This week on the Macrocast, Ylan, John, and Brendan are joined by Nick Bunker, Director of North American Economic Research at Indeed to discuss the latest core PCE data. Nick discusses some of Indeed's proprietary labor market data, including its Job Postings Index, that shows that average wages are now outpacing inflation.
Nick brings his expertise to the conversation, discussing the Fed's next moves and the robust demand for workers across the globe. The group also forecasts future labor market indicators, including part-time employment shifts and hours worked. Tune in for an episode packed with insights to help you navigate the latest economic developments.
This week on the Macrocast, Ylan, John, and Brendan are joined by Nick Bunker, Director of North American Economic Research at Indeed to discuss the latest core PCE data. Nick discusses some of Indeed's proprietary labor market data, including its Job Postings Index, that shows that average wages are now outpacing inflation.
Nick brings his expertise to the conversation, discussing the Fed's next moves and the robust demand for workers across the globe. The group also forecasts future labor market indicators, including part-time employment shifts and hours worked. Tune in for an episode packed with insights to help you navigate the latest economic developments.
Hello everyone and welcome to the macrocast. I'm your host. Ilan Mui, a managing director at PENTA, Brendan Walsh and John Fagan of Market Policy Partners are also behind the wheel today. Our very special guest riding shotgun is Nick Bunker, director for North American Research at the hiring platform. Indeed, Nick, we're so glad to have you.
Speaker 2:My pleasure. Thanks for having me.
Speaker 1:Fantastic. Well, we've got a lot of economic news to discuss today GDP, inflation, the Fed's meeting next week. In fact, the data has looked so good that our friends at Axios are saying that this isn't a soft landing. This is actually no landing at all. What do you think about that?
Speaker 2:Yeah, I think in terms of the soft landing debate, I think what I was thinking about, particularly this morning when you got the recent batch of core PCE data was it awesome? Gulsby at the Chicago Fed's been saying the golden path which, when he talks about it, even the better version of the soft landing, at least so far we are seem to be trotting along that I just was looking at. One way to think about this is at the end of 2022, fed had their December meeting. They put out their projections for what they thought the end of 2023 would look like. At that point they were projecting or at least the median participant was projecting unemployment would be about 4.6 percent and core inflation would be 3.5 percent.
Speaker 2:In the fourth quarter what we got was something closer to an unemployment rate about 3.7 percent and core PCE growth, at least through December, of 2.9 percent. We got more disinflation with a much smaller increase in unemployment. That's, I think, very encouraging, never mind the fact that we also got news today that, on a year-over-year basis, gdp was growing at 3 percent after adjusting for inflation. I don't know the proper plane metaphor here, but things are looking pretty good for the US economy. We've gotten resilient economic growth looks like there's a lot of the disinflation we've gotten from supply side increases. I guess it's the opposite of stagflation. In many ways They've gotten continued strong growth and disinflation at the same time. Very positive and hopefully a lot of these trends continue into 2024, or we continue walking along this golden path.
Speaker 1:Yeah, definitely, the consumer has been one of the pillars of I'm trying to think of a traveling metaphor to go along with the golden path that the consumer has been trudging down the golden path for quite some time now. They really were the driver of the strong GDP numbers that we saw. What do you think has been behind that continued resilience of the consumer?
Speaker 2:I think, for at least for a large part of the last few years, folks have been talking about excess savings or fiscal stimulus, and what I've noted particularly from my vantage point, I think, about the US labor market, it's what we're seeing in real wage gains that since 2021, particularly spring summer, we're seeing very rapid nominal wage gains, but for many folks inflation was faster than wage growth.
Speaker 2:That's no longer the case. You can see, especially since this summer, maybe early fall, average wages are outpacing inflation now and, if there's some way to cut the data at least from the survey behind unemployment rate, most workers are getting inflation-adjusted wages right now. So I think part of the resilience, at least over the last few months and hopefully moving ahead, is that we have seen wage growth in nominal terms moderate but still be fairly resilient, and inflation's come down faster. So there's more folks who are getting inflation-adjusted increases in their paychecks. So if their purchasing power is rising so that you continue to see consumption grow. So I think that's again this idea of sort of a positive feedback loop. I believe markets say strong enough, inflation has come down and that seems, at least for now, to be a source that continues powering consumption growth.
Speaker 3:Nick, when you look at this, you're at an interesting company that probably has a lot of interesting data. How much of what you see internally kind of informs your decision not your decision, but your view on the economy?
Speaker 2:Yeah, so I think there's two aspects. I mean there's a variety of aspects. We'll talk about Two. One is the continued resilience of the lay market and the second is what I was just talking about with real wage gains. So the first is, in terms of the resilience, a data set that has become more prominent over the past few years has been the government's measure of job openings from the job openings in the return of a survey, in part because it was signaling, hey, there's lots of really rapid demand for workers, and it's been a side of the way market tightness. What we've done indeed strictly hiring a lot of the team that I am part of is we've developed our job postings index. Yeah, that's a measure of-. The jolt is pretty slow.
Speaker 3:We're getting a couple months behind it.
Speaker 2:Yeah, so our job postings index, it's a daily measure. To your point about speed, oh wow, it is a daily measure and release it weekly. So the latest government data is through the end of November. I've got data from a week ago and it's that is so cool. Monday or Tuesday I'll have data from today, and so we've got and you personally, get it every day. So there's a query I run every morning to be like a quick check on it. So it's almost like cheating. You're getting a look behind the scenes.
Speaker 4:Is that fair?
Speaker 2:It's one of the advantages of having my job but what we share publicly, that comes out on a weekly cadence. So depending on when our data is rolled out, sometimes we've got about a four to six week front run. I won't call it cheating on what we're seeing from the government data and in terms of how that stacks up the government data. This is a podcast. Otherwise I'd show a graph, but what you can see is that basically look at both series our job postings index, Jolt's job opening series, right before the pandemic. They basically map onto each other fairly well, with two big differences. One is the timeliness that we just talked about. And then there's Jolt's is more volatile. It jumps. It's only a monthly series, it's a survey. That's what the S and Jolt stands for. Yeah.
Speaker 2:There's not that many people right, it's about 60,000, I think. Establishments overall somewhere in the 40 to 50 range, 50,000. But the response rate has come down significantly. This has happened for quite a few government surveys, especially in the early days of the pandemic. Some of them have bounced back Jolt's. It dropped significantly. And then there's our data which is based on what we're seeing on our platform.
Speaker 2:It's user based, it's not a survey. It's what we can see in the platform and it's more timely, but on the long run it's essentially the same trend. So what I can see in our data again this is through a week ago, so January 19th is that job postings are still elevated compared to their pre-pandemic level. They're up about 23% from what we saw back in the beginning of February 2020. Now that's down a lot from what we're seeing in basically January 2022 when our series peaked. It's down 25% from that level. It's pulled back significantly, but it's still quite elevated.
Speaker 2:So I think that to me, in terms of the continued resilience of the labor market, is that we still see a low unemployment rate, we still see signs of hiring and from our data, we can see continued strong demand for workers, signaling that, hey, this is a labor market that has moderated, it's a labor market in many ways come back into a more sustainable balance, but there's still healthy demand for workers, particularly in the sectors that tend to employ more workers. So food preference services, nursing, childcare, those are all very elevated. I think nursing job postings are up 38% for the pre-pandemic level. Childcare is like 43%, so there's lots of demand there.
Speaker 1:Well, I can say number one we all have a great demand for child care today, because we were just talking, before this podcast began, on the fact that schools are closed. So that's just a personal note. The second thing I will let our listeners know that Nick Bunker is a jolt junkie, so you are not throwing shade on the government data at all, but it's maybe supplementing yes, it's binding with what you see on your own private platform.
Speaker 2:Yes, I have the privilege to get to work with our data, which is fantastic.
Speaker 2:I'm also a person who is hitting command R repeatedly at 10 am every month when the Jolt's report comes out, so I think our data is incredibly useful.
Speaker 2:But, yeah, it is a compliment to something you very much should use in conjunction with government data. My view is and I can talk about some of our other data is our data products where we're trying to help inform people about what's happening in labor markets. So the JPI just mentioned we have US data, but we also have data for six, seven other countries and a variety of more. So, yeah, so we have data that gets released for Canada, the UK, ireland, germany, france and Australia, and then we have some other markets that we have as well, because our team is international. But, yeah, so I think it's our data. I think I will talk about the utility of our data till the cows come home. But also, government data is incredibly important and, yeah, I definitely don't want to throw shade on it at all, in part because there's great measures from Jolt's that our data can't directly speak to, like, say, the quits right.
Speaker 4:Yeah, yeah, I mean this is a very rosy picture that we're talking about and the data has just come in and it has been Goldilocks, the Golden Path, whatever, and when you put that against, and we did see a gauge of consumer confidence get a little bit better. But generally we've talked a lot about this disconnect between the data and the economic mood of the country, which tends to be a little bit sour. Where do you come down on that particular issue?
Speaker 2:Yeah. So I think my very simple explanation for it is we're talking about how there's been a lot of disinflation and that means that there was really elevated inflation for a period of few years there. And I think what I've learned over the last few years as someone who doesn't have personal experience with elevated inflation rates of, say, the 70s, is that people really hate high inflation. They really really really don't like it, especially when, for most people, that are growing faster than their wages. So I think, as I referenced earlier, that wages are starting to exceed inflation again and that there's got to be a period of time where that sort of catches up to people's lived experiences and that in my first approximation inflation was high. People don't like that and as that wanes maybe we've seen it in a few data sets, like very recently is that once that starts to trickle into people's lives, they feel better about the economy.
Speaker 4:That's an interesting formulation the idea that the golden path and growth is going to be steady. You get that disinflation and the real wages are running ahead of it and people are feeling better. Is that the kind of scenario? That's not the kind of scenario you typically have the Fed cutting rates into. And yet we've got a Fed meeting coming up next week. The odds implied in futures markets are for 97% likelihood that they hold, but the odds flipped to 50-50, essentially in the March meeting and for the full year the base case is still around 125, 150 basis points of total cuts. How do you square that with the economic signals that you're seeing?
Speaker 2:Yeah.
Speaker 2:So I guess the way I think about this is that the way the Fed has talked about their interest rates is that they currently view them as restrictive.
Speaker 2:It's actually slowed things down, that it's doing the job of being restrictive enough on economic activity that's brought inflation down, or it's leases contributed to the disinflation. And if they think it's restrictive now and it's been restrictive for quite some time if the economy has gotten to a spot where inflation's at or right above their target, the labor market is still holding up, they got to ease off at some point. Right. But the way they've talked about it is that, hey, it's been restrictive. If it's been restrictive some time, if you're on this path and the break's been down for quite some time and you want to keep going there, you need to ease off the break at some point. So that's how I've been thinking about it is that they view that they've been pedaled to the metal, but the pedal they've been pushing is the break, and now they need to ease off a little bit in order to continue along the positive trajectory we're on so far, right now.
Speaker 3:What do you think the risk of a policy mistake on their front, that they stay kind of on hold for too long? Do you think that the economy needs a little less tightness?
Speaker 2:So I don't know if it's. I think my view of it is that what you can see in the inflation data so far is that things have come down. It's not on a year-over-year basis, it's not back to the Fed's target, but look at the six-month it essentially is, but that there is this risk that if you do think rates are restrictive and if you're holding that for quite some time, the labor market has moderate and still resilient. But if you look at a lot of the data, it's come down and maybe leveling off. But the risk is that it's taken non-farm payrolls, for example, they've slowed down quite a bit and maybe they start to level off or maybe they keep going.
Speaker 2:And the risk is that in a lot of labor market data so far it's looked towards moderation, but there's some point where it keeps going and then it's no longer moderation, it's deterioration, right, right. So I think that's the risk there is that the trends look very benign right now but they can accelerate quickly, potentially, or they can just keep going. They can sell in for a landing or they can keep declining. So I think my view is that, at least with the data so far, I don't think they need to urgently cut right now because there's any risk of recession starting next month or anything.
Speaker 2:But it is like, over time, as the inflation data comes in more and more benign, the risk is going to start tilting towards. Okay, this is restrictive, yeah.
Speaker 3:And one thing that we've been talking about the last couple of weeks is the cost of shipping goods because of the situation in the Red Sea, but I kind of keep going over to my head. So if we know that goods are going up because you have to send it 40% longer around Africa and also that's why oil is going up, and then you worry, okay, that's seeping into inflation, but we know exactly why it's happening and stricter rates might exacerbate that problem. Cutting rates might be the solution to now a company can borrow cheaper so that maybe you can pass that on and it doesn't end up with the consumer. I'd be interested in your view. I haven't fully thought it out yet, but it seems like one of those that we actually. It's not a theoretical inflation thing. You know exactly why that cost is going up. Yeah.
Speaker 2:And I think there's also the traditional central banking playbook. As I understand it, is that when you have a supply shock like that and it looks quite temporary, is that you don't tighten into it, because how much our interest rate is going to affect the geopolitical situation? Yeah, so it is, it's rates are higher, we're done.
Speaker 2:Yeah, I think there's some interesting theories of monetary policy transmission. I don't know if that's one that has much grounding in theory or empirics. Yeah, exactly, so I think it is one of those that, yes, it's a risk, it's out there, but it's one that you can monitor. And also, if you're at the Fed and you think rates are restrictive right now, it seems unlikely that at hike they'd maybe just hold it for longer. It does seem like what they're saying right now is they're saying, hey, we're not thinking about this, but maybe they are about cutting, so they can just slow plate a little bit. And again, if the conversation is about do they start cutting in March? Do they start cutting in May? Maybe they have some time there.
Speaker 3:Yeah, and the markets are already starting to price that in, and so their decision is also front run, partially by the market.
Speaker 1:Yeah, I mean I'll point out it was the Fed that brought up the idea of rate cuts. Right, it's what didn't happen. Market scenery acted in a complete vacuum. So it's something that is part of the discussion, is at least in the view scope at this point, even if the actual date is uncertain. And, john, I mean I know that it's like a coin flip now for the March meeting, but that's actually come down quite a bit from where markets originally were, when they felt like March was a guaranteed, to see the Fed starting to slice.
Speaker 4:Yeah, absolutely. The Fed's communication barrage after the dovish perception of Chair Powell's press conference after the last meeting. Yeah, we've seen a barrage of pushback from Fed officials but the data has reinforced it. But you just see, it's incremental, it's a gentle move. I think that the Fed for next week. Our guess is that the Fed is going to remain pretty cagey. It's not. They've got a decent amount of time between the end January and the March 20th decision. So you know it's probably going to be a situation where they try to hold steady, let the data do the talking for them and so far the data has incrementally pushed back those rate cut expectations, not a ton, not a sea change, but going in the direction I think the Fed probably wants.
Speaker 3:Yeah, but it is a communication issue because you know, in their projections, especially in June, you know they thought inflation was going to be almost a percent higher than it is today. So not criticizing them, but that's just the reality that they have to communicate to the market. You know why we're here and you know, and more importantly, where we think inflation is going to go in the next three months, because the fourth quarter proved to be, if you analyze the third fourth quarter, well below their target.
Speaker 4:The other thing that you know the Fed has to take into account is that you know, obviously they say that rates are in restrictive territory and I'm sure that they have a lot of data that shows that. But you know, everybody knows that what's the neutral rate? It's just a guessing game, right? Really nobody knows. But what is absolutely manifest is that right now, even if rates are restrictive, financial conditions are not restrictive. If you look at, you know metrics of financial conditions, you can, you know their pockets of tightness. Obviously, you know commercial real estate is one. But you look at, you know the Chicago Fed's gauge of financial conditions. I'm looking at it right now. It's as loose as it's been since, you know, very early 2022. And they it's you know on the very high.
Speaker 3:financial conditions are low too, yeah.
Speaker 4:Yeah, very easy side of where they you know of the last few years. So that's, you know there's a chance that they become so pro-cyclical and if they're just looking at models and, you know, at this environment, you will look at the stock market. I mean it would be if the Fed starts sounding increasingly dovish. I mean this could be gasoline on an already kind of roaring fire in financial markets. All-time highs for the stock market. Usually the Fed doesn't cut into those, but you know we'll see. It's a very different. It's a very different context.
Speaker 1:So it kind of begs the question is the market doing the Fed's job, for? Do they need to cut if financial conditions are loosening? Just with the discussion, or even with just a whiff of cutting in the air? You know, markets are, financial conditions are loosening, markets are doing the job for the Fed, so the Fed can kind of stay, put, take some pressure off. That's for sure. Nick, I don't want to put you on the spot here, but I'm going to do it.
Speaker 1:I gave you some time to dodge. If you need to start thinking of the pivot in your head. No, but I know you're a director of North American research but you mentioned that indeed does have data, you know, for a number of other countries. Do you have any sense of how the US labor market compares to the international markets? And you know how are we positioned compared to others?
Speaker 2:Yeah. So what we can see in, indeed, data I think it's broadly similar to what you see in trends and other data is that it's been a broad-based rebound globally, with the US being a particular pocket of strength. So I mentioned, you know, on our job postings data, that what we're seeing in the US is there's been a clear moderation, but things are still elevated from the pre-pandemic levels. That's broadly what we're seeing in the other data as well. The UK, you know, basically postings are back to their pre-pandemic level, even if they moderate quite a bit, but that's back to where it was in early 2020, which was still a pretty robust, strong labor market. You see it in German data. Canadian data postings are still elevated, I think somewhere in the 10 to 20 percent above pre-pandemic levels. Australia job postings are well above there, even the US. So demand for workers is still strong.
Speaker 2:And then what we? So? Another series that we put out is our Indeed Wage Tracker. So it looks at the growth in wages and salaries advertised in job postings on Indeed. What you see there is a relatively consistent global story that posted wage growth peaked early 2020 to maybe a little bit later and has come down.
Speaker 2:With the exception of the UK. Wage growth has been more resilient there, even as it has seemed to peak. But our measure for the US and our measure for the euro area they're roughly at 3.8 percent year-over-year. So they're still. They've come down quite a bit and the US supposed to. Wage growth peaked at a little over9 percent year-over-year but they are both moderating but slightly above pre-pandemic levels in the US, faster than inflation. So CPI and again this is posted wage growth. So maybe it's a little bit indicative of future trends in labor markets as most measures of wage growth are realized. So again, in both these markets you're seeing the story of hey, it's a relatively it's a resilient labor markets, but ones that are sort of have reeled in some of the excess from what we saw in late 21 and early 22.
Speaker 1:John, how are central banks internationally thinking about the labor market and inflation picture? What are we seeing in terms of? Are they thinking about cuts yet?
Speaker 4:Well, we saw the European central bank come in this week and hold rates. That was expected. There's been a lot of chatter about when they're also discussing cuts in Europe and I think probably with a little bit more justification. On the growth side there has been a little bit weaker the US obviously outperforming. We got PMIs that came in. They were not that different than expectations in Europe, but still very much contractionary Technical recession. That's the kind of status of the German economy and so forth. They definitely have a leg to stand on when it comes to rate cuts.
Speaker 4:But the cautious nature some of the more calendar-based guidance that we've heard coming out of the ECB is when will they have enough data, assuming that trends extend as they currently expect? That's finger in the wind. They've talked about late spring. The markets have them cutting earlier, but that's not as dramatic a disconnect as it might have been. I think that there's a coordinated cutting opportunity. I think one place we focused on is the UK that has a little bit more of an inflationary problem. We've seen some upside.
Speaker 4:The Bank of England may be, among the major central banks, one of the more cautious to start easing. Then we also have the Bank of Japan which is marching to a completely different drummer this week. They did not move rates, they are still in. Is it really the last central bank standing in negative interest rate territory? Negative 10 basis points isn't dramatically negative, but wow, they're seen hiking this year up to zero, getting out of negative territory and maybe inching above. They would be remained dramatically out of step with all the other central banks but given the weakness of the yen, it's not that big a problem. Usually you wouldn't see the Bank of Japan pull something like that because it would put a rocket boosters behind the yen and they wouldn't want to see that. But the dramatic weakness like generational weakness in the yen Too time to travel to Tokyo and Japan.
Speaker 2:It used to be so expensive, now it's a deal, chris one thing on the ECB meeting I mentioned, I was covered North America by trying to follow other markets. One thing that I saw was that President Lagarde mentioned tracking wage growth. This is a bit of a plug. She did mention the indeed wage tracker as a measure that she's been following in terms of wage growth metrics.
Speaker 4:That's a really quality shout-out.
Speaker 2:Yes, it was very exciting to see that. I just want to plug for our data is that we think it's a good measure, but some folks who make monetary policy agree with us as well.
Speaker 1:That's your second quality shout-out, nick, didn't? Chair Powell also reference, indeed, data during one of his speeches?
Speaker 2:He did In the Jackson Hole speech. She didn't directly reference it. Figure six of the Jackson Hole speech, not that I've thought about this a lot. He presented trends of wage growth. There were four series. Three were your classic average earnings, employment cost index and the only other thing, that's wage growth tracker. The fourth was our indeed, wage tracker data for the US.
Speaker 1:Fantastic. Obviously, it's a very nerdy audience, but there really is no better press than you can get than figure six of the Fed Chair's Jackson Hole speech. Let me ask you this as you think about the year ahead and the dynamics that we've been talking about in the labor market, what else is on your radar screen? What secret data does indeed have? What secret data are you looking at outside of, indeed, that can maybe help us inform and understand where things might be headed?
Speaker 2:I think we talked about essentially labor demand, so job postings. There's obviously some other measures there I keep an eye on, for example, for hours growth in, say, the publicly available data and sort of measures of part-time work. We talked about wage growth. So one thing I'm keeping an eye on and it was one of the really big stories in labor market last year was labor supply, that you saw labor force participation, particularly for prime age workers, pick up a lot in 2023 in some ways and define some of the expectations, particularly after what we saw in 21, when hey, where's all the workers? I think they were just slower to return, like many of the supply side shocks. So there's two things that I thought were notable about last year and when it came to labor force participation. One was that we got back to levels we actually hadn't seen since 2001, 2002. So back to 20 year highs, but it's a little bit below what we saw at its all-time peak back in the 90s, like late 90s. That's where you really saw that top out. So I think it'll be interesting to see if we can continue to make progress in that direction, particularly, as you saw, the big rise in 2023 was among prime age women. So these workers, women aged 25 to 24, they were much more responsive to labor market, or at least much more responsive over the last year, which is actually what you're seeing in 2018, 2019 as well. The looks seemed to as prime age women really were the more the source of growth. And then the other thing this is a little slide back to, indeed data is immigration. Then a large chunk of the increase in the labor force growth since 2021 has been among foreign born workers. If you look at it, share labor force, starting in kind of 2019, it's dipping down the 2020 and 2021 very depressed level.
Speaker 2:Labor force was foreign born.
Speaker 2:It's risen pretty steadily now is slightly above its pre pandemic levels.
Speaker 2:One thing we can see on, indeed, is interest in job postings or just searches on our platform from job seekers outside of a country, based on their IP address.
Speaker 2:So we can see what share of searches or what percent of clicks on a job posting in the US are from outside the country and similar what you saw in that foreign born share of labor force fell off during the pandemic. It started to take back up and, depending if you look at searches or share of clicks, they're back to their pre pandemic level or slightly above, and but they both leveled off over the end of the year. So something I'm gonna keep an eye on is hey, are we gonna see continued growth or a push for labor force position from foreign born workers, if that's something that can increase supply at a time we're seeing moderating demand? Because if not, if anyone wants to see the labor market come more into balance and I think it's questionable whether that should be a goal but if you do and this is something I was talking about in the Fedments recently then you need to see more reduction demand in order to get further moderation.
Speaker 3:And is there certain industries that you're seeing that the foreign workers are most interested in, or is it kind of broad based?
Speaker 2:So it's varied a little bit and that you do see in terms of the overall share it tends to be higher wage occupations like tech workers, but you also do see lots of interest in hospitality and tourism, some food preparation jobs. So it's sort of bifurcated a little bit. There's some sectors it matches up with industries or occupations you tend to see lots of foreign interest in so sort of maybe software development, very tight or scarce labor markets that have lots of potential immigration and also some more manual labor.
Speaker 3:Anything for economic policy podcast. Co-hosts.
Speaker 2:You know what? I haven't looked at that data. Maybe I can.
Speaker 1:It's a very small sample size.
Speaker 2:Yeah, I think I don't know how many postings there are.
Speaker 3:Yeah, we also do it for free, so it's not bad.
Speaker 1:I guess you can't actually call it labor, right, if you don't actually get to come from it. Well, nick, thank you so much for joining us today. We really appreciate all your insights. That does it for us at the macrocast. I'm Elan Moy with Penta. Thank you to my co-host, john Mbrenzad of Markets Policy Partners. Again, that was Nick Bunker, director of North American Research at the hiring platform. Indeed, we hope that you all enjoyed our show. Thank you for listening and remember that you can always subscribe to the macrocast wherever you get your podcast. Have a great day.