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St. Louis Fed VP on labor market: ‘We will get back to where we were pre-pandemic’

Bill Rodgers, vice president and director of the Institute for Economic Equity at the St. Louis Federal Reserve, joins Yahoo Finance Live to discuss the May jobs report and what it means for the U.S. economy going forward.

Video Transcript

BRIAN SOZZI: We continue to dig into this morning's May jobs report. Let's bring in vice president director of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis, Bill Rogers. Bill, always great to get some time with you. What are your first takeaways on the report?

BILL RODGERS: Well, I think it's a very good report. It's a nice solid report in the sense of the job creation numbers over the month were strong, which I think will continue over the next few months. And so we will get back to where we were pre-pandemic.

I also like the slight tick up in labor force participation because that's where I feel that when we get back to pre-pandemic, I'll celebrate, but I also don't want to celebrate that we're at full employment. We won't be at full employment even when we get back because prior to the pandemic or just-- the pandemic started, we had about 33%, 34% of American households who would have difficulty or could not have paid an unexpected $400 bill. And that's not what we want to be.

BRAD SMITH: Bill, Brad here. Always a pleasure to speak with you. And particularly continuing to track some of the inequities in the data as well, even as we look among the unemployment rate right now that sits at 3.6%, you look across some of the worker groups, and ethnically, for Black Americans, it's at 6.2%. For Hispanic Americans, that's at 4.3%. What will it take to start to narrow that gap?

BILL RODGERS: Well, that's a great question. And I have a blog post that came out a few weeks ago that really-- that tried to assess that and particularly focusing on the role of a strong economy. And what we found was that young, less educated minorities who are about 16 to 24 years of age, that they do the best in terms of improving absolutely, but also beginning to narrow that gap if they are in states or communities where the unemployment rate has been not only below 4%, but below 4% for a sustained period of time.

And we found that that was around 12 to 14 months, where you began to see not only everybody recovering from the pandemic, but the young minorities who are at the lowest rung of the job ladder begin to narrow relative gaps. And that's in employment. So we're going to continue to monitor that. But that's a good news. And that's another reason why it's so important that we continue to have a strong economy, continue to have an expansion that we've been-- have had as we came out of the pandemic.

BRAD SMITH: You know, Bill, further along that, though, there's also this kind of added thread of the number of employed persons that, essentially, are people of color that are in the services industry, that are going into jobs.

And that comes back to wages as well in this conversation because of the impact of the real wages that they're actually going to see because of the need to go into an office, to spend on gas to get somewhere, and not being able to work from home or work virtually to still make sure that they are getting the paycheck at the end of the day, too. And so, where we're seeing that issue kind of exacerbated, is there a fix that can be put in the near future?

BILL RODGERS: Well, there's no silver bullet. I had written a piece for the Russell Sage Foundation [INAUDIBLE] a number of years ago, where we took on this very issue. And a lot of people like to pin you down and say, well, you know, what's the one thing you would do? And I get it because there's only a fixed amount of resources. But these are gaps or differences or disadvantages and challenges that these particular groups have faced over decades. And so, it didn't emerge overnight.

And what that means is you have to do work in education and training, working on improving soft skills, but you also have to focus on employers. And one of the great things about this economy, by running an economy so warm, that it has forced-- it forces employers to rethink their attitudes and their perspectives about who's employable because they need to get people into the workplace.

And then, third, there's a whole set of policies that can be done, such as raising the minimum wage, and that there's strong evidence to show or suggest that some of the wage growth that we've been seeing, particularly in leisure and hospitality, it is a result of trying to attract and retain employees. But there's also this institutional effect.

And then the pandemic relief and recovery efforts really showed-- so, you know, that those kinds of efforts can make a difference and they do make a difference. And then, finally, just using those-- again, the policy lever that, overall, in these different buckets really can help out. And it's been shown to help out.

BRIAN SOZZI: We've seen layoffs-- layoff announcements really pick up from very large companies over the past week or so. Is it fair to still call the US labor market tight?

BILL RODGERS: Most definitely. We haven't had an unemployment rate at this level for a very, very long time. And also, just to my earlier point about it being sustained, it's tight, but are we at a full employment level? No, because for those group of young men and women that I've focused on in that recent blog, their unemployment rate is still around, I think, 14% to 15%, we estimate it, which is not full employment to me.

BRAD SMITH: It comes with the reminder here that those that are employed and even those that are unemployed, they are all consumers, too, in a consumer driven economy that we live in. I mean, at the end of the day, if you do see consumers trading down or picking and choosing where they are spending, they're spending strategically. In the face of some of the recessionary warning signs that they may be feeling, how does that impact even the opportunities for employment going forward if we do see, to Sozzi's point, some of those jobs either be pulled back or the hiring freezes instituted?

BILL RODGERS: Yes, I was in Memphis over the last few days, meeting with our bank boards and meeting with a variety of community stakeholders. And one of the conversations I was having with folks was talking about what we call-- our estimates of we generally call Black buying power. And just even from Memphis, if we were to narrow or close the income gap between Blacks and whites there, we were estimating that's an additional $5 billion in buying power that could stay in the community and be spread out to households, who would then kind of consume and then also spread-- and it's going to be spent in these businesses.

And so, it's one of our four cases for equity that I've been trying to talk about and educate people on that when we do work to lessen these inequalities, whether it be in jobs or wages, that they help-- they can help the corporate bottom line.

And then also being at the National Civil Rights Museum, which was a, really, honor, and just referencing some of the work that Dr. King had written-- had done in 1966 where he's talked about that this comment-- made comments about how job creation is harder than actually voter roll creation. And he's talking about job quality. But it comes back to the essence of your question, right, that, again, we have to continue this expansion. That's the first ingredient to helping and addressing these equity issues you raise.

BRIAN SOZZI: And Bill, when you talk to these leaders in business and other contacts in your network, do you get the sense they are planning for a recession?

BILL RODGERS: Not right now. Not right now. I think-- and this is really important because so much of the next direction we go really does-- excuse me-- center around people's expectations. I think right now, for the most part, people feel-- are reporting and sharing that some of the professionals is like, wow, this economy is so strong. Why is it that we still can't get these other young people into the labor force? That's still the big question.

BRAD SMITH: Vice president and director for the Institute for Economic Equity at the Federal Reserve Bank of St. Louis, Bill Rodgers, always a pleasure to speak with you. Thanks so much for joining us this morning.

BILL RODGERS: Yeah, gentlemen, thanks for having me.