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America has jobs

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Despite the April job report’s low numbers. Myles Udland breaks down how there is no lack of demand for labor among employers and how this demand will shape the post-pandemic recovery.

Video Transcript

JULIE HYMAN: And Myles, of course, one of the things that is driving this economy right now is a lot of jobs out there, right? And that's something we will see eventually if it feeds through to those inflation numbers in larger part than it seems to be right now. But we got more information on this, as you wrote about in the Morning Brief yesterday morning when we got the job openings number, which we came-- which came in at an all-time high in terms of the number of open jobs. And as we see there, the ability to fill those jobs is pretty challenging right now. That, of course, was reflected in Friday's jobs report as well.

So as we think about what this job market looks like, it's going to be really interesting to see how exactly those jobs get filled, right, what employers need to do in order to get people into those positions.

MYLES UDLAND: Yeah, look, I mean, it's a pretty simple story, right? You know, we've got 8.1 million open jobs in the US right now. We've never had that many open jobs here. The last time we had anything near that was 7 and 1/2 million back in, I think it was November of 2018. So that's right as the Fed choked off the expansion, raising rates five times, as it did. Or it was finishing up its five rates hikes. As it got into December of 2018, there, the market fell 20%. So, again, we are in uncharted territory as it relates to open jobs.

But that chart that we showed there, which comes to us from Indeed, at least from my mind-- and I think this is the most simple economic explanation here-- the Occam's razor of how does this resolve itself, employers are either going to not hire for the jobs that they hoped to, which I think, right now, at least as it was reflected in the March jobs report, that's the play. Or you are going to have to raise your wages. I mean, there's really no other options as it relates to how do you get employers in the door if you have all these jobs open.

Now, as I mentioned in the Morning Brief today, we've seen things like what Chipotle announced, what Tyson Food talked about on their call, with clarity around schedules, the ability for people to have the legally required two-week visibility on their schedule, which we know is often not the case at many fast food or contingent work situations. Those are some ways, some ancillary fringe ways, let's say, that employers can keep their employees happy.

But ultimately-- and we cite some work out of Capital Economics in the report-- ultimately, wages, which have already been high and rising during this recovery, are likely to go higher still, Brian Sozzi. Because with millions of folks out of work and more jobs open than there are unemployed people right now, that's pretty much the way that you can go about trying to get people in the door.

BRIAN SOZZI: Well, before I ask you my next question, Myles, I do want to congratulate you and Sam Rowe for your honorable mention by [? Sabu ?] for the Morning Brief newsletter. It's awesome. I read it every morning. It is amazing to see how far it's grown since you launched it, and so, hat tip to you. That's very prestigious stuff. But ultimately, you know, does this type of wage inflation you are seeing, I mean, do you think it's transitory? I mean, it's hard to claw back wages, right, once you get hired.

MYLES UDLAND: Well, again, I mean, the conversation around transitory is the rate of increase in the wages itself transitory, right? So if we are forced-- if someone is forced to increase wages against the prior year by 5% or whatever, whatever it is, 6%, 7%, OK, that's that one year's increase. That measures in inflation data and consumer demand and ability to spend and all that stuff. Does it continue to increase at that same rate in future years? That is basically, again, the conversation both on the wages and inflation. And that's the way to frame this conversation as far as the Fed sees it.

The wage pressures this year are certainly going to be notable compared to last year. I think the Fed is interested on whether those increases are at the same rate next year, as they were this year. Or are we likely to see a cooling in the rate of increase? And so, I guess, this is second order. That's like the fancy way to say it, right, Julie? The second order effects of wages and inflation and all that. And, you know, that's really the conversation today.

JULIE HYMAN: Well, and something else to throw into that whole discussion that was another surprise on Friday, I mean, wages were surprising on Friday as well, right, that they were a bigger increase than estimated. The economists' forecast was for wages to actually have fallen year over year because we are seeing more gains in jobs at the lower end of the wage spectrum.

So you got to throw that wrench in the works as well as we try to game out what the wage increases are going to look like this year. If the preponderance of jobs that were lost were lower wage jobs, then when those jobs are added back into the economy, even if they are at a higher wage than before, they are going to have less of an upward effect on the overall level of wages. So that's going to be something that we need to track as this all unfolds as well.

MYLES UDLAND: Yeah, and, again, base effects, everyone's favorite-- all economists' favorite term is base effects. And so, we get to-- I don't know if there's been a Yahoo U on that yet. But if Brian Cheung is watching-- another honorable mention at the [? Sabu ?] Awards, we should mention in the explanatory category. If Brian Cheung is watching, I hope he will do a Yahoo U on base effects coming up.