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The May jobs report is 'exactly what the Fed should want to see': Economist

Julia Pollak, chief economist at ZipRecruiter, joins Yahoo Finance Live to discuss the May jobs report and how the Federal Reserve may respond.

Video Transcript

JARED BLIKRE: Welcome back. The May jobs report out this morning. The economy adding 390,000 jobs and the unemployment rate holding steady at 3.6%. Joining us now is ZipRecruiter chief economist Julia Pollak. And Julia--

JULIA POLLAK: Good day.

JARED BLIKRE: --just your quick comments on-- and I guess, any hot takes-- on this morning's numbers. The headline number coming in a little bit strong and some of the other numbers a little bit weaker than expected.

JULIA POLLAK: I think overall, this is an extremely encouraging report. This is exactly what the Fed should want to see-- solid, strong wage-- job growth, which means they'll be able to continue whacking inflation without pushing us into a recession, and wage growth kind of slowing a little bit, decelerating just a touch, with wage growth particularly in those industries like leisure and hospitality and transportation and warehousing, where it's been above 10%, double digits for several months, easing back down a little bit.

SEANA SMITH: And Julia, at ZipRecruiter, what are you seeing personally? Because we've had a number of companies saying that they're either freezing hiring or laying off workers. Yet, they're still-- the job openings are hovering just below that record number that we recently got, right around 11 million. Are employers able to find the workers that they need, and are workers able to find the jobs that they want?

JULIA POLLAK: So, overall, businesses are hiring very quickly, both to replace very, very rapid turnover, more rapid turnover than they've ever seen, and to expand headcount. So most companies still tell us they want to expand headcount. And that's what they plan to do.

They are being held back by labor shortages, which are a massive, massive challenge for them. But we saw in today's report some encouraging signs that labor force participation is coming back. Even older workers, who left in droves, are starting to recover. Labor force participation is almost fully recovered, both among teens and among prime age workers. And those 55 plus workers, those older workers, are slowly coming back.

JARED BLIKRE: I want to shift over to inflation. And of course, this is one of the Fed's dual mandates here. We just talked about labor. The other is inflation. And we're going to get CPI prints next week. I believe the Street is expecting them to hold-- at least the headline number to hold above 8%. Your thoughts on where inflation is heading over the coming quarters.

JULIA POLLAK: Yes, so the last inflation report showed us that inflation came down in the most volatile categories, but core inflation rose, and it picked up in services, which, of course, are a much larger share of the economy than the goods sector. So there are still reasons to be worried.

But hopefully, with labor supply picking back up, with legal immigration picking back up, all the workers who've been sitting there, waiting for their visas to come in, the staffing agencies who have recruited them, and who've had a terrible time because they've been held up, there are signs now that some of those constraints are easing. And hopefully, that will reduce the pressure and take the heat off both prices and wages just a little.

SEANA SMITH: Julia, you mentioned the fact that older workers are returning to the workforce. How much of that, do you think, has to do with the fact that we are seeing inflation, that people are spending more just in terms of their everyday life, whether they're going to the grocery store or filling up their gas tank? Has that been a massive driver, as we see this uptick in older workers?

JULIA POLLAK: So I think there are both push factors and pull factors drawing older workers back into the labor market. On the one hand, the older workers we know often un-retire and come back to work, not just because of financial concerns, but because they want the stimulation, the activity, the excitement, the social interaction. And when the conditions are right, when wages are growing fast enough, they come back to work. And of course, the huge increase in remote opportunities and more flexible opportunities is very, very attractive to them.

Of course, they are being squeezed by inflation. But we shouldn't forget that many retirees who live on a fixed income do see that income adjust. Social Security checks are adjusted according to the cost of living. And so, yes, while the gap does widen for a while before those adjustments are made, they will be made whole, to some degree.

JARED BLIKRE: Yeah, those [INAUDIBLE], hopefully they are made whole there. But I want to shift our attention to the housing market, where we've seen things slowing down a bit, but not really when it comes to prices. Also seeing mortgage rates coming off of multiyear highs. What are your thoughts on the housing market going forward?

JULIA POLLAK: Well, there still is a shortage of supply. This is just in another market in the United States where supply is the main constraint. And that's why even as demand has come down a little bit, prices have continued to go up. I think the labor market will be very similar in that way that you would have to shave demand down substantially to see some kind of relief on prices. The overall issue with housing, it's just that we haven't built enough units. And we still are held back by rules that make it almost impossible to do so in some places.

SEANA SMITH: Julia, real quick, who is hiring? Because you're out there talking to the employers right now, who are looking to add to their headcount. What sectors and where are we finding the most opportunity?

JULIA POLLAK: Well, in each jobs report, there's something called the diffusion index, which shows you the breadth of job gains. And it has been enormous lately. It has been, what, 69% in today's report. It's been above 70 in recent reports. That means that the vast majority of industries are adding workers. If you look through sort of 800 industries, it's difficult to find ones that are losing jobs. And most of the ones that have lost jobs have lost 1,000 or 2,000, just a handful. So almost every part of this economy is hot and offering new and exciting opportunities.

In the industry that's in the headlines for layoffs, that is actually the industry where we see the fastest growth in job openings. So tech. Tech far from showing an aggregate decline in employment, added 13,100 jobs in the last jobs report, and what we see happening, any time there is news of a layoff or a hiring freeze announcement, we see recruiters across the country looking up the employees of those companies and aggressively reaching out to them to recruit them. So there is still a shortage of tech talent and way more demand than supply.

SEANA SMITH: All right, Julia Pollak, great to have you. Thanks so much for joining us today.