A frozen labor market in the US? — GZERO Reports

[00:00:00] Speaker 1: Hey, everybody. We're here at our U.S.-Canada Summit. Interesting fact, job numbers in May were strong on both sides of the border, both in Canada and in the United States. But why don't people feel good about it? I am going to ask Erica McIntarfer, who is the Distinguished Policy Fellow at Stanford Institute for Economic Policy Research. Did I get that right? Yes, you got that right. Former Commissioner of the Bureau of Labor Statistics. I know what that is for sure. So last week in the United States, we heard May job numbers, 172,000 new jobs added, double what economists were expecting. Yet, most recent Gallup survey showed more than a third of Americans say the biggest issue right now is the economy not going in the right direction, and two-thirds said they're having a hard time finding a good job. What gives? [00:00:51] Erica McIntarfer: We did have these great job numbers, and it was the third straight month of above-expected job growth. So not just a one-month blip. So there are some signs that labor demand might really be coming back, which is good news. But it's true that it doesn't feel good everywhere in the U.S. economy. I'm sure not in the Canadian economy either. Because when you look under the hood, this labor market doesn't have all of the aspects that you would expect to see in a good labor market. In particular, hiring is very low. So in the U.S., hiring is at 2010 levels, like levels we have not seen since right after the Great Recession, when hiring was really, really poor. So in 2010, my Starbucks barista had a master's degree in mechanical engineering. That's how bad the labor market was for young people in 2010. And we're kind of in a similar situation like that today, even though unemployment's pretty moderate. That's because there's no layoffs, but there's no hiring either. It's a frozen labor market. And that means it is actually a really tough time if you're looking for a job. [00:01:55] Speaker 1: So help me understand, then, if we're adding 172,000 jobs, then why is that not helping to grow the workforce? [00:02:05] Erica McIntarfer: So it's a very good question. And it could be that just the recent payroll gains we've seen, and those numbers aren't showing up yet in the labor force survey, so it's not moving the unemployment rate down. It could be we're just seeing some seasonal, like, favorable numbers, like the World Cup is happening. Like, it was a particularly nice spring weather-wise. So it could be that this is just a blip, and we're not actually seeing a real pickup in the numbers. So time will tell exactly what's happening there. But I agree, it's a little bit of a head-scratcher. [00:02:41] Speaker 1: Pull back the curtain for a second for those of us who don't understand where all these numbers come from. Is the data reliable and trustworthy? How do you compile what the month's job report looks like? [00:02:54] Erica McIntarfer: The payroll survey, the one that we just had, the 172,000 job growth, that is a survey of firms, 600,000 firms. So it's a very large survey. Most firms that are large are in there all the time, and they send monthly reports to the Bureau of Labor Statistics, usually electronically. For smaller firms, there's a lot of phone calls that are made. And then, like, very quickly, the Bureau of Labor Statistics is like a factory floor, because those numbers just turn out very, very rapid turnaround. And they compile the numbers and do all of the analysis, and then we print the report. And on the labor force side, that's a household survey. And so we contact 60,000 households and ask them about their labor market experience. You really have to talk to households to know why people are not working. [00:03:46] Speaker 1: So, as I mentioned, job growth in Canada in May, as well as in the United States. However, Canada's unemployment rate remains higher than in the U.S. by a couple of points. It's significant. And I'm just curious what the connection is, because there are obviously such shared economies in so many ways, right? Do we look at Canada as foreshadowing where we may be going or the opposite? [00:04:10] Erica McIntarfer: There are different labor markets with slightly different dynamics. I'll speak to the U.S. context, which I really do understand. Part of it is that layoffs are very low. That's true here in Canada, too. So that's keeping a cap on the unemployment rate. It's also true that the workforce is older than it used to be, and that tends to push unemployment rate down, because unemployment is just higher, typically for younger people. So some of this is demographics, and some of the difference between U.S. and Canada might be demographically. It could also be macro. [00:04:42] Speaker 1: So let's talk about AI, right? So obviously a huge topic everywhere, but particularly when it comes to jobs. We saw commencement speeches at universities all across the United States. Big, high-level executives mentioning AI and getting booed. You said in 2010 your barista had a degree in mechanical engineering. Well, it seems like that's only going to get worse. Is that just perception, or is that reality? [00:05:10] Erica McIntarfer: The reality is it's a very tough labor market for young people right now. How much of that is AI is actually a question. Some of it probably is AI, but a lot of it is what we just discussed. Hiring is really, really low. And when hiring is low, it disproportionately impacts young people, because they're the ones that are trying to break into the labor market, and they're the ones that are trying to have early career progression. So slow hiring is always bad news for young workers. And what you see is, like if it was just AI, you would just see young workers having a hard time in those occupations that are affected by AI right now. But it's much broader than that. It's all occupations. Young workers are having a tough time. [00:05:52] Speaker 1: We heard today on the main stage here at the summit, experts saying America's workforce is aging, retiring at a rate of something like 10,000 per day, similar in Canada. And by the way, across the G7, aging workforces. So if young people aren't taking those entry-level jobs, or there aren't entry-level jobs for young people, is the way I should say it, how do you build the workforce of tomorrow? And are there policy levers that should be in place right now to look to the future? [00:06:22] Erica McIntarfer: It's a very good question. And it's something that lots of places that have slowed hiring are really struggling with right now. I'll give an example from very recent history. So after the housing crash, construction firms stopped hiring young people. And they actually stopped hiring young people for almost a decade. And then construction came back. And there was like a building boom during the pandemic. And they're like, where's the next generation of construction workers? Well, they didn't hire young people for a decade. And the workforce aged more rapidly than the U.S. workforce overall. And then they just didn't have any workers that had been trained. So they had shortages everywhere. And that could happen more broadly if this continues. [00:07:04] Speaker 1: So to end on one more question on AI, what we hear from a lot of tech executives, and not just tech executives in fairness, really, I've heard this from economists too, that like any industrial revolution or technological revolution, it's going to change the workforce, but new jobs can be created. Are you optimistic that that's true? And is it going to happen quick enough for the people, the population that we're discussing? [00:07:29] Erica McIntarfer: So I am personally fairly optimistic that that will be the case, that new jobs will be created. And, you know, new technology is always disruptive. It disrupts occupations. It disrupts industries. It makes some jobs obsolete. But technological change has been a feature of the North American economy for 200 years. And we have a lot of economic history to look back on. And what happens is new jobs are created. Most of us have jobs now that our grandparents couldn't even conceive of. [00:08:03] Speaker 1: All right. Well, Erica McIntographer, thanks so much for being here. [00:08:06] Erica McIntarfer: Thank you for having me.