Moody's Talks - Inside Economics - Women and Work

Episode Date: October 8, 2021

Betsey Stevenson, Professor of public policy and economics at the University of Michigan's Ford School, joins Mark, Ryan, and Cris to dissect the September employment report, the future of working from home, and Biden's economic agenda. Also, Mark has a podcast, a YouTube channel, and now a Twitter handle. Follow @markzandi.View full episode transcript here. Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by my two colleagues and co-hosts, Ryan, Ryan Sweet. He's the director of Real Time Economics and Chris Doretti's the deputy chief economist. Guys, I was just in Washington today. It was pretty quiet. Surprisingly quiet. Walking the streets, it doesn't feel like it's normal. So I don't know. New York feels a lot more like it's back. D.C.'s got to. of ways to go. What's a holiday weekend? People probably bailed. Isn't Columbus Day on Monday? My kids are off school on Monday. Oh, I didn't know that. Okay, maybe people took the afternoon off.

It's a federal government holiday. Yeah, there you go. Oh, it's Columbus Day, Monday. Monday. Oh, so you think people are taking four day? It's a start of a long weekend, yeah. Oh, well, there you go. Well, I was there yesterday in D.C.

And it was quiet as well. It was quiet as well. It was quiet. So I think there's something to it. Yeah. And that voice you heard, listener, is Betsy Stevenson. Betsy, welcome. Glad to have you.

Great to talk with you. Yeah. It's a real pleasure and honor to have you. Betsy is at the University of Michigan now teaching at the Ford Policy School. How long have you been at Michigan, Betsy? Well, I started at the University of Michigan in 2012. and I know exactly how long it's been because I was pregnant with my youngest child and he turns nine on Sunday.

So it's been nine years. Wow. We all want to know, especially Ryan, are you a football fan? Are you a Miss football fan? Oh, you know, this is like a thing you're not supposed to ask us because like what am I supposed to say here? I mean, of course, if I was going to be a football fan, I would love Michigan. But I, you know, I care a lot about children and their development and their brains. And I find football a little bit hard to watch because I think these are really young people.

And I'm not sure I should be watching them smash into each other like that. Yeah, good point. Ryan is a huge, everything Boston fan, apparently Penn State. I didn't know that about him, but a Penn State fan. I bet you may not know this, but University of Michigan is undefeated. and so is Penn State, and they're going to meet when, Ryan, a couple of weeks from now. Yeah, in a few weeks. A few weeks, yeah.

I did not know that. No, there you go. There we go. I'm going to tell you, so my partner, Justin, has season tickets. So it's just a very divided household. Oh, so he's a big fan, Justin. Yeah, yeah. So he goes to, he's been to every game so far this season.

He'd have a rip-roar and conversation with you about football right now. And you know what I do during the game? I do something fun with my children because it's not very crowded around Dan Arbor during the game. Makes a lot of sense. And Betsy is a well-known, fantastic economist. You were on the Council of Economic Advisors for a few years, a couple of years under President Obama. Yeah. So that was actually an interruption in my University of Michigan time.

So I came here, pregnant, and then with a nine-month-old headed to D.C., and spent a little more than two years on the Council of Economic Advisers and returned to the University of Michigan. Was it Jason? Jason Furman, who was? Yeah, Jason was chair. Jason was chair and we started on the same day. In fact, Jason played a big role in recruiting me. I didn't quite realize why he had such vested interest at the time because he didn't tell me he was going to be named chair. That worked out. Yeah, it was great. I really, I feel like I learned a lot from him. And he's really, really fantastic.

Yeah, he's really, really good. And before that, you were, or at least at some point before that, you were also the chief economist at the Bureau of Labor Statistics, the BLS. Actually, at the Department of Labor. Oh, Department of Labor. Oh, okay. The Bureau of Labor statistics sits within the Department of Labor, although it's quasi-independent. there's only actually one political appointee in all of the BLS, and that's the person who's at the head. And even there, it's supposed to be a quasi-political appointee

in that they are not supposed to turn over with the presidency. Because that's really, you know, we want our data to be government neutral. We want it to just be the data. But as chief economists at the Department of Labor, you know, I did get to work on budget issues related to the Bureau of Labor statistics. So I felt like that was something I really needed to think hard about. But when I was chief economist, the Department of Labor, you know, the U.S. unemployment rate was quite high. It was, you know, in that number we thought that it wouldn't hit.

It was still, I think, close to 10% when I started. And so I pretty much worked on two things, extending unemployment insurance. Can we get Congress to do that? And what kind of jobs packages can we pass that? get people back to work faster. Boy, sounds very familiar, doesn't it? Yeah. Right.

Yeah. I'll come back to that. Yeah. Yeah. Yeah. And am I wrong? Does the BLS also have a chief economist? No, they do not.

Okay. They're really about collecting, you know, collecting data. And it's run by just incredible career public servants who, you know, work on designing surveys and collecting data. I mean, a lot of the actual data collection gets farmed out to census, but, you know, BLS owns the data. And, you know, the, but it's been a very, I think really important part of the U.S. government to try to keep our statistical agencies, you know, free of any kind of policy analysis. Yeah, absolutely.

Well, we actually have hired a few people from BLS and two of our star. One is Marissa Dina Talley's been on the podcast a couple times on labor market issues. She was BLS and Dante, right? Dante D. Antonio, another star. I mean, they're fantastic because well-grounded, very balanced, strong empirical economic in addition to theory. So, you know, fantastic employees. So we're economists to have. So, yeah, agreed.

And Justin, you mentioned Justin, your husband. He's a star economist as well globally. And I've had him, you may not know this, Betsy, but he spoke at one of my conferences many moons ago. He spoke and we were honored to have him. I do remember him telling me, I thought it was very interesting. We were at dinner and he goes, you know, because I think he like you, before the podcast listener, Betsy said,

I don't do forecasts, right? Try not to do forecasts. And I think Justin has that same perspective. And he said, you know, how can you do these forecasts? I mean, aren't they doing nothing but stories? You know, so I go, I had never thought about it that one. I go, yeah, I guess, yeah, there's got to be a story behind it for sure. So I thought that was very funny.

He was great. But you guys have, he's your partner. You guys, because you have this on your, I was looking at your Wikipedia, you actually say your partners for tax reasons. I thought that was interesting. Okay. And in the interview, Justin has said that before. And I mean, it's true that the way we tax families means that it's tax efficient to not be married. And you know, it's funny because, you know, one of the things the IRS said when the Supreme Court case came down and said, you know, gay marriage is legal. People were like, oh, are you going to convert all of these partnerships to marriages? And they were like, no, that could have like really negative tax implications for people.

And we're not in the business of, you know, forcing that on anybody. They got to come and reveal themselves as this is their choice. And I thought it was funny that they directly said, like, some people remain unmarried for tax reasons, which was actually quite interesting because I had wondered whether they would consider that you know, a reasonable choice or not. But, you know, it's true, we are not, we're not legally married. My kids ask about this every once in a while. Like, that's a weird choice. And I was like, well, we've been really busy. Which is true. You guys are so prolific and, you know, do such great work. So it's really good to have you. Thank you. And, of course, this is Jobs Friday. So the first Friday every month,

the jobs numbers from the previous month are released by the Bureau of Labor Statistics, a lot to talk about. So let's dive right in. And so, Ryan, you want to play the game? You want to give us a statistic and have us take a crack at trying to figure out what that statistic is? All right. So I'm sure it's jobs related. This is going to be about the jobs number, right? It is. Okay. And I think it's a good segue into the big topic. Which is the job market. Right. Well, no, I think we know. Good point. All right. It's fine.

Just for everybody's identification, and I'm sure you know, but we do this, we talk about the economic statistics, and we generally play a game to kind of make it easier to digest because it can be a little boring. And then we dive into a big topic, and it just so happens today because we have Betsy, who's one of the premier liberal economists on the planet. We're going to talk about jobs. So we're going to talk about jobs, jobs, and jobs. So we can't call it that. So what's your statistic?

Okay. it's 5.969 million. 5. Let me get this right. 696 million? No, 5.969 million. Call it 6 million. We can round. Is it anything with the unemployed, the number of unemployed?

You're getting closer, though. The number of jobs we'd have to add to get back to our old employment level. That may be the case, but nope. No, that's not. I think it's less than $5 million now. I'll give you a big hint because this. Yeah. This is one reason, or this is key to our forecast.

Okay. For stronger job growth is this number. Okay. So is that the difference between job openings and unemployed? The number of chips we need to get in the country? That's right. That's great. I don't want you guys to suffer.

No, wait a second. So there's 10.9 million open job positions. So 5.9 minus 10.8 would be 5 million. Oh. I don't think, yeah. No, no. Okay, fire away. What is it, Ryan?

So this is the first thing I went to when the job number came out is the number of people not in the labor force, but want a job. Oh, yeah. Yeah, that's a good one. There's a litany of reasons why people aren't in the labor force, you know, child care responsibilities, their own illness. And there was 1.6 million people that were unable to work because of own illness in September, which is most likely COVID-related. Wow. That's a lot.

1.6 million people that couldn't work but wanted to, but couldn't work because of their own illness. They couldn't work because of their own illness. Wow. That's a lot of sick people. It's roughly the same as in August. I mean, with 200,000 cases a day and COVID tending to keep people sick for two weeks, I guess that number's not that surprising. But when you add it all up like that, that's a lot of people.

And if all those people were in the labor force, we would have had job growth over a million. Exactly. I mean, if all those people had been able to work. Yeah. That's a great number. So just to remind the listener, the September employment report includes the week of the 12th. And if you look at the trend in COVID cases, the seven-day moving average, that was right around the peak. So that was like things were the worst.

Now we're on the other side of it. So I think job growth is really going to pick up over the next few months. Yeah, Ryan, thanks for clarifying. That's why I said 200,000 cases a day because that's roughly where we were during the reference week. Maybe I should have started, though, without diving right into the game because people don't have context. Maybe, Ryan, can you just take a couple minutes and just, you know, level set? What did the report say? What, you know, what were the numbers, just so people...

So overall, the employment report was disappointed. We're economists and, you know, we already thought of, right? We were just taken it for granted, but maybe we shouldn't do that. So what were the numbers and, you know, what was your quick interpretation of the number? So the quick, quick interpretation is it's disappointing, but misleading. So the economy added 296 or 294,000 jobs. Or 100, 194,000 in September. That's well below the concept.

It's weaker than what we thought it was going to be. The unemployment rate fell from, it fell to 4.8%. It was north of 5%. But that fell because people dropped out of the labor force, so it fell for the wrong reason. So I literally wouldn't interpret too much into that. Job growth, overall job row held back by the government.

There was over 100,000 decline in government employment, and it's really in state and education employment. And that's seasonal adjustment issues. This is usually a big month when a lot of teachers get, rehired. We might have pulled forward a little at hiring in August, but also, you know, there's seasonal adjustment problems that, you know, contributes that if you strip out government, private employment was up over 300,000. That's closer to our forecast and still, you know, weaker than the consensus, though. So there was a lot of things to get, you know, I think the knee-jerk

reaction was this is a weak report, but the more you dig into it, Delta had his fingerprints written all over this. Delta's grip on the labor market's going to weaken. So I agree with Betsy that the next few months we should see much stronger job growth. So no cause for concern, you know, changes to our forecast because of this are going to be small, doesn't change our Fed forecast. So, you know, overall, you want to get too hung up up in one single report? Particularly, again, we've talked about this in the past, massive upper revisions to prior months. I think it was almost 170,000 net gain to the prior two months.

So September is going to get revised up. It's not going to be this week. So disappointing, but, but, you know, but misleading. Is that your interpretation, Bessie? So I wouldn't necessarily call it misleading. I think if you add August and September together, and that deals with the teachers pulled forward into August, that deals with the upward revision for August, you would still see that August plus September, even with our revision for August, is below what people's forecast for August plus September was. So there's still some disappointment, but I completely agree that Delta,

his fingerprints are all over this. And I, you know, I never get in the business of forecasting, but I feel so strongly that the report for October is going to be better. And that's because the reference week is next week. So I know what people are behaving like right now, you know, I see around me. I see what my friends are doing. I see what, you know, people are chatting about on social media.

And I see where the Delta cases are. The case rate is half what it was during the reference week. in September. So I'm not saying it's going to be a stellar report, but it's going to be better. Do we get revisions up? I mean, there does seem to be this thing with the BLS, which is when we're in a recovery period, they always tend to underestimate on first release. So if you wanted to bet the revisions, it should be if it was done, if we got this thing

right, you should not, you should be able to count on zero as being the revision number, but Actually, it's more than 50% chance it's an upward revision. And that's just going to be true next month as well and the month after that, because that's just what happens with the BLS as we come out of our recession. And we've seen a surge in business formations, you know, the EIN numbers, the taxpayer identification numbers for new companies that's just called Skyward. So that's a good sign. And it's tough for the BLS to pick that up, even after the, we'll have to wait for the benchmark revisions,

you know, when they come out to really see the impact of that. So I agree with you. But to add on to Betsy's comment about, sorry, go ahead. Next week's the reference period. And if you look at Google Mobility at workplaces, it's steadily, has steadily risen since the September payroll reference period. So there's signs that people are going back to work. Case counsel are lower. Box office sales are rising.

People are going through TSA checkpoints more. So a lot of the high frequency data that, you know, we look at a daily and weekly basis are all improving. So, you know, October is definitely going to be better. Actually, that goes to my statistic, but I'll come back to that, which I'm sure you're going to get right away. We already know what it is. This is my go-to statistic. Okay. Chris, did you heard Ryan and you heard Betsy, what do you think?

What's your interpretation of the report? So I have a, I certainly agree with the assessment regarding, you know, weakness in September. October is going to be much stronger, so no dispute there. And I chose the statistic that falls right in line with the, you know, the, you know, with the discussion here. So I'll throw it out. It's 74. far away. 74%. That the female, wait, now, that can't be the female labor force participation rate. That's the, that's not the employment.

Almost. Just a little twist on your, no, Ryan's on it. He's got a little twist on the demographic. What did he say? Male. No, no, it's female. Female. Catch me up. What did Ryan say? Oh, a female labor force participation. Oh, for 35 to 44 years. old woman. That's a little esoteric. Well, okay, here's why I chose, it's not just, you know, pick one out. That is the prime age demographic that saw the largest decline in labor force participation

in the month of September. So that's the relevance. And I think it speaks right to the Delta variant again, lack of childcare. I'm experiencing this myself, so anecdotal evidence here as well. Clearly, there's a real struggle there, and that is, in my opinion, holding back women from returning the labor force. As the Delta variant continues to decline, I am expecting that to reverse, and I would support that stronger October number. Okay, so this is going to get straight at my statistic, which was 26,000. 26,000.

26,000. Is it related to female labor force, something related to women in the workforce? It's a negative number. Negative 26,000. I know what it is because I saw your tweet. I saw your tweet. I saw your tweet. You're on Twitter?

I actually, I am now engaged on Twitter. I am engaged. Sarah's helping me out here, my assistant. I knew that the problem was that anything I'd have to say I've already said on Twitter so you'd be able to catch my my stats. I do have one other number that you might not have. Well, before you go there, I wanted to ask you about that, because I saw it and I was a little confused. So you're saying female employment in the month of September. So this is non-farm payroll jobs. Oh, non-farm payroll. Women had 26,000 fewer jobs

in September than they held in August. So that means that 194,000 jobs that were gained more than 100% of them went to men. Men gained 220,000 non-farm payroll jobs in September over August. And if you turned to the employment report, you saw it wasn't that stark, but you still see the same pattern. You know, there was an increase in employment for women is much smaller than the increase in employment for men. And so, you know, the negative number tells a darker story, but both, reports and both August and September show a decline in job growth for women. Which is consistent with the Delta impact, the virus impact. Yeah. And consistent with the point that child care as we go back to school is, you know,

causing a little bit of disruption. Did anyone look at employment at daycares? It did. It's 10% lower than it was pre-pendemic. It did increase, though, in September. Yes. It was up 17.8. I'm embarrassed to say. I did not know that in the non-farm, this is in the establishment survey, you can see how many women are employed in the establishment data? Yeah. Oh, my God.

I'm embarrassed for you. I not know that. It's table B-5. I always go to the household survey. Table B-5, employment of women on non-farm payrolls by industry sector seasonally adjusted. You got a. I missed that. I did, geez, I didn't know that.

I just historically always go to the household survey for that, and that showed an increase. That's why I was confused. Right. And so what you see here is that, you know, women lost a lot of non-farm payroll jobs in government. That's not surprising, right? So female employment and government jobs declined by about 90,000 jobs. So the number of jobs from August to September held by women in government went down by 90,000. They saw some growth in leisure and hospitality, but not, not anywhere near as much as men did.

So they added 7,000 jobs. That's it in leisure and hospitality. So, I mean, you know, you can't take, I'm going to just repeat what Ryan said. You can't take any one month seriously, you know, and say this is the be all and end all, particularly when you're diving down to how many of these non-farm payroll jobs are held by women in retail trade. But, you know, what we do see is retail trade, that's a great example of employment where all the jobs that men held prior to the recession are added back. And women are still well below the number of jobs they held in retail trade prior to the pandemic. And it fell again for retail trade in between August and,

Sorry, no, it didn't fall. I was much as I would say it fell in between August and September and retail trade and it didn't, but you're still seeing numbers that are, are quite, have not really recovered. So it fell a bit in August over July and then rose back up a little bit so that it's sort of back to its July number. But yeah, you can take a look at the jobs held by women and what we saw. you know, in August was that like more than two-thirds of the job gains in non-farm payrolls went to men. And then we see more than 100% in September. So those start to paint a picture. And then you turn to the household survey.

And you see, well, women are getting employment gains in the household survey. So it looks a little bit better. But they're not getting gains anywhere near as much as men. So we're still seeing a picture where the Delta variant slowed women. and down more than men. That seems to be pretty clear across, you know, four different surveys, meaning two different surveys, two different months. Yeah, I mean, it makes sense. The industries that got creamed were leisure hospitality, retail, healthcare. These are dominated by, by women. Right. And we said healthcare jobs declined in September. Yeah, big decline. Yeah, very large,

decline. It's a little surprising. Yeah, I was going to tell you a story from 2010, which was, I remember, briefing the labor secretary on the data before it got released. And she said, oh, thank God for health services. That's a recession proof industry. Those jobs never go down. I said, do not say that. No such thing is a recession proof industry. But we just had enormous demand for health care. And in a normal recession, people don't stop getting medical care very much. In this recession, I think people, they find medical care when there's a raging pandemic a little scary. And people do put it off. Well, there may be some labor supply issues there, too, right?

Absolutely. Yeah. I mean, if you listen to any hospital, they're saying, I just can't get people. You know, I just can't because they're sick or they're burned out. Or they died? Yeah. Like, we didn't actually lose some health care workers during this pandemic. Yeah.

We never talk about that. But, like, we lost some workers. and then we've got people who are burned out who are, have decided it's too risky and people who retired early because they thought it was too risky. I mean, I've, you know,

got a number of, you know, letters in the mail from health care providers saying, at my family's request, I have sped up my retirement and you will, we will be transitioning your patient file to, you know, and so I do think it's a,

you know, they're both demand and supply issues going on. Well, The other issues, if you look at nursing homes and other assisted care, that was declining before the pandemic and, you know, obviously got crushed because of the pandemic and continues to decline. I think people who are very nervous about having parents or, you know, their grandparents and that kind of a care environment in the pandemic. I mean, this is why it's so important that, you know, of the many, there are many things I would like to see get done from a public policy

perspective, but increasing funding for home-based health care is really going to be important because people are frightened of nursing-based care. And, you know, two out of three people who provide care for an adult that needs care are women. And a lot of those women aren't able to work because of the care demands. So we've got to figure something out, or we are going to find that it's not all women go back. Yeah. Well, there's a lot of to unpack when we'll come back to many of the things we were discussing but should I give you my statistic I mean I think you'll probably get it pretty the guys will get it pretty quickly 94 94.1 94.1.

Chris you can have this. Go ahead Ryan. It's a slam dunk. Isn't it? Too easy. I got your record. What is it? What's up Chris? Ryan's got the record. I want to see another W for you. Go Yeah, this one doesn't count because this is like padding. Well, what is it? Our CNN Back to Normal Index. Wrong. That's dead wrong. Really?

That is what you thought it was. You always go to CNN back to the CNN back. I'm kidding. It is. That's what it is. So Betsy, we have our website. We put the wrong number up there. We put together this, what we call Back to Normal Index,

is a compilation of a lot of government statistics, but a lot of third-party data, Google Mobility, home-based, TSA, checkpoint data, just a lot of third-party data. We use statistical techniques to combine it and come up with index equal to 100 on February 29th, 2020, so right before the pandemic. And it's daily data.

We update every week. And it turns out to be very, we do it by state, too. So it's quite interesting to see, and it's very sensitive to the pandemic. We could see when Delta hit, it hit the south hard and fast. And so Florida, which had come all the way back, sunk back into the soup again. But it now feels like, and this is the thing that's so encouraging, it's turning. It's turning more positive. You know, we had been down to 91, 92 percent of normal.

Now we're 94 percent. And all it all feels like we're moving in the right direction. So I, like you guys, I'm going to do, I do forecast all day long. I'll continue to do forecast. I'm forecast in October, November, December should be good months. I think we're going to get, you know, something closer to a million as opposed to 500. You know, certainly is compared to 250,000 or 300,000. Well, the number that Ryan started off with, the number of people who were sick and couldn't work.

Yeah. I mean, you know, we just have. that number that, you know, makes a huge difference. And actually, it's interesting because I have one more statistic, if you want to hear my... Yeah, far away. Is it 300, it's 394,000, but I will tell you right up, it's negative. Negative 394,000. Is it some decline in some part of unemployment? Like, long, okay. It's a decline in the number of employed of Decline to the number of employed of a particular demographic. Employed, not unemployed.

Employed. Oh, 394,000. And this comes from the household survey, then. Yeah, from the household survey. Yeah. I don't know. I didn't catch that. Women were.

No, no. Women were up. Women were up. Yeah, they were up. Yeah. I don't know. Was it older? People with a high school degree only.

Oh, that's a good one. That's a good one. Yeah. So what we saw on that household survey was a big decline in the number of people employed that have only a high school degree and a decline in the number of people employed who have less than a high school degree. And we saw all the employment gains were among people with a college degree or some college. So it's really, you know, that case-shaped recovery, everybody talks about.

You really see that in the household survey. this month. And I do wonder if some of that was like, those are people who work in-person jobs and if they're sick, they stay home. Right. So that, you know, and, but it's really stark.

And I, it's actually, if that also is reflected in the establishment survey, then it makes you think hard about what those wage gains are really reflecting. Because if all the jobs, job gains went to college graduates, then of course they're, you know, those are going to be higher wage jobs. Oh, you mean the mix effects, the impact on the average hourly earnings.

Yeah, exactly. Very strong. Yeah. Hey, before I do a series of questions I want to ask the group and Betsy in particular, but Ryan, going back to that statistic that Betsy mentioned, the 1.6 million sick, give us some context. was that up from where it was a few months ago or? Yeah, up from a few months ago, but almost identical to what it was in August. Yeah, okay, but it must have been a lot higher 18 months or 12.

18 months ago. Yeah, I don't know the exact number off the top. Yeah, but do you think it was a lot, it was lower before Delta hit? Yeah, actually, if you graph it. Yeah. Along with daily confirmed cases, like a seven or a monthly average, they track pretty closely. They're not identical, but they're close.

All right, very curious about it. Ooh, that sounds like a very nice graph. I'd love to see that graph. I love my choice. Yeah. Hey, let's, so let's unpack some of this. So, you know, one of the riddles that we've been part of the popular discussion and debate around the labor market is you've got 10.9 million of open positions, record number of open job positions. By orders of magnitude, I can't remember, but if you go back pre-pandemic, labor work was pretty

tight and I think was six and a half million maybe seven million that was the peak that was all time high at that point so that's a lot of open positions yet we have still 4.8% unemployment which is full employment unemployment we've got a lot of folks that stepped out of the workforce not even count as unemployed we talked that was Ryan's statistic early on so yeah I'm guessing that there's lots of reasons for this Betsy but what would you put at the top of the list or what two or three reasons would you put? I assume one is just people getting sick. Would that be one?

Or what else is going on here? Well, I think, I mean, yes, there are people who are sick. There are people who are fearful, you know. And I think that's the thing that gets missed is all those openings reduce the opportunity cost of not working. because if I, in a normal economy or even in a weak economy, like coming out of the 2008 recession, if I turned down a job offer, I don't know when I'm going to get another one. And so that means that the opportunity cost of turning that job offer down is quite high.

And that reduces the bargaining power of workers. It also pushes people into jobs right away. They think I better take that. All those openings tell people that, you know, if you feel like maybe it's too risky, there are too many people getting sick and you wait two weeks, you're not going to lose much. You're going to be able to get another offer in two weeks. That's an interesting point. If you think that this offer you've just gotten is too, you know, too poor, like, you know,

$14 an hour, I really want to hold out for $15. You're not really risking not being able to get $14 back, right? You're going to be able to get that $14 offer if you back, if you turn it down and, you know, search another week or two. So, and the chances that you get a higher offer are pretty good. So, you know, if you think about the way economists think about where should you set that reservation wage, that wage where you say, I should take it, well, you're going to set it much higher when we've got record number of job openings. And I think. Interesting point. I hadn't even thought of that, but it makes a lot of sense. And I think that's just a big part of what's going on. And what that does is it just slows everything down. down. Because employers get reluctant to make that higher offer. They're not quite sure themselves. And workers are like, no, I'm just going to keep looking. And the good news is that once people settle down, or actually, people should be in jobs that they're happier to stay in. We should see

a decline in separations going forward if that's really what's going on. And so, you know, I'm optimistic that we're going to have a rougher road getting to a full recovery. But once we get to a full recovery, people are in jobs that they're going to feel more settled in, that they're not going to be, you know, have their eye as close to the door as maybe in the past. So I think that I don't think this is necessarily a bad thing. But I think that's a big part of what's going on. You know, one other theory that was proffered, I haven't heard folks talking about this as much, maybe just because the data doesn't bear it out, is that all of the government support, particularly the supplemental unemployment insurance that was provided to workers as a reason

for workers not going back. I mean, if you go back a few months ago, that's all I heard, particularly from business people, that that was the reason why people weren't going to work. What do you think of that idea? Any evidence bearing on that? Well, I think that it's, you know, what people were saying was, well, if you're gathering unemployment insurance today, you might as well wait until you can go out there and until the unemployment insurance ends. And then you can try to find a job. And I just don't think that was what was motivating people as much. I think that it provided a cushion that allowed people to say, I don't want your job. I'm going to keep looking.

I think that that cushion, though, it's more about the overall safety net that we provided people during the pandemic. So I think the stimulus did that as well. I think the moratorium on evictions. I think the child tax credit, all of these things, they didn't tell people not to work. They said, if you don't take the first job you're offered, you're not going to starve to death. So you can decide you're going to look a little bit harder. You can go back to school. You can get that credential.

you want. You can think about moving to a different location where there might be more jobs available. I think it just gave people a little bit more freedom to be able to make better choices and different choices. And I think that that, again, I think it's all about slowing things down more than I think it's about people saying, you know, I'm just going to sit at home and not work. I think, you know, it seems like what people are doing at home is trying to figure out what their next move is and what they want to do, it's not sitting at home and thinking, this is the life I can just pull in the government check and I don't need to work. The thing that employers are upset about is all this cushion gave workers a lot of bargaining power.

So they look them in the eye and they say, no, I don't want that offer. That's a terrible wage. You're going to send me my schedule without any input from me three days in advance. And, you know, I don't have any control. No, I don't want that kind of job. So, you know, what we're in, you know, with higher wage workers, we're seeing things like, you want me back in the office five days a week? No, I'll quit. Thanks. You know, it's across the spectrum where workers are saying, you know, these are the conditions I want. And if I can't get them, I'm just going to look for something else. And it is, the bad thing is all those jobs out there or the good thing. is all those jobs out there, give them the freedom to do that. And that plus government support that means that people don't fear that if they don't, you know, that they're not bringing home a paycheck right this very second, that they're going to starve to death. I think that this has given us this big increase in worker bargaining power.

And I, you know, you mentioned like 2019. We spent years saying, this labor market's awful tight. When are wages going up? When are workers going to get some bargaining power? And there was no worker bargaining power to be seen. We'd sort of squint at the data and be like, maybe. Maybe we're seeing some wage increases somewhere along the distribution. And I started to see some higher wage workers saying things like,

you know, I've always wanted to move to Colorado. Can I work remotely? But what we've seen now is just a massive surge in sort of work. asserting what they want and then actually acting to try to get it. Yeah. Yeah. Now, we do have some data that goes back to the question around UI and its impact on labor markets.

The state level employment data, half the states roughly ended the supplemental UI earlier than was in the legislation. The American Rescue Plan allowed for that supplemental UI to extend through the early September in some of the southern. Western states decided, well, this is, they bought into the idea that this was causing people not to go take those open positions. So therefore, they ended the supplemental UI early. And then half the other states, mostly in the northeast and the west coast, kept it to the end of September. And if you look at what happened to jobs in June, July, going into August, there's no discernible difference, at least not, you know, to the eye. there's no discernible difference in terms of job growth in the states that ended early in those states that kept it on through the end.

So that, you know, I'm sure there's a lot of micro data we're going to have to sift through and you're going to be revisions and we'll see how it all pans out. But at least so far, the data seemed to suggest that that I, that theory as to why people weren't taking those open positions is a pretty thin one. Yeah, I mean, you know, the thing is, it was sad. It was really just, you know, ending those benefits early was sad. It didn't, it didn't increase employment. And, you know, the critics of the studies that showed that it didn't increase employment have said, well, those are also all the states that had the Delta variant surging. So, you know, it's hard to know. I was like, well, yeah, but that's also why they probably shouldn't have ended unemployment insurance early. So, you know, it, the thing.

that I think was clear early on in those studies showed is even if there were some people who would have gone back to work earlier if we hadn't had such generous unemployment insurance benefits, this was such a small fraction of the unemployed that most of the good effects would be undone by the decrease in money in the pockets of households without jobs. Right. So on the one hand, you incent people back into the labor force. On the other hand, you curtail spending because there's all these houses that lose this income. And then the whole thing sort of comes out in the wash is a big nothing burger, except for it's not a nothing burger. It's a big decline in the well-being of people who don't have jobs. Yeah, right. Going on to wages, you brought

that up of going back to the pre-pandemic. As I recall, the wage growth, at least as measured by the employment cost index, the ECI, or even by the Atlanta wage tracker, which tracks the same individuals or time based on individual data. So it gets around these mix issues that we know or make the average hourly earnings data, the wage data from the monthly, the employment report problematic because of the mix effects. That was pretty strong, you know, pre-pandemic. And we're right back to that level right now pretty close to that rate of growth, you know, somewhere around 3, 3.5 percent, something like that. Does that kind of wage growth? And of course, there's the other thing to throw into the conversation

is that, you know, inflation is on the high side. Right now consumer price inflation is 5%. Lots of reasons for that. But do you, with that backdrop, are you at all concerned? concerned that what's going on in the labor market, the acceleration and wage growth, is an inflationary problem? Is it contributing to the inflation we're saying? Is it a problem going forward in terms of undesirably high inflation? Does that worry you at all? Well, I'm guessing that you guys have actually done the calculation so you can say exactly what it's contributing to inflation right now. My understanding is that it's pretty small in terms of, you know, you know, it's current contribution.

You know, I'm more concerned about the decline we've seen in the labor share of income over the last, you know, several decades. And now I was actually just teaching this to my students. And I said, you know, when I was a youngster, when I was in college, I was told the labor share of income was fixed, fixed over time, fixed over countries. It wasn't going to change. And, you know, in graduate school, that was. sort of what I was taught. And then we start looking at the data and we're like, it looks like it's

falling. And then it kept falling and kept falling. Now we know the labor share of income has fallen. And that means, you know, just in case not everybody's fully up to speed, it means if we took all a GDP and said how much of that goes to the workers and how much of that goes to the owners of capital, the share going to workers has been declining. And I think that that's a problem for the economy. I think we have to solve that problem. So I'm not worried about waging. increases, you know, wage increases can contribute to inflation or they could contribute to a rise in the labor share of income. So it depends on whether they're coming out of profits. If, you know, we have some businesses that are feeling a little bit of the squeeze and some of their excess profits are

having to go to labor costs, but they don't pass it on to consumers or whether, you know, this happens in very low margin industries where they pass the costs on to. consumers. And it's also going to depend on whether we see workers getting more productive. So I'm not worried about, you know, some of the scare stories are about come, you know, well, here's a fast food restaurant and they've just introduced an AI machine that's going to do order taking at the, you know, at the drive-thru. You know, and we're getting workers replaced at the fry station with a robot, you know, those things will make all the rest of the workers in the fast food restaurant more productive and justifies higher wages for them. And, you know, a lot of those jobs weren't

the world's best jobs anyhow. So as long as we, you know, sort of keep growing and we keep training workers and we keep finding places for them to be, you know, those kinds of investments, I'm thrilled to see businesses making them because they'll justify higher wages for people. Yeah, and in fact, we're productivity growth has accelerated, consistent with the strong wage gains. So the unit labor costs, the difference between wage growth and productivity growth, that has not budged. That has not changed. So businesses are still enjoying these very high margins and raking in a lot of earnings. Corporate profits are very strong despite the increase in wages.

So at least so far, I mean, obviously, there's a script to be written, but at least so far, it doesn't feel like the wage gains. are problematic in terms of inflation. I mean, it seems to me like inflation's pretty obvious. I mean, container ships are, you know, they're what, like, quadruple what they used to be. And the cost. The ship from Shanghai to New York, yeah, the container shipping costs are four or five times what they were because of the pandemic. Right.

So, I mean, that's going to push some prices up. And, you know, I think that stuff's going to get ironed out. I thought the magic that we saw with the pandemic was, I mean, I mean, who bought masks in the United States in February 2020 or January 2020? And now, you know, I can go to the store and pick up a box of 100 masks at just about any store. We're really responsive to changes in demand. So, you know, people want masks and hand sanitizer now. And we make masks and hand sanitizer or we import masks and hand sanitizer.

But we've figured out how to get it to people. You know, I actually just bought a box of masks, and I like the, you know, the N95s because I think they do, you know, better job. Oh, they're hard to wear, though, aren't they? I like them because they create that space in your mouth where they're not right on it. They create the bubble. But, and, you know, I have an unvacc nine-year-old, so I'm pretty paranoid. But I bought a big box of those from Costco when they first. came out in January, I think, and I paid $99 for it.

And I just re-bought that box, same box, same manufacturer, same import for $59. And so that price coming down, that's like, okay, yeah, we supply masks now, right? And the supply increased. And, you know, so I do think we see like a lot of weird temporary price fluctuations going on that reflect the supply chain problems and our shifts in demand. And I do think people might have permanently changed what they consume going forward. And we're still trying to learn exactly what those permanent changes are. Right. There's a couple more topics I want to hit on. But before I do, let me just turn to Ryan and Chris. Is there anything that Betsy said that you take umbrage with,

that you disagree with or want to push back on? It all seems, It seems to be perfectly logical. Very consistent with what we've been saying. Yeah. Yeah, yeah. I like the productivity story, right? I'm a big fan of that, and the better matching. Certainly should contribute to productivity growth along with investment.

So I think that all makes sense in terms of wage gains, not necessarily being inflationary. So, yeah, no objections on my end. Ryan, I don't know. No, I agree with everything. Everything fits into my, my, my, forecast for inflation coming back down. But all are so easy, right? I mean, look, everyone's on board with you.

Well, that's good. Okay. Let me turn to another topic quickly, because I know we are taking a lot of your time. And that is remote work. This feels like it feels like we're going to get out of this pandemic relatively quick. I mean, the economy is going to recover from this pandemic relatively quickly, at least compared to previous recession. So, you know, if everything kind of sticks to script, and I know you don't like to forecast,

but if everything sticks to my script, you know, we'll be back to full employment. We'll be back to like a mid-3% unemployment rate, you know, another 12, 18 months from now. So full circle, round trip, it'll be like a three-year kind of period, you know, early 2020 through early 2023. And that's pretty consistent with the Fed's forecast and the CBO's forecast and everybody who does forecasting. That's kind of sort of where they're landing. And that's about half the length of time it's taken on average in other business cycles since World War II. Obviously, the one after the financial crisis, that took us nine years or 10 years to get it all back.

So we're going to get back pretty quickly. But there is going to be some long-term consequences of the pandemic. And the one that I think might be, at least from my perspective, a real game changer in lots of different ways is remote work. But I'm really curious, you know, how you're thinking about that, whether you think it's here to stay and how that's going to evolve and what the implications might be. So are you, what do you think of that? Is remote work here to stay? Remote work is here to stay. And that is certain.

You know, people really want it. That's a forecast, by the way, Betsy. That is a forecast. And that was a forecast with no uncertainty. You know, that was like a no interval there. But that's because zero remote work is a, you know, is a ridiculous number. I'm not going to tell you that it's going to be 36% remote work or 52% remote work. But I'm going to tell you that.

Ryan will tell you that. In fact, I'm going to ask them that in a second. Go ahead. Um, the, uh, you know, what you see is people want it. And even most employers think the idea of expecting people to come into the office five days a week, um, is just not really going to work. I think what we've learned is that there are definitely some benefits to FaceTime. So people want to see people in the office. But there's also some productivity gains that come from people having some quiet time at home and avoiding the commute. You know, I've been championing work championing, workplace flexibility and the ability to do remote work for a long time. And the argument always was, every employer who tried it out found that, you know, people, they save a lot of time not commuting, and they give some of that time back to their boss, to their job. You know, they spend, if they would have spent an hour commuting, maybe they spend an extra 40 minutes on themselves,

but they spend an extra 20 minutes working. And that's where you can get, you know, easily get productivity gains because you don't think of them as hours worked. You think of them as a job. But now speaking of productivity gains, remote meetings, being able to do things without getting on an airplane, I mean, that's huge. And I think companies are really going to have to think a lot harder about what requires a face-to-face meeting. Because even right now we're recording. And even if I'd gone across town to a different studio, that would have meant that this would have taken an extra hour of, my time. And that would mean I would do fewer things like this. I, you know, I have a principles of economics textbook and I really like to be able to connect with instructors who are either using

my book or interested in using it and just, you know, see how things are going with them. I used to fly out to universities and, you know, give talks about economics teaching to instructors and watch them teach. And I don't, I can now. join their class and be a, you know, guest lecturer for 10 minutes in it. It takes me, you know, 20 minutes of log in, do the little guest thing and leave or, so these things that can do a lot more of them. And I can't imagine why I would want to go back to so many things, you know, in, in person.

And even at the, you know, at the university, they said to us this year when it came to academic seminars, well, why do you need such a big budget for so many airplane trips when we can have you do like half of them in person and half remote? And some people who would never come in person are happy to come remote. So it actually ends up being a win-win. You know, you get a greater diversity of academic speakers coming through and the university doesn't spend as much. Yeah. At least on that. Yeah, I totally agree. Totally agree. Ryan, do you know, know offhand from the BLS report today's report what percent of folks are working remotely because of the pandemic you do you know that oh my gosh Ryan do you go ahead well I might be wrong but my memory

was it was 13 percent which was smaller than I thought what is it Ryan or do you know too it's like 13 1 oh he's honest you got it that is so rude Ryan yeah like oh pets you don't know it's 13.1 no because when the podcast is over, Mark will call me and be like, it was 13.1. Why didn't? That's true. We go out multiple decimal points here. Well, I think it's low because that's affected by the pandemic, right? Correct. I mean, they're saying I'm working at home because I can't work wherever because of the pandemic. So that's why that's come in. But that doesn't mean, that's not a there's a number that are actually working remotely or a lot larger. Like I don't need to work at

home. I could be in the office. I'm not working. I'm working at home, but not because of the pandemic, right? So I'm not counted in that. I wouldn't be counted in that statistic. Oh, that's a great point. Yeah, I wouldn't be counted in it either. Yeah, that's right. Hey, one thing about this remote work, I'm really curious how you're thinking about this. So remote work, how is that going to affect wages? It's like, okay, I'm a Moody's employee. I work in New York. Moody says you can work wherever you want. And I say, okay, I'm going to go work in Tampa, Florida. Wages in Tampa are a lot lower than in New York. Moody says, oh, and by the way, this isn't what Moody's is saying. I'm just picking on Moody's. We can talk

about Moody's policies, but let's pick somebody else. Goldman Sachs says, okay, you go to Tampa, but your wages have to now be more consistent with Tampa wages. Well, what if then J.P. Morgan swoops in and says, we'll pay you a little bit more. We don't care you're living in Tampa. Okay. So you think that's what's going to happen. So here's the thing. If you got labor demand and you got labor supply. So I think that you're not going to be able to pay people like, oh, wages are lower in Tampa. So I'm going to pay you less because you're in Tampa.

I just don't, I don't see how that sticks because you could get an offer from somebody else. But what will happen is there's a bunch of people who are like, there's no way. I'm working in New York City. I did not move into that city. And Goldman couldn't hire them, but now they can because they're willing to hire people living in Tampa or they're willing to hire people living in, you know, Nebraska. And that means that they have a greater number of people that they can select from. That will push wages down. That will even push wages potentially down for people in New York, right?

because overall the supply of people who they you know the labor supply of potential workers for Goldman Sachs just went way up and what that will do is you know push wages down what's likely to happen though is you know it's going to be a tool that some employers might use to pay people a little bit more. You know, you want to pay people what you think that individual person is worth in terms of what they produce. I want to be really careful here

because I never think somebody's salary is what their worth is. But, you know, you want to be able to pay somebody based on, you know, what kind of value you think they're bringing to the firm. But you can cause a lot of animosity and reduce overall productivity if you're paying people

a bunch of differentiated amounts. So I can imagine a lot of companies trying to lean on the like, well, I'm really paying you less because you live in Tampa, not because, you know, Mark, you're just less productive than Ryan. Right. You know, but at the end of the day, if, you know, you're worth the wages you were getting paid in New York, then you'll have a bunch of other competing offers that will bid those wages right back up to what you're earning in New York. Yeah, I think a lot depends on the occupation, right? If you're an occupation that you're in a national market. or a global market, then you're right. I mean, it doesn't matter. You're going to get bid. Your wages are going to get bid right back up. JPMorgan is going to come and say, I'm going to pay

you more. Why wouldn't I do that? But if you're in an occupation where, you know, the labor supply is more of a local supply, and that may be, you know, folks at work in back office operations, for example. Yeah, but that's the whole point of remote work is that this is what's happened is it has changed who you can hire all around the country. So it's, it's helpful. people in, you know, in weaker labor markets, now they can reach out to stronger labor markets and say, hello, I'm available. I can do it just remotely. And I think that one of the things, I mean, this is part of this sort of grand reallocation is, you know, will we see employers who can have people work remotely, hire people who live in areas they've never had them

work before? And what I saw prior to the pandemic was a lot of companies that would bring people in, get to know them, you'd get some work experience. Maybe you worked there one year, two years, five years. And then they were willing to let you move somewhere else, right? Like my publisher, one of my development editors lives in North Carolina, not New York. But she worked in that New York office for a number of years. They all know her really well. And now they let her live in a place where she can afford to buy a house, North Carolina.

I you know it's funny because I was talking to her. She was interviewing someone they were the publisher was hiring and she's like, yeah, they better live in New York. So there's still a view that like new employees need to start in the home office. But I think that there's going to be some willingness to hire people with a plan to have them work remote. And I think that will change the labor supply, particularly in labor markets that were very tight prior to the pandemic. and it will help people get jobs who live in labor markets that were quite weak prior to the pandemic.

Okay. One other set of questions or one question because we are running out of time. The president, President Biden has put forward a very ambitious agenda, legislative agenda around various social programs, housing, health care, education, child care, elder care, climate risk mitigation. That's in addition to the public. infrastructure plan that's working through Congress as well. One, the administration argues that the plan will help long-term growth in different ways

and improve labor productivity, but also labor force participation. Do you buy into that? And of all of the different elements of the agenda, the build-back better agenda, which one or two of those things do you think is going to be most impactful in terms of affecting long-term labor force participation or growth. So I absolutely believe in that. And, you know, I did this little experiment with my students the other day, which is I showed them how much higher incomes would be if we could have maintained the total factor productivity

growth we saw in the 50s and 60s through, you know, to today. And I think they were shocked because they think that everything's driven by changes in inequality. But what were we doing in the 50s and 60s? Well, we had the most educated population in the world. And we've really fallen behind on that. So what have other countries done? They've invested more in early childhood education, which gives kids a really good start, a foundation for building more knowledge and becoming more productive as workers. And they've also invested more in making it affordable for them to go to college and complete college. So we, We start kids in college at similar rates to other developed countries, but we don't graduate them.

And one of the reasons we don't graduate them is the financial pressures. So from investing in early childhood education to college, I think all of that is absolutely critical to returning us to being more competitive with other countries and in terms of the productivity of our workforce. I think, you know, you can only grow so much by raising labor force participation because you grow as the labor force participation rises and then, you know, it can't go past 100%. So, but, you know, what we, again, I think the key is to not think just about how much labor force participation rises, but how much you build a more productive workforce by helping foster continuous work experience. So if we, keep women in the labor force and, you know, through the time period which they're having children, and we keep them connected to the labor force and they stay in the labor force. It's not just we'll have higher labor force participation, but we actually have more continuous labor force experience that leads to more productive workers. And, you know, another big problem we have is male labor force participation. And there, I think, you know, it really is things like the early childhood

education and investing in college that are part of the key drivers there. So I think there's a lot in this package that is about, you know, boosting, you know, our long-term productivity. You know, asking me to choose is kind of tough because the problem is, and I think there's how the president and the administration sees it, is what would it mean to try to invest in more productive workers today who are, say, two or three or four years old, when by the time they're old enough to reap the returns on that productivity, we've had enormous destruction due to climate change.

So why, you know, we pick investing in children, but we don't give them a planet in which they can be productive in in 30 or 40 years. So you can't pick children over climate. But if you pick climate, well, we're not investing in the people that can be productive in the planet that we're saving. And one of the things that I think the United States has been doing to its detriment over the last,

I don't want to say 20 or 30 years, maybe even longer, is we've been consuming the investments in infrastructure that previous generations made. And consuming it means that there's less there. And we need to be adding to that, infrastructure investment so that, you know, we have the modern, you know, internet. We have the modern roads. We have modern bridges. We can't put self-driving cars on the roads because we don't have roads that could have self-driving cars on them right now. So how can we take advantage of

technology that's developing like self-driving cars if we're not investing in the infrastructure? So I think it's really about how do we build a country that can be more successful economically as well as fairer, but more successful economically in the long run, you know, in 30 or 40 or 50 years. And the thing that really worries me is Congress keeps making decisions based on these narrow 10-year budget windows. And what those 10-year budget windows have done is led us to make decisions that are bad for our children. children's future and are really focused on, you know, a very short-sighted near-term. Yeah. And the president's trying to break out of that, right? Because he's saying, hey, look, if you look out 15 years, I pay for all this stuff. So he's trying desperately to do that, which is exactly right. Well, thank you so much. I do want to let everyone know

that your podcast with Justin, think like an economist, is just fabulous. It's fantastic. Really enjoy it. You guys, listeners, they put us to shame. I mean, she's She's got, you can't, well, if you go up on YouTube, you'll see this. She's got, I thought I had the high-tech microphone. She's like blown us away with her room there in the, in the microphones. But you guys have a great podcast, and I want to thank you for coming on. I do, I want to advertise, though, that I have really engaged on Twitter. And now I, I'm Marks Andy, you know, on Twitter.

So I'm doing this. I'm in. I'm engaged. So please. feel free to follow and go to Economy.com, Inside Economics. Tell us what you want us to chat about and we'll certainly work on that for you. So with that, we're going to call it a podcast. Take care now.