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‘We will need a more sustained recovery’ before tech, finance sectors start hiring again: Indeed Chief Economist

Jed Kolko, Indeed Chief Economist joins Yahoo finance’s Zack Guzman to discuss his outlook on the labor market as we move closer to the 2020 presidential election, and the coronavirus pandemic continues.

Video Transcript

ZACK GUZMAN: Just want to highlight that we are seeing continued strength here among the major indices here as the Dow hits a new session high following the optimism shared by Speaker of the House Nancy Pelosi that a deal could get done by the end of today. Right now, we are seeing the Dow up 312 points. We'll continue to track that and bring you updates as we get them.

Of course, that would be a shot in the arm for a lot of these hard-hit sectors, perhaps some of those restaurants and other travel businesses tied back to a large hit that we've seen play out in this pandemic. They've been dependent on PPP funds to keep their businesses afloat. We've seen a lot of jobs in those sectors hardest hit lost since this all began back in March.

So I want to dig in to the data a little bit more in terms of where this recovery sits. We continue to see jobs not see the same strength of recovery we saw earlier back in the summer months. So joining us now for more on that is Jed Kolko, Indeed's chief economist.

And Jed, I know you guys track this very closely in terms of where you're seeing job postings head to. So talk to me about what you've seen week over week as it still continues to lag the strength we saw before this pandemic hit.

JED KOLKO: Sure, there's still a long way to go in this recovery, Zack. What we see on our site is where job postings are. Right now, as of about a week and a half ago, job postings are down around 17% compared to the trend last year. Now 17% is a big number. It's certainly better than where we were at the low point, which was early May. Then, job postings were down about 39% from a year earlier.

So we are a little bit more than halfway back to the baseline. But progress has slowed. There was more rapid improvement over the summer. Now in the fall, the climb back has gotten slower. A lot of the easier gains have already been chalked up. And we're in for a longer period of recovery now.

ZACK GUZMAN: Yeah, that was going to be my question because we have seen kind of this jump back in terms of that short-term boost in a lot of the hospitality jobs when you think about restaurants being closed, lockdowns being lifted, and what jobs would be immediately brought back.

But when you look at those longer term jobs to be recovered, where are you seeing the biggest pain points there, and what needs to be done to bring those back? Because a lot of those might not even be tied to necessarily a business reopening or not. How should people be looking at that?

JED KOLKO: There are two kinds of sectors where the recovery and job postings has been much slower. The first is hospitality and tourism and anything that depends on large crowds of people coming together. Arts and entertainment, sports, those sectors are still down by almost 40% or even 50%, in the case of hospitality and tourism. Those are really sectors whose recovery, it's going to depend on what happens with the virus. Until then, it's hard for people to feel comfortable traveling long distances and being in crowds.

The other kind of sector, though, where job postings are still down significantly from last year's trend, are some of the higher wage sectors like tech and finance. Now these aren't sectors that have had as many layoffs or shutdowns, of course. These are sectors where lots of people can work from home.

But they're also sectors where it's more expensive to hire and fire. These are sectors that don't ramp up hiring as soon as a lockdown ends. These are sectors where hiring takes more time. It's more expensive. And they're making longer term bets on the future. So we will need a more sustained recovery in economic confidence before we see those sectors really start hiring again.

ZACK GUZMAN: Yeah, and you talk about those sectors and which states really depend on travel and hospitality as well. We got the update from the Bureau of Labor statistics in terms of state unemployment. It generally lines up with what we see reported weekly in insured unemployment claims as well, depending on which measure of unemployment you want to look at.

But still, the themes are the same. Hawaii leading the nation, when we look at the rate there, incredible unemployment rate of 15.1%. followed by Nevada at 12.6%. So I mean, we know that these economies are heavily levered to travel. You think about the Strip or Hawaii, Hawaii just recently reopening to travelers who can show a negative COVID test.

So what does that maybe say about how those states might recover? Because there is still a big question mark about whether or not people even want to travel to the Strip or Hawaii during all this.

JED KOLKO: Yeah, the places where people travel to from long distances ar4e those that are suffering-- Hawaii and Nevada. Though there are other tourist destinations where we see job postings near or back to last year's levels, the types of travel destinations people can drive to like the Outer Banks of North Carolina, the Great Smoky Mountains in Tennessee. Those are vacation areas that have actually done fairly well this season, as people are substituting shorter distance, more affordable trips for some of the longer ones.

The other place, though, kind of place that really is struggling in this recession are big cities, cities that are dependent on some of those harder hit industries, but also cities where more people work in jobs that can be done through home. In places like New York and San Francisco Bay Area, local services, retail restaurants are really suffering in part because people are able to work at home and insourcing a lot of those activities for themselves.

ZACK GUZMAN: Yeah, and that's kind of the question mark about these big cities. You talk about some people coming out and saying that, look, New York's never going to come back to what it was. San Francisco is never going to come back to what it was.

And that might be true if you believe these companies are fully shifting to work from home permanently. Because who would want to pay the rents that are that high if you can have a better place to live somewhere else? What are your thoughts on that, though, because, obviously, the recovery here across the country is going to be tied to seeing some strength come back in some of those major metropolitan areas.

So in terms of forecasts, clearly, the recovery has moved ahead of even the forecasts that we've seen from the Fed. When it comes to what you guys are projecting at LinkedIn here, talk to me about where you see unemployment rates going if we do continue this kind of slow and steady pat moving forward.

JED KOLKO: Well, I think the question of remote work and whether people will leave big cities is a crucial one. I do think, of course, more people will work remotely permanently after the pandemic than before the pandemic. But a lot of that remote work might be having to go to the office just once a week or every other week.

That could mean moving to a more affordable suburb where you can have a commute that's manageable if you're only doing it once a week, but not necessarily moving across the country or to the mountaintop or to the island. So it may be that we see some shift of people who aren't living in some of the most expensive neighborhoods, but that doesn't necessarily mean that these rich, large labor markets will see everybody flee.

It also depends on where people expect their next job to come from. Even if your current job might let you work remote long term, you may still want to be within striking distance of where your next job might be, which might be one where you have to be in the office, and therefore, you want to stay commuting distance from that big downtown.

ZACK GUZMAN: Yeah, and I also wanted to ask you on that line of questioning there in the latest in your guys' latest report here from Indeed, looking at the gap, I guess, between high paying jobs and low paying jobs. Because a lot of those might be centralized in companies or cities where, you know, you've got to be paid more to even survive in them. What does that gap look like in the recovery when Indeed breaks the data out to look at where that recovery is based?

JED KOLKO: So we are seeing that a lot of low wage job postings have recovered better than high wage job postings. A lot of that has to do with the fact that the types of sectors that will ramp up their hiring as soon as demand recovers are sectors like restaurants and retail. They make faster hiring decisions than some of those higher wage sectors like tech and finance that want to wait longer to see what's happening with the economy before they start ramping up hiring again.

ZACK GUZMAN: I mean, it's interesting to see all this play out. Obviously, not just the sector differences, the state differences, but as you're saying there, the recovery across income levels also quite different. But Jed Kolko, Indeed chief economist, appreciate you walking us through all that. Be well.

JED KOLKO: Thanks very much, Zack.