Joelle Gamble Explains the Confusing State of the US Labor Market

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, I'm gonna say something, and I don't think it's particularly controversial, but this is my assessment. No, no, no, this is my basic assessment of where we are, big picture, over two years since the start of the pandemic, 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.

Tracy Alloway (0:49)

So-

Joe Weisenthal (0:50)

That's not controversial, that's right.

Tracy Alloway (0:51)

I mean, yes, if you look at headline unemployment, I think it's a, what is it, 3.5 or 3.6%?

Joe Weisenthal (0:58)

3.5, I think.

Tracy Alloway (0:59)

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.

Joe Weisenthal (1:17)

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 great financial crisis period. It started picking up, started gaining steam in 2015, 2016, 2017 So by this measure, we've suffered a setback, a real reset perhaps.

Tracy Alloway (1:53)

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.

Joe Weisenthal (2:21)

Right, so one other statistic that's important. Part of the story with declining labor force participation might be retirees, you have a lot of old people who maybe after the pandemic hit, they're like, okay, I'm just not gonna...

Tracy Alloway (2:35)

The great retirement.

Joe Weisenthal (2:36)

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 olds, sort of so-called prime age workers, another way of measuring sort of labor force participation, that's at 80%, not too bad, but again, prior to the crisis, we were at 80.5%.

And so again, some of these things, like say, old people retired, they don't seem to explain the full story. Anyway, the bottom line is there still seems to be some mystery about what's going on with labor.

Tracy Alloway (3:11)

Yeah, well, the mystery is 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.

Joe Weisenthal (3:27)

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 gonna 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 Joelle, thank you so much for coming on the podcast.

You're going to answer all our questions. We're gonna walk away from here without a mystery. But in all seriousness, 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 are wrong. We just needed a stronger economy. And when growth picked up, most of the jobs came back. And we actually, 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 structural shift in who's working these days post pandemic?

Or is this gonna 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?