Odd Lots - Joelle Gamble Explains the Confusing State of the US Labor Market

Episode Date: August 29, 2022

The unemployment rate is down to 3.5%, which is far lower than just about anyone thought it would be a year ago. So that's great. On the other hand, measures of labor force participation are below where they were pre-crisis. So the question is whether there's been some fundamental shift in the composition of the labor market vs. the pre-pandemic era, or whether we're still in the process of normalization. To dive into this more, we spoke to Joelle Gamble, Chief Economist at the US Department of Labor. Among other things, we discuss the narrowing gap between black and white unemployment and whether this progress can be sustained throughout the cycle.See omnystudio.com/listener for privacy information.

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Hello and welcome to another episode of the Oddlots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, I'm going to say something and I don't think it's particularly sort of controversial,

but this is my assessment. No, no, no. This is my basic like assessment of where we are like big picture, like, you know, over two years since the start of the pandemic. Okay. Which is that the labor market has recovered far faster than anyone would have expected in March and April 2020. And the big issue now, of course, is the sort of above trend, significantly above trend, above target inflation. So that's not controversial. That's right. I mean, yes, if you look at headline unemployment, I think it's a, what is it, 3.5 or 3.6%?

3.5, I think. 3.5% for July. But I think the controversy or where there is a lot of disagreement is over what that's telling you exactly. Because if you look at some other indicators of labor market health, things like the participation rate, those show a very different picture. Very different picture. You're totally right. So I'm looking at the overall labor force participation rate here on the Bloomberg. And as the latest reading, it's 62.1%. Pre-crisis, February 2020 was 63.4. So it is clearly, like by this measure, we have clearly not recovered. And of course, this was trending down through much of the post-grade financial crisis period. It started picking up, started gaining steam in 2015, 2016, 2017. So by this measure,

we've suffered a setback, a reset, perhaps. Yeah. And this is where a lot of the tension in dissecting the labor market exists right now, this idea that the unemployment rate is really, really low, but there is also this narrative that no one wants to work anymore and that it's hard for companies to find the right workers and things like that. And even within the labor participation rate, there are variations between gender, between race and age and things like that. So there's a lot to discuss. Right. So, you know, one other statistic that's important. Part of the story with declining labor force participation might be retirees. You have a lot of of old people who maybe after the pandemic hit, they're like, okay, I'm just not going to. The great retirement.

The great retirement, et cetera. But that can't explain the entire story because even if you look at, say, employment to population for 25 to 50 year old, sort of so-called prime age workers, another way of measuring sort of labor force participation, that's at 80 percent. Not too bad, but again, prior to the crisis, we were at 80.5 percent. And so again, you know, these, some of these things, like say, old people retired, like they don't seem to explain the full story. Anyway, the bottom line is there still seems to be some mystery about like what's going on with labor. Yeah. Well, the mystery is, you know, if you look at unemployment, it all looks great. Everyone seems to be working. If you look at some other things, then especially anecdotal data from companies who say they're having trouble finding workers, then it seems like no one's working. You know what? Let's talk to someone who is much smarter than us and who knows a lot about the labor market data and in fact that's their entire role, their entire job. We're going to be

speaking today with Joelle Gamble. She is the chief economist at the Department of Labor and she's going to clear all of this stuff up for us. Hopefully so. So, Joel, thank you so much for coming on the podcast. You're going to, you're going to answer all our questions. We're going to walk away from here without a mystery. But in all seriousness, you know, I remember in the wake of the great financial crisis. We had also a big drop in labor force participation rate, employment to population ratio. And people said things like, oh, this is like a structural change to the labor market. Something happened that's just different. And it turned out most of those people were wrong. We just needed a stronger economy. And when growth picked up, most of the jobs came back.

And we actually, you know, we did eventually get all the jobs back. It just took way too long because growth was so sluggish. Do you see evidence of a more strong? structural shift in who's working these days post-pandemic, or is this going to be another story where everyone is quick to rush to pronounce structural change, but really it's just a matter of time before full normalization? Well, I think in a very online world, there's often, you know, a rush to assess the state of the labor market, but I see things a few ways. One, there are real through lines that are trends, especially when we're talking about the labor

force participation rate, right? There's an aging population, for example, you know, there's gender shifts, particularly with labor force participation rates for men, particularly white men declining over time. That was pre-pandemic. That was occurring during the recovery from the Great Recession. And so there are real things that are more structural. I think I would also include immigration in the way that's affecting overall labor supply as a structural change, though this administration is doing all we can to increase authorized immigration and fixing some of the mistakes that were made by the last administration. But there's also some things that may be unique to what we've just experienced, which was a huge

disruption to the U.S. economy, a deep recession, and a really fast recovery. I think Claudia Golden actually has a really interesting working paper that came out this year that highlights kind of the relationship between some of the pre-pendemic labor market trends and how we assess it today, particularly the fact that, for instance, there's a big run-up in female labor force participation right before the pandemic recession, and that matters for how we think about female labor force participation today. And that big increase in the run-up right before the recession was among women with lower levels of education, young children, younger women. They're more marginally attached. Those are also some of the women whom we could see coming back now,

and that would improve labor force participation. In fact, education plays a big role. For instance, both men without college degrees and women without college degrees who are in their prime age working years, could come back to the labor market and improve labor force participation. That's in addition to the fact that people died, there's excess retirements, all those other stories that we've been talking about. So there's a mix of structural trends and there are some unique things that are happening right now that are affecting the composition of the labor force. Could you dive in a little bit more into the gender discrepancy in labor force participation?

Because if you chart, for instance, the participation rate for prime age women versus prime age men. Those two lines just go in very different directions. So for men, you know, it's been trending down for a while. For women, it's been trending up, right? Up until COVID hit, as you mentioned, but it certainly recovered a lot faster than the male participation rate. What's going on there? So I think a few things are happening, but I think it's important to delineate even within gender, different populations, right? Women are not a monolith. Men are not a monolith. And I think it's important to do that in part because, you know, when we think about how the recession affected women and their labor force participation rate, you know, the ability to work from home

likely played a big role. Women with higher levels of education, you know, even if they still had caregiving duties, were more like, were more able to keep their jobs, women who had to go in person for work, whether they were mothers or not, were more likely to have to, you know, lose their job, get laid off, et cetera. And so I do think that the education plays an important role there. And And then in terms of, you know, the labor force participation rate right now, I think this is a very well-told story that, you know, for women, the ability to enter the workforce is affected by a number of factors, including, including care, including, you know, workplace safety, including school policies as well. And so I think there's a pretty complex story there, but I would really

underline the importance of, you know, looking at the nuance within the population of women in the U.S. economy. And we can get into race as well. I think that's that's, that's, that's, important too. Obviously, even last year, there were a lot of schools that were disrupted, that weren't open the entire year, both of my, I think at least one of my kids definitely had days where they had to stay home due to the school being closed due to COVID. Do you see significant potential upside gain still for women once we get to a place in which the care question to some extent is at least no longer uncertain. Maybe not as ideal as it would be in the sort of ideal scenario of like universal child care, but something where at least like the uncertainty of

whether you're going to have someone watch your kids during the day goes away. I think the word uncertainty is key there because when you have certainty about child care arrangements, for example, or other care arrangements that enables you to plan, that enables you to plan either of you're having to work from home, you know, or it enables you to plan to go in person, especially as more people feel comfortable, going into work or more employers feel comfortable asking their workers to come in. And so, you know, there's probably some upside risk there. But as you also mentioned, you know, there are bigger investment needs in that space. I'm June Grosso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you

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Search for Bloomberg Law on YouTube, Apple, Spotify, or anywhere else. else you listen. On the East Coast, listen as you start your day. And on the West Coast, catch up in the evening. That's the Bloomberg Law podcast with me, June Grosso. Subscribe today wherever you get your podcast. So setting women aside, which is a terrible phrase, if we focus on the male participation rate for a second, I'm still wondering, like, why has that been trending down for so long? And why does it seem to be struggling to recover? What do you see there? Because I imagine you see a mix of the data, but also, you know, some anecdotes as well. Yes, I think, I think it's a few things. In terms of why it's been declining downward, there are some structural challenge there in terms of

access to opportunity. It depends on, heavily by race, too. You know, folks who are interacting with the criminal justice system are also, you know, going to struggle more to find employment to get discouraged and end up leaving the labor force. You know, there are people who are not in the labor force, right? So they're not participating, but who do actually want a job? But I think it's an important distinction to make here that not everyone who wants a job is actively looking by the way we measure it in the Bureau of Labor Statistics surveys. So there are challenges there. I also think that, frankly, you know, this is a place where tighter labor markets can help. You know, I mentioned women with lower levels of education being more likely to be marginally attached.

That also can happen for men, particularly for black men. and we're actually seeing, for black men at least, a much higher level of employment, or a much faster employment recovery than in the last recovery. So, for example, their employment's population level has been pretty elevated for some time. Why do you think it's been so, the trajectory has been so different? I mean, this would for years, you know, post-grade financial crisis. Like we talked about this slow recovery in all of these measures. And we talked about there was this huge gap between white unemployment and black unemployment. And it's still high, but it's closed a lot faster than anything that we've seen post-grade financial crisis. And A, why do you think that is?

And B, is this something that you think we can build on as an economy and that some of these gains can be locked in and that the benefits of having a job that seem to, you know, that have lots of positive externalities, long-term benefits? Is this something from the current environment? that you see is benefiting the economy for years to come. Yes. So there's a lot to unpack there, but I think to your observation about the unemployment gaps, that is, you know, an important aspect of this recovery, right?

The gap between black unemployment and white unemployment or Hispanic unemployment and white unemployment tends to be correlated with the business cycle. So when you see a fast recovery, you see a lower ratio of unemployed persons to vacancy, then you are more likely to see better labor market outcomes relative to a looser labor market for black and Hispanic workers. So that is definitely part of the story. I think the nature of the recovery may have particularly helped black men in terms of obtaining a job. So, you know,

there was a big increase in consumption on goods relative to services last year. And that has ripple effects along supply chains, including through e-commerce. and transportation and warehousing jobs, those kinds of moving jobs, frankly, that black men disproportionately hold. So that's probably a part of the story there. Though I will also, of course, note that those are not always the best quality jobs. And so we do want to improve them. The department has an initiative called the Good Jobs Initiative that's really focused on that because we're always so worried in these recoveries about getting jobs.

And now we're at the point where we at least get a chance to think about, are these good jobs? how can we give people choices in this labor market? So I do think that that's certainly a part of it. In terms of locking in gains, that is a huge policy question and policy priority for us at the Department of Labor, in part because we want to make sure that workers have rights, they have protections through, of course, enforcement, whether it's discrimination issues, wage theft, et cetera.

We also want to make sure that workers who want jobs have pathways. Sometimes, you know, you don't have these clear pathways to jobs based off where you live, you know, based off of your social network, et cetera. And so, you know, creating pathways retraining apprenticeships, connections to employers who offer good jobs is also really important part of locking and games. And then, of course, you know, ensuring that workers do have power when they're on the job. This is an administration that cares deeply about supporting workers' choice to join a union if they want to. And Tracy, just looking at the charge here, you know, in summer 2013, so basically like over four years after like the financial,

crisis started, the gap between white and black unemployment was 7.6%. Today is down to 2.9%. So the speed with which this is compressed, which often happens in a business cycle as it goes on, is just clearly much faster than anything we saw in the past. This kind of leads into another question. So if black men are disproportionately present in industries like warehouse or warehousing or transportation and things like that, Do you worry that those gains won't be sustainable if we do see consumers start to pull back? You know, for instance, we've seen some of the big box retailers talk about having too much inventory at the moment. Do some of those jobs start to look vulnerable? I mean, I wish that this was a new story for black workers.

But unfortunately, you know, there's a, I think, a phenomenon that is kind of common parlance these days, which is last fired, last hired first fired. And so, you know, frankly, black workers, black men and black women are often, you know, the most reliant on the labor market strength to be able to achieve better outcomes. And so, you know, yes, I'm always worried about, you know, making sure that they have pathways to, you know, better jobs, to jobs that are sustainable. At the same time, we also want to see sustained labor market progress as a department. We're focused on outcomes. So wage growth that's sustainable is important here. you know, the ability for workers to find trainings and apprenticeships and access other jobs if they want to, especially if they're in industries where job quality isn't great or industries that are particularly

susceptible to swings in the business cycle. And, you know, I think that that's kind of the best way to kind of bridge that gap to not just rely on where we are at in the business cycle, but to instead make investments in, you know, long run growth and making sure that the benefits of that growth is shared. So I want to get your take on a question, and I posed this to Goldman Sachs' chief economist Jan Hotsias a few weeks ago. But, okay, everyone, tight labor market, tight labor market. Companies having a hard time hiring. We hear about that all the time. And yet, wage growth has been negative.

And this has sort of been the frustration of a lot of people that's like, yes, there are jobs out there, but wages aren't keeping up with prices. If the labor market is really so tight, why aren't workers? able to command, in your view, strong, high enough wages such that they can outpace the pace of inflation. High enough raises, sorry. So it's absolutely an important question. And first off, I would just say it emphasizes why it's so important to get inflation down to a reasonable level.

We saw that in July because real wages increased 0.5% right, because CPI was unchanged at one, which is just one measure of inflation, but it was unchanged for the month of July. And so I think that that's a very important. piece of the puzzle in part because, you know, workers can feel when the cost of living isn't up to, you know, what they would like it to be. It's important to, I think, to think about some of the mechanisms by which sustained increases happen, one, and also to think about the labor market not as just like this aggregate, you know, phenomenon, but actually a lot of different

sectors, industries that interact and that have different kind of needs and different standards for their workers. So at like a kind of big picture, you know, level, you know, the mechanisms by which sustained wage increases happen in the long run are not just a tight labor market, though we're seeing that in this labor market, you know, workers have choice to get bargaining power and switching jobs. It's a good way to get a wage increase. But there's also mechanisms that are important, like, you know, having bargaining power, whether it's through unions or some other, you know, collective action mechanism that allows you to negotiate changes in your employment contract, like cost of living increases.

So COLA clauses and clauses and contracts can help bear. So that's another thing that we're just not seeing quite the same level of, in part because as union density decline, the prevalence of COLA contract, and COLA clauses and contracts also declined. So there are some of the typical mechanisms that may have existed decades ago that allow workers to have power, enough power to negotiate wage increases that top inflation mechanically that just aren't quite there in the same way. And then the last piece I will say is that I do think this question also varies by sector,

in part because we're seeing, I think the New York Fed actually had a publication on this where the sectors that are the farthest from full recovery, so the farthest below their February 2020 employment level are the ones where we're seeing the highest wage growth. Those are also the sectors where, you know, labor costs are a higher share of total firm cost. And so there's a different story by sector. It's not just like an aggregate wage growth figure, though we often see that reported in the news. Can you talk a little bit more about how some of the idiosyncrasies around the pandemic have impacted the labor market and whether or not you still

see those as forces affecting the labor market as a whole? And I'm thinking specifically of things like the PPP, the Paycheck Protection Program, and also, of course, the impact of COVID itself and people who may have to stay out of the workforce because they're taking care of people who are ill or those who have unfortunately incurred things like long COVID. How are those affecting the labor market? Is there still a big effect from things like that? That's a great question. I think there are a few things that I think about when I think about the effects of COVID, you know, on the labor market. You know, first, I think this will be the subject of maybe 1,000 research papers in the coming, coming years, especially the relationship between

the federal policy response and the labor market today. But we do know, right, that a strong federal policy response kept incomes relatively unchanged or by some measures net improved on average. And so that was really important because the income can translate into spending, which can translate into job creation. On the small business response, this seemed to be particularly helpful. early on in the labor market recovery because there's been studies that have found that, you know, small business relief, particularly PPP, helped increase employment in particular through increasing the percentage of workers who were recalled from layoffs. We also know that layoffs were a big part of unemployment, you know, early in the pandemic recession. So I do think that there's some

clear things about not just the pandemic, but the response to the pandemic that have impacted the labor market today, their persistence, I think, is unclear to me at this point, but we did just see 528,000 new jobs added last month. And so I'm not sure if that question will come to ahead just yet. Some of the other trends that I think are really important in the labor market vis-à-vis the pandemic. One piece that we haven't talked about yet, I think, is productivity. And so, you know, I think there's been a really healthy debate around what is happening with labor market productivity. you know, it's both a statistical phenomenon output over hours worked, as well as a real economic phenomenon. So, you know, our ability to produce more given the same inputs, including workers producing more with the same effort.

And on both fronts, it's hard to measure this monthly or even the quarterly changes that we get because there's so much that can swing month to month in terms of business investment and hiring. And yearly data is better. So I will caveat with that. But I do think that it does raise some questions. and there has been some interesting research on that front that I think is worth noting. You know, one around just like the way in which the pandemic may be affecting these kind of short-term prints on productivity that we're getting. So, you know, there could be, it could be possible that, for instance, you know, productivity rose above trend in 2021 as businesses produced more with fewer workers and that we're, you know, now kind of recalibrating where businesses are hiring more workers and workers are on average producing or working fewer hours. So output is, you know, roughly constant or slightly negative.

And then there's also, you know, something else that could have happened, which is, frankly, that, you know, during the pandemic, business is operated with fewer workers because sick workers also affected overall from productivity. Or frankly, workers were clocking the same number of hours, but working less because of supply chain disruptions. And then finally, you know, it could be a compositional effect where right now we're seeing, you know, stronger employment gains in lower productivity sectors like leisure and hospitality that does not, of course, me, those workers are not valuable. I just mean in macro terms. And so that could just be shifting the overall productivity numbers. And I think that's important in the short run. But then on the long term, there are also possibly meaningful changes on the kind of, you know, productivity as a real economic phenomenon. Because before I think I was talking about it more as like a statistical phenomenon, but here as like a real economic phenomenon, so things like the effects of work from home or

automation that might have taken place in workplaces due to safety or labor supply concerns. And so I think there are some real questions here that are yet to be, you know, completely sorted out. But I think are really important and a big part of how I'm thinking about the labor market, in part because productivity is so important for making sure wage growth is sustainable for workers. And at the Department of Labor, we just really want to see workers get paid what they're due. Yeah, I mean, one thing, and there have been corporate executives talk about this on conference calls, Neil Dutta, Renaissance Macro has flagged this. I wonder if part of the productivity story is like if a bunch of people just started jobs relatively recently, like no one is particularly

productive in their first month at a new job. And that's slightly exaggeration. Not everyone is at their first month, but in a period of a lot of labor market churn and new hiring. And you mentioned the half a million jobs that were created last month, whether we still are just in this sort of state of flux in which we haven't gotten into sort of people finding their groove and businesses operating at a predictable clip again. I mean, that seems like a reasonable theory to me, and it's kind of plays into the composition piece that I mentioned about workers who are coming online and how that affects the top line figures.

So there's one other thing that we haven't really spoken about yet, and that's the wealth effect. So this was also, you know, a pet theory of the past couple of years when it comes to explaining lower participation rates, the idea that, well, you know, maybe if you're older, or even if you're not older, but say you invested a lot in crypto or something like that a year ago. Or have a house. Or have a house. Right.

Or a stock portfolio or whatever. If you saw a lot of gains in those financial assets, you might think, well, it's not really worth working anymore. I can sit this one out, you know, wait for COVID maybe to blow over and then rejoin the workforce if I want to or not if I'm financially able to sit it out. How are you viewing that kind of wealth effect? Is that a tangible thing in your opinion? It certainly makes sense on the surface. And I think it's part of what's enabling workers to have some choice in the labor market. They didn't have to rush back to a job that wasn't their ideal job. So there's some increase in worker power that's happening there. I am on the surface, at least skeptical of it being a long run challenge, in part because, you know, savings can't. run out, especially for workers who don't have a lot of wealth, which is frankly a lot of workers. And also in part because so much about our financial well-being as Americans is reliant on our job, not just the paychecks we take home, but also things like health insurance and retirement benefits,

if we are fortunate enough to have a job where we have those. And so at a certain point, that kind of strategy will not work well for a significant chunk of workers, even if it does help workers today, I'm on the whole have more bargaining power. So how concerned are you that, you know, we do have very high inflation still and the Fed is in tightening mode and the mechanism more or less, people dance around it a little bit sometimes, but the mechanism more or less to combating inflation through rate hikes is to weaken the labor market, weaken wage growth and hope that that sort of like slows things down. and maybe there's this hope that we can take care of most of it just by reducing job openings

and relieving some of the pressure there. But how concerned are you about like some of these gains that we've talked about unwinding as part of the anti-inflation efforts? So I first must start off with an awkward disclaimer, which is I have full respect, as the administration does for the Fed's independence on these issues. So I will not comment on Fed policy. Okay. So I think a few things.

One, I think this is why it's so important to see sustainable wage growth in the labor market, to see participation increase, and to see wage growth, you know, reflecting the values, the value that workers bring to business. Like I want to see wage growth, of course. I want to see sustainable wage growth. I also, you know, I'm really fascinated by, slash, I've been following this really important debate in macroeconomics. I'm not a macroeconomist, so I will,

fully claim that I am just following it, around, you know, how we might land softly, how we might actually achieve a soft landing here. And it really does seem like there are a few ways things can go, but it doesn't seem completely improbable, in part because, frankly, as you all know, as observers of this debate as well, there's a lot of wonky signals out there in terms of what's going on in the macro economy. We saw three consecutive months of job openings decline without major movement in the unemployment rate, which again, it's premature to say, there we go, mission accomplished, but things could go a lot of

different ways. We could see a vertical fall in job openings and things might work out, the beverage curve, which is what I'm referencing, the unemployment rate to vacancy ratio, it could shift back to where it was in prior recoveries, and then we might be in a different situation. I think this debate is really healthy. I think it's important. I don't pretend to have an opinion on it. I'm mostly focused on outcomes for workers here,

but it does seem like, you know, it's really worthwhile to try to do all we can to make sure we get cost down and try to get on a sustainable path in terms of the labor market and the economy overall. It doesn't seem like a fool's errand. Yeah, I just remembered we've actually done a whole episode on shifts in the beverage curve, haven't we?

Oh, yeah. Yeah, although that was last year. Yeah. But, okay, so on this note, though, And, you know, I take the point that you're not involved in this debate specifically, but I'm wondering if you could talk generally about the impact of online job searches on labor market data and statistics. Because this is also one of the pet theories for why that beverage curve relationship might be changing, which is that it's much easier for companies to just post a bunch of job openings somewhere online and, you know, maybe hope and wait that they'll get a really good candidate. it, but they don't have to accept anyone. So there's this discussion point that maybe online job searches are kind of skewing that data. I think that that's a very valid theory. If the cost of

job postings is going down, especially due to technology like the ability to post online, then you would expect employers to go fishing a little bit more, even if they're not always interested in catching a fish. And so you might see, you know, slightly elevated job open. I think as the Bureau of Labor Statistics defines it, you know, they are running a survey by which they're, during which they're actively asking employers, you know, is this an opening that you were actively hiring for? Now, there's probably a lot of room for interpretation there. But, you know, by the Department of Labor standards, you know, we are doing our best to try to measure job openings for which employers are trying to fill a job versus, you know, this kind of

more passive approach to looking for workers that might happen if job. openings are less costly. I think something else that's really interesting about, you know, the job openings data is that it may also, and I think this is bearing out with data, it also might just reflect some shift in preferences too. So some of the highest job opening levels by sector are the service sector job openings. So, you know, retail trade, healthcare, food services and accommodations, especially food services and accommodations was kind of skyrocketed, right, when the recovery began, in part probably because there's a high exposure risk to COVID if you work those jobs and lower wages, though those wages are rising really fast. And so, you know, some of

the openings data, again, I'd like to emphasize the sectoral differences because they tell you an additional story may also be influenced by where workers are trying to actually search for work and fill jobs, especially those lower-skilled workers who may have a slightly better opportunity in this tightly market. Hi, I'm PJ Vote. My podcast Search Engine has a new two-part series for you. Of all the new technologies coming out of AI, the most transformative one might be driverless cars. They're already on the road in 10 American cities, and they're quickly coming to more. We tell the story of how we got here. The secret team at Google that spent 15 years building what might be the safest vehicle on the road, and we cover the fights brewing in blue cities,

where unions and politicians are working to keep those cars off the streets. Listen to search engine wherever you get your podcasts. What's the Inflation Reduction Act going to mean for workers? A number of things. I'm like, oh, I'd love to talk about that. So, you know, we were talking earlier about real wage growth. And I think that the Inflation Reduction Act is really important because, you know, we're seeing the impact of inflation on real wages and it highlights the broader importance of lowering the cost of living overall. The Inflation Reduction Act is doing that by tackling some of the real cost of living challenges that Americans feel now. of course, especially at the pump or in the grocery store, but they're also longstanding challenges. So bringing down energy costs, healthcare costs, you know, the high costs for prescription drugs. Because, you know, those are all things that workers have to pay for with the wages that they are earning. And so when I think about the Inflation Reduction Act and I think about, you know, improving the cost of living, I think about workers who are going to have paychecks that stretch a little farther than they did before.

Actually, just, you know, sort of in general, and I know, you know, we were talking about, you know, talking about the Fed, but in your work and in your day-to-day and the Department of Labor, how much are you thinking about essentially, and again, you know, the White House just signed something called the Inflation Reduction Act, but how much are you thinking generally about this idea of non-monetary efforts to reduce inflation, both through the law but through other regulations, finding ways to relieve pressures, finding ways to expand the supply side, ways to bring about productivity so that we have other ways of fighting inflation other than just the rate hike layoff channel. Well, I frankly think about it as things that we should be

doing no matter what, to be completely honest. You know, we were talking about the labor force participation rate and, you know, increasing labor supply is important to the long run growth of the U.S. economy, creating new high-quality jobs here at home, including in manufacturing, the Inflation Reduction Act would do clean energy manufacturing in particular is important for the growth of the economy. I mean, it also is important for bringing down the cost of energy, but it's also important for growing the economy because, you know, if we have a bigger pie and we, you know, do grow that pie in a way that is shared so workers have more power so they get a bigger piece of

that pie, you know, that has the bonus of both, you know, growing the U.S. economy, increasing productivity. Everyone benefits from higher living standards. And, you know, American workers have, again, like I was saying before, paychecks that stretch a little bit farther. Or they get a chance to get a job in a sector they could not work in before taking home a bigger paycheck that comes with, you know, strong worker protections and maybe retirement benefits, health care, all the things that a lot of workers need. I have a basic question, or maybe it's a weird question. But what's the impact of inflation on labor force participation? because I could see a way to argue it both ways, which is, you know, on the one hand, if the cost of living is going up and you can no longer afford, for instance, food or to pay your rent, then that would force you back into the labor market. But on the other hand, you know, you could also imagine a subset of workers who think, well, if prices are going up and everything is unaffordable, then what's the point of taking on, for instance, a part-time job or something that's not really going to be able to.

to help me offset those. So how are you viewing that relationship? I think it's a really interesting question. My first thought was to look to, frankly, consumer expectations for inflation. We just saw that there was a fairly big drop between June and July and the short and long run expectations, because I imagine that that might give you a sign as to whether or not that's playing a big role in their decision making. But again, this is off-the-cuff hypothesis. Sure. So that's one thing. But at the same time, if you have an urgent need to feed your family, you know, pay your bills, I imagine even if your paycheck wasn't stretching as far, the choice is probably to try to earn a wage. There are, of course, you know, other reasons which labor force participation might be lower for some workers.

Like I mentioned earlier, you know, care, you know, lack of access to opportunities or discrimination, you know, the opiate prices, prices has even played a big role in the declining rate of participation for white men. There are other bigger structural factors that play a role, but that individual decision feels, feels like it leans more on the side of if there's a job on the table, I might take it, then, then not. Can you talk a little bit more about immigration? And we know that over the last few years, starting with the last administration, there has been this very big drop overall in immigration. How do you see that? Is this something that's going to affect the economy in the long run? Or when you look at data right now, whether it's productivity data, wage data,

are there areas in which this is clearly showing up right now the effects of that? I think the effects of immigration are definitely showing up in the labor market data today. There are individuals who've measured this. I wish I could remember the papers off the top, of my head, but, you know, the gaps can be fairly significant, you know, hundreds of thousands. I think even there was an estimate that was showing last year that there were two million missing immigrants in the U.S. economy. Obviously, not all those immigrants would be participating in the labor market, but a sizable share would. And so, you know, that does affect overall supply of labor. But we're actually also seeing that even for, you know, workers who are born outside of the U.S.,

who are working in the U.S. today, you know, they are also. taking advantage of, you know, this bargaining power and are switching to sectors that may seem, may be higher quality, which I thought was interesting because often the thought is we'll just bring in a bunch of immigrants, they'll flood the labor market and take all these terrible jobs. But born born workers in the U.S. also have choice. And so we are saying when there is opportunities for workers to have choice, they also, you know, will choose better quality jobs. So I think that that's, that's important on the, you know, solutions front, I think obviously the policies of the last administration played a big role. And frankly, the pandemic hampered, frankly, the federal government's

ability to process, you know, legal immigrants into the U.S. And so for at least where I've said, from what I've seen the administration's doing, all it can to kind of fix, you know, a lot of those challenges, including just the undermining of our ability to actually make the immigration system work for people who are doing their best to navigate it. So I just have one last question here. And it just goes back to the last non-farm payrolls report. We got 520. 28,000 new jobs. That was well ahead of expectations. And not only that, added a half a million people to the workforce does not exactly feel like something that should or is supposed to happen in the labor market as tight as this one. Like if really employers are like really scraping and

like there's, you know, everyone who wants a job in theory can find one. And employers, I say, oh, we can't find workers. Like, it's hard to imagine how do you add another half a million jobs in that environment. What does that tell you? Does that change any of your assumptions about the state of the labor market that as recently as July? This is still an economy that's just adding that many workers per month. My biggest question is always, what's the trend line going to be? And excuse this very wonky answer, but I love three month averages for this reason. So one, I think it's important to watch to see if this continues or if this was a temporary uptick because prior to July, you know, we were seeing slightly lower figures that were trending,

trending lower than they were before. So that's, you know, out the gate first reaction is, is this going to stick? Is this the start of a new trend? That doesn't seem likely to me, but we will see very, very soon. And then the second thing is, you know, to a question you asked earlier, it's a sign that Americans do want to work. It seems like, you know, every time we have a recovery, you know, the employer side story kind of dominates the headlines, which is the idea that Americans don't want to work. But they want good quality jobs in sectors where they're not at risk of contracting a deadly virus.

They want to make enough money to pay the bills, especially in an environment where, you know, inflation can be eating away at what they're taking home. And that's kind of what I see in that data in July. Joelle Gamble, thank you so much for coming on odd lots. The labor market is obviously such a big and sprawling topic, but that was really helpful in terms of, sort of understanding where we're at right now.

So appreciate you coming out. So glad to have been here. Yeah, that was fun. Thank you so much. Thanks so much, Joelle. Thank you. Tracy, I found that to be very useful, all kinds of interesting things. You know, one of the things that we haven't talked about that much is this productivity

question. Yeah, that's true. And I find that I think Joelle talk about that. Maybe we talked a little bit about that with Jan, but I'm not really sure. But I do feel like that's one of the big sort of mysteries, questions. key determinants, like where we go from here. And I also like the way she sort of distinguished between productivity as the sort of statistical artifact, which is like, yeah, you can look at GDP and you can look at how it's worked

and come up with some math that say workers with is productive. But then also productivity is this sort of true deep economic phenomenon of we're going to have higher pay and a more robust economy. We need productive workplaces. Well, I'm also getting flashbacks to actually the old Yan Hatsias, argument about productivity just not being, you know, measured accurately in a modern economy where there's a lot more emphasis on software and things like that. That whole conversation was a really good reminder that the labor force is not a monolith, as Joelle mentioned. And there are, of course, these different groups within it, all of which may be reacting in different ways to the past two years. And then, of course, she made the point also, you know, in addition to demographics, it's also about industry type. And I thought her point about the proportion. of black men in transportation and warehousing and things like that and the relationship with

the overall business cycle, those kind of being the first hired, first fired. That was really interesting to me and a good reminder. Yeah, we'll have to see what happens because again, look, it is really encouraging that the spread between black and white unemployment is much narrower and compressed much faster in this recovery. On the other hand, you know, as she pointed out, there's questions, and as you just mentioned, about last hired, first fired, there's the quality of those jobs. Okay, we saw this huge explosion in demand for warehouse labor, huge explosion in demand for transportation labor, huge explosion in demand for food service and lodging, things like that, not high volume jobs, not necessarily high paying jobs, not necessarily the most stable jobs.

So we'll have to see, and of course throw into the mix, a Fed that is clearly trying to slow down the labor market, and whether these gains will hold persistent and have positive carryover for the future, I think remains a question mark. Yeah. So, okay, so we've come out of the labor market mystery podcast with more questions. Is that right? Or at least more things to watch. More things to watch. So, yeah, we answered a bunch of questions and now we have a one to new questions. Yeah, all right. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Allo. And I'm Joe Wisenthall. You can follow me on Twitter at The Stallwart. Follow our guest, Joelle Gamble. She's at Joelle underscore Gamble. Follow our producer, Carmen Rodriguez, at Carmen Armin. And check out all of our podcasts at Bloomberg under the handle at podcasts. So, Joe, we have something pretty exciting coming up.

That's right. We're going to be doing a live episode of the podcast and listeners are invited to join. Yep. We are going to be playing host to Perry Merling and Zoltan Poe. are the two of them are going to be debating the future of the dollar. It's on September 6th at 3 p.m. at Bloomberg HQ, and if you want to come, Tracy, how can people sign up? It is totally free. All you have to do is make sure you RSVP in advance. Please send an email to oddbots at bloomberg.net. Thanks for listening.