Guy Berger, Ph.D.’s Post

My recap of the June jobs report. We're not at the tipping point into recession, but on the margin this jobs report moves us a little closer. Most reassuring: prime-working age employment is holding steady, unlike recent pre-recessionary periods. https://lnkd.in/gKG6mjx7

Thought provoking suggestion by Gad: how about federal government incentives for locating universities in economically struggling areas? Why hasn't this been tried? (Has it been tried and I'm not aware of it?)

TL;DR: Strong labor supply growth continues to drive labor market cooling and higher unemployment, but employment is holding up ok. 1/ Probably the first detail that jumped out at me in today's jobs report was the increase of the unemployment rate to 4.1%, the highest since late 2021. 2/ Growth in nonfarm employment also appears to be slowing - the 3 month average of 177K per month is the slowest we've seen since early 2021. 3/ HOWEVER: a lot of the "deep cuts" in the report look less concerning. 4/ The increase in unemployment was mostly driven by an increase in new labor force entrants and labor force re-entrants. Unemployment due to permanent layoff actually fell to its lowest level since January. 5/ The share of prime-working-age Americans with a job was unchanged at 80.8% - just shy of a 23 year high. Employment has remained steady even as unemployment has risen - suggesting a rise in "steady state" job search activity rather than job losses. 6/ The share of the labor force that is working part time for economic reasons (people who want full time jobs but can't find them) fell in June to its lowest level of the year. 7/ Job gains were strongest in health care & social assistant (+82K), government (+70K), and professional & business services excluding temp agencies (+32K). The biggest job losses were in temp agencies (-49K), durable goods manufacturing (-10K), and retail trade (-9K).

From this week’s issue of The Economist . This isn’t surprising! Technological innovations take a long time to have a significant economic impact - the timeline is years and sometimes even decades. It takes time to find economically significant use cases, time to adopt those use cases at scale, and time to reallocate resources as a result. Beyond “it’s too early”, this technology is overhyped. Even if you think it will be highly impactful (as I do), it won’t be as big as fire or electricity. If by 2040 it’s as impactful as the Internet or personal computer that will be a pretty big win. https://lnkd.in/g63uB4QW

My preview of June's employment report, which will be published the day after what I hope is a wonderful July 4th holiday for all who celebrate! It'll be sunny and warm here in San Francisco. 1/ In the preview, I ponder our proximity to a recession tipping point. I don't think we're there at the moment... 2/ ...but beyond "at the moment": a few months of consistently worse data would change my mind.

My substack recap of today's BLS JOLTS report. Things could change, but this doesn't look like an economy getting closer to a recessionary tipping point. https://lnkd.in/gDUqAxrP

The Beveridge Curve is the relationship between job openings and unemployment: openings tend to be high when unemployment is low, and vice versa. It's back in the news because after a long period of dislocation (when openings were freakishly high), we're "back" at a combination of openings and unemployment similar to what we saw in the in the late 2010s. One worry people have: are we back "on" the 2010s Beveridge Curve, with further decreases in openings resulting in large unemployment rate increases? We don't know. The Beveridge Curve has shifted over history (for example, the early 2000s Curve was below the 2010s one). There's good reason to believe that *at some point*, squeezing openings will result in large unemployment rate increases (rather than the modest increases we have seen over the past year). But we really don't know whether that point is already here, or still in the future.

TL;DR: The Great Stay continued in May, with unusually low hiring, quits and layoffs. 1/ Unlike "the Great Resignation" of 2021-22, when labor turnover was unusually elevated, we're now in a "Great Stay" where hiring, quits and layoffs are lower than you would expect given the unemployment rate. 2/ Hiring is particularly "meh" - it's at levels that last cycle would have been consistent with an unemployment rate around 5.5% (instead of the current 4.0%). The good news is hiring declines have moderated significantly over the past year. 3/ Quits are marginally below where we would expect given the unemployment rate. The fact that quits have been stable for quite some time is also a good sign - it's revealed preference from workers that the job market doesn't appear to be deteriorating. 4/ Layoffs are very low by historical standards. 5/ Over the past year, we've seen something that surprised me: turnover fell but net employment growth did not. This probably reflects a surge in labor supply, coming primarily from immigrants. 6/ Job openings continue to significantly overstate how hot the labor market is.

Today I accidentally wrote "Beveridge Curge" in an email, which is probably appropriate as a portmanteau of "curve" and "scurge"

One of the best-known "recession trigger" rules of thumb is Claudia Sahm's: historically when the 3-month moving average of the unemployment rate increases by 0.5 percentage points or more above its 12-month minimum, a recession has started. (If you don't follow Claudia on here, you should! She's one of the best macroeconomists in the US.) As the unemployment rate has crept up over the past year, we've gotten closer to "triggering" the Sahm Rule. But for those who follow this rule closely, it's worth remembering the 12-month window moves, and as a result the threshold for triggering it is going to drift upward as a reflection of increases in the unemployment rate over the past year. (In my opinion people attach a little too much talismanic meaning to the Rule - it's not like saying "Candyman" 3 times. But the phenomenon it tries to quantify, small/gradual increases in the unemployment rate converting to large/rapid ones without warning - is very real.)