesses throughout the economy. And that's not something that happens in other countries, right? People come to the United States because our environment is much more favorable to starting a business than in many European countries, for example, where you need any permits and they're just a lot more regulation to go ahead and start a business. In the U.S., as we know, you can fill out a form with the IRS to get your employer identification number and you're off and running.

There you go. And there's business capital available, right? So it's just a very unique environment, I would argue, that favors that type of productivity growth. On top of that, I think we can I guess? Yeah, go ahead. Just because it's something that it's been bothering me a bit. You know, you bring up business formations.

And we get this data from the IRS on. on employer identification numbers, EINs. I think that's the right background. That's right. Because if you start a business, you will have to pay taxes and you need to get an EIN number to do that. And they took off when the pandemic hit, the number of EIN numbers that people are applying for

to start new businesses took off. And they've been very elevated, remained very high since the pandemic. Maybe off a little bit from the peak, but they're still very high. That's right. So in that goes, you're making that the point that, look, that's an indicator, a barometer of that dynamism that is so critical to innovation and ultimately productivity gains and growth.

And you don't see that in other countries. Can you just peel that on, you started to peel it a little bit, but peel the onion back one more layer. Why? What's, you know, and why the pandemic? You know, what, you know, because there's a clear jump when the pandemic hit. presumably that's, you know, people got thrown out of jobs and they started to reevaluate, you know, what they were doing and they started, they got stimulus checks and, you know,

they didn't have to pay their credit card or their mortgage and so they had some cash and said, oh, if I'm going to start a company, this is the time to do it. But, you know, we're past that now and it's still elevated. So maybe there's something else going on. What do you think? Yeah. You know, some of this is speculative, certainly. But I think the pandemic was a game changer in a lot of ways.

It's not just the initial reaction to your point. You could have written off 2020 increase in small business formations as people just, you know, panicking or worried about the future. And, you know, very rationally deciding, hey, I need a plan B here. What if these jobs don't come back or what if the future looks different? And I have some stimulus cash. I've got some time because of the lockdown. And so I'll go ahead and start a business. But you're right.

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

So I think that's part of it. I also would point to the immigration increase that we've seen. Both legal immigration, people coming into the country, really wanting to be here, right, as well as the undocumented. And, you know, we know by nature immigrants tend to be risk takers, right? They may have more limited opportunities in the labor market for that first generation. And so they are the ones that typically will start that retail store or will be. willing to pursue some type of small business venture in order to get the family started,

get there, live that American dream. So I think the surge in immigration that we've seen, although it certainly has many, many costs on local communities, it's also supported our labor market. And I think it has also translated into more entrepreneurship, at least the idea of entrepreneurship has continued to spread. Yeah, it makes a lot of sense. Can I throw one other? I mean, there's probably there's many, but one other that I think might be not well known

and get your reaction. Just the age distribution of the population. There's a lot of baby boomers my age, and there's a lot of millennials of the kids of the baby boomers my age. And they are now in their early to mid-30s, and that's when you tend to start a company, right? because you've been working for some time, you've gained some experience, you can see what works, what doesn't work, you've got a lot of energy, you're probably naive and stupid thinking, and I'm talking about myself when I started my company when I was 30, but you know, you're kind of dumb. You know, you kind of think that there's this is going to work even when it's not, she probably won't

work. Well, you're less risk averse, right, when you're younger. Yeah, definitely. That's the way of saying it. Yeah. Yeah. I said dumb, but, you know, right. Okay, less risk averse.

Yeah, good point. What do you think of that theory? I think there's some truth to that. I think Dante might like that theory. We'll come back to Dante in a second, but go ahead. But I've also heard anecdotes at least. I haven't confirmed this that because of the rise in home prices and stock market values throughout this period, who also had older people retiring early from their corporate job or their job.

Oh, now. Isn't that interesting? job and going ahead and opening up that small business. And now we have tools, you know, to make it easier to even come up with some type of smaller small business, let's say, or part-time business on the side. And that certainly contributes as well. So I think there might be something to that that it's not just the younger folks, but you also have people who had a full, full wholesome career and now are pursuing that, you know, that small business dream that they kind of had in the back of their mind as well, because they have,

the wealth to support that. Well, that would be consistent with the, well, I was going to say that would be consistent with the lower participation rate for 65 plus, but that's wrong. It would be, they're employed. Yeah, so that doesn't work. Yeah, that isn't consistent. So, Dante, you're kind of the productivity skeptic. The kind of the conversation that Chris and I have been having is a little bit different

than the one that you and Chris have been having. The one I've been having with Chris, as I asked him, why is productivity growth stronger in the U.S. than elsewhere? The debate or conversation you two have been having is why and will productivity growth here in the United States, has it improved and will continue to improve on a sustained basis? So it's a similar conversation, but a different one, right? So you heard what he said about the dynamism and presumably that goes to continued strong improving. productivity growth here, what makes you more of a skeptic? You know, why do you think productivity growth here won't be stronger going forward? And first of all, you know,

did I characterize your view correctly? Yeah, I'm a skeptic. I think that's a fair characterization. You know, on the, I think the dynamism angle, I'm just a little bit more cautious that that trend will continue. Like, I don't see what the fundamental driver is of that dynamism staying much higher than it was over the last couple of decades, right? I can see the pandemic as sort of an impetus for change for a certain amount of time, but it doesn't feel like that alone is enough to sort of drive that higher level of dynamism moving forward. So I still think we could see some pullback in that as time goes on. And then more broadly, there's obviously other reasons why I'm skeptical. There's, you know, demographics of the population. You pointed to, you know,

that could be supportive of some of that dynamism, but the aging of the population. is, I think, still a headwind on overall aggregate productivity growth. I don't see technology as, and Chris hasn't made the argument that technology is the primary boost of productivity right now, but I don't see it as big of a driver. I don't think of productivity growth over the next five or ten years that some other people might believe that it will be. The AI, the artificial intelligence, the remote work, you know, that kind of skill. You saw that stay from BL, by the way, quick tangent.

You saw that BLS put out a kind of a meta study on remote work and productivity? I did. I didn't get a chance to read it carefully yet. I don't know if you did, but I think the story was it was a positive, at least a slight positive for productivity growth. Is that? Yeah, it wasn't a game changer in any sense, but slight positive. But it was kind of looking at different studies that are looking at different aspects of the question and kind of bringing it all together in a meta study.

But I have to take a closer look at it. Yeah. Yeah. Okay. So you're kind of skeptical that artificial intelligence AI or remote work or any other technology is going to come along here and really give us a meaningful pop to productivity growth. Yeah, I think it gets supportive like any new technology, but I don't see it as a game changer for productivity yet. Right. Right. Right. Okay. And I also am a little bit worried about remote work and its impact on turnover. Yeah, there's some early evidence that, people who are fully remotes have higher turnover rates, you know, quit jobs more frequently than

people who are, you know, in the office or hybrid. And I think, you know, Chris has argued before, I don't disagree with him that, you know, as you get people who are staying in jobs longer, as we've seen the quits rate come down over the last couple years, that's been a boost to productivity, right? You get people who are more familiar in positions, are able to contribute more, or able to, you know, sort of make a bigger impact on a company as they've been in a position longer. So if you've got any reason that's going to keep turnover higher than it has been historically, I think that has the potential to be a negative for productivity growth. What about the argument that remote work and hybrid work arrangements lead to better job matching?

So people aren't staying and maybe they're quitting more because they're not staying in jobs that are not a good match for them. And ultimately that would benefit both the employer and the worker. Yeah, I think that's a positive side to it. I guess it's a question of which of those effects is bigger, right? So I think there is certainly some positive to an expanded labor market. Companies can hire more broadly. If they're hiring remotely, you can get a better match potentially if I'm looking nationwide or globally instead of just, you know, in a narrow area. So I don't argue that there is no positive. I just wonder what the net effect is, right? So I think there's probably positives to it. There's negatives to it. And I think maybe it's a little bit more negative. But I say, that as someone who works remotely and, you know, obviously wants to espouse a benefit of it, too. Yeah. It was highly productive. I think it's worth out for us. Yeah.

So just to, and I think I've done this in the past, but let me do it again with some, to characterize things with numbers to make it more concrete. So since world, between World War II and the financial crisis that hit back a generation ago, productivity growth, non-pharmine, farm business productivity growth, I think was about two and a quarter percent per annum. Between the financial crisis and the pandemic, it fell to about one and a half percent per annum. And since the pandemic till now, you know, it's almost five years now, it's still, it's only ticked up a little bit. It's like a 1.6 percent per annum. Do I have that? I think I have that right.

No, you cocked her head. I think it's a little stride. It depends on when you sort of cut the pandemic period. I think you can argue a 204, the fourth quarter of 2019. That's when I started. I think you got the numbers. I think you got the numbers. It's 1.8%.

Yeah. Maybe the uptake is a little bit stronger just depending because there was a lot of volatility there in 2019 and 2020. Okay. Okay. Okay. But let's say it's kind of in that ballpark. Are we, Chris, are you thinking we go back to two and a quarter?

Are we going back to two? or, you know, what are you thinking? I mean, what's the number? I think we're going to stick above two. Above two. We're going above two. Over the, say, over the next 10 years. Yeah, exactly.

Over a long period of time. Two percent, over two percent. Well above where we were prior to the pandemic for that. Okay. Okay. And of course, that's consistent with our forecast. And Dante, you think we're not going, we're kind of stuck where we are? Yeah, I think we stay below.

low to. I don't necessarily think we go back to one and a half, but I don't know that we sort of keep accelerating from here. Okay. Somewhere between one and a half and two. Yeah. And, Marissa, where are you on this? I do think it's going to be meaningfully higher once the benefits of AI kick in. I just don't know when that's going to happen, right? So I don't, I don't know that that necessarily happens in the next three, five years. Maybe it's 10 years out or 15 years out, I think the world looks very different, actually, once we fully harness those benefits. All right.

And Kristen, I'd say above two. Above, you say above two. Longer term. Longer term, yeah. But over the next decade, you're not quite sure. Yeah. So probably over the next decade, I'd say roughly where we are right now. Okay.

I'd say that I'd agree with you that the benefit of AI and some of the other technology. technologies, green technologies, lots going on, right? Or probably farther out than, you know, a lot of the hype would have you believe. My argument in the meantime is you will have the payoff of some of the infrastructure and other investment that has gone on. I think that'll provide somewhat of a boost, or maybe it doesn't get us all the way to that level, but I think it's going to be supportive to increasing that productivity while that research and development continues, right?

So that's, I think we might have a little bit faster runway than just having to wait for AI to really pay off. I guess the other thing, going back to, you know, the conversation around us versus the other, the rest of the world, AI is certainly a comparative advantage for the U.S., right? Because, you know, we're building out the infrastructure, the data centers, the getting electric grid in the right place, doing all the things we need to do to make AI a reality much faster than, I think. think anywhere else in the world. Maybe China is there as well, but certainly not Europe, certainly not the other developed countries, I don't think. Is that fair? Chris? Yeah, I'd argue, yeah, not only the infrastructure, but I think the innovators want to be here. Yeah, the companies are here. Yeah, right. If you're going to start an AI company, you're going to California.

You're going to the U.S., right? You find the talent here. You find infrastructure. You have environment that is favorable to you. So yeah, I think that's quite attractive. Because that stick around long term, I think that's a real risk, but at least for now. Right. Dante, anything else you want to bring up about this? No, I think I've been skeptical enough. You know, I feel like my, my skeptic arguments get a little bit weaker every quarter that goes by and we get another strong productivity growth number. And I think we'll get a strong one next week. Obviously, we got a strong GDP print. So there's no reason to think we won't get another strong productivity growth number next week. So, you know, I still think there's room for some pullback here over the next

couple quarters, a couple years, but I'm becoming less convinced over time. You know, I'm in this very weird psychological place, I'll have to tell you. You know, because I'm with you, with you, Chris and Marissa, on the potential for, and I think increasingly the likelihood that we're going to get some step up in productivity growth. And obviously, there's no nothing better than that. I mean, that means stronger growth, more income, more tax revenue, higher corporate profits, higher stock prices. I mean, it's like an elixir. You know, this is exactly, you know, the secret sauce that drives, you know, standards of living. But at the same time, this election, it really is making me nervous. Things can change so fast. So, I don't know,

right? Are you feeling the same way I am? You feel, I mean, in the the context of productivity like this will impact the long run outlook for productivity growth? I do indeed. I do indeed. If we get into a tariff war, if we, Chris talked about immigration, and if we go in their opposite direction, you know, if we unwind some of the, Chris was talking about some of the industrial policy, and I don't know if that's the right word, but the policy to, you know, support long-term growth, chips act, infrastructure. structure legislation, inflation reduction act. That all feels like a potentially at risk.

Who knows? So, yeah, I think, yeah, the election can have, you know, depending on how it plays out, to have some impact on our long-term growth process. Certainly, our near-term growth prospects, but also our longer-term growth prospects. So, you know, are you as such a kind of a schizophrenic, psychological place as I am? Dante never is. he's so certain about everything. I don't know if I'm certain about it.

I mean, yeah, I'm concerned. I'm not sure that I'm quite as concerned as you are, but I think there's definitely more uncertainty there than we're used to. We're used to. But, you know, good news is, I guess it's good news. We're going to find out here pretty soon. We're going to find out here pretty soon. Okay.

Anything else, guys, on the jobs front? I kind of managed the conversation pretty closely. Didn't let us go off script to any significant degree. but the downside of doing that because the benefit of that is we're going to finish relatively early it's Friday at 530 so I think Chris really wants to go get his glass of Kiante and check on his his crypto portfolio so I know that but of course as he does every Friday as he does it's a Friday night activity it's a Friday night thing but by having being so scripted I didn't allow for you know

unscripted thoughts. So anything that anybody wants to say on the unscripted thought kind of side of things? It can be anything. I guess we alluded to it, but there was a lot of other data that came. There was a data rich week, right? It was a data rich. Income, income, spending. Oh, we got GDP too, didn't we?

GDP. We didn't even mention. Right? Yeah. And nothing really stuck out to me as a significant warning sign. If I have anything. There's nothing. There seems to be still, you know.

No. holding and I see the future, you know, the election will be the election, but I guess I'm a little bit more optimistic that, okay, you know, we'll take it, we'll make it through. I'll take it. I'll definitely take it. So the next time we talk, we'll be on the other side of the election. Yeah, I think I'll be in Europe, I think. Yeah. All right. I think you were in Europe the last time. Where are you? I'd say it's a tradition. I run. You flee the country during elections. Convenient scheduling, you. No, it's just that I tend to go to Europe this time of year every year.

This is when I go. So election. Discorrelation, folks. Discord. No causation. Discorrelation. Just correlation. Yeah.

Okay. All right. Well, buckle in. It'll be a fascinating week. And with that, dear listener, we're going to call this a podcast. Take care now.