Thank you for this analysis. In my industry (transportation infrastructure) we’re seeing a lot of delayed or canceled RFPs, which will cause a delayed reaction of reduced demand for engineering and construction labor. But it’s a bit complicated: in the long term I imagine much of the work will eventually get done, just delayed. Some of the near term problem is a supply concern: state and local governments worried that tight labor supply will cause higher bid prices and lower industry capacity (fewer bids). In the long term both the supply problem and the delay (in addition to tariffs of course) cause higher costs to taxpayers.
I am not a transportation expert by any means, but you do not mention the role of federal dollars which seems to be omnipresent in transportation projects. I suppose it might make a difference if you live in a "red" or "blue" state, but the net effect of cutting back federal expenditures on transportation has to have some ripple effects.
Thank you, Claudia! Putting the numbers in perspective is quite helpful.
I would say that the firing of the BLS Director goes deeper than many folks are saying. Changing out the leader because of some pretense is something that many institutions can handle. What is of greater concern is the relentless and coordinated attacks on trust. The effectiveness of our institutions and our democracy depends on trust.
For some reason Americans don’t know when certain developments occurred. So the internet boom actually happened closer to 2010 but people conflate the dot-com bubble with the actual economic benefits of the internet/iPhone. The China Shock happened right before the internet boom while Americans conflate NAFTA with the China Shock/globalization. Anyway, my point is 2002-2012 is one of the worst economic periods in American history and two major developments that were supposed to make the American economy stronger actually made our economy not just weaker but we had a lost economic decade!?! 1992-2001 was one of America’s strongest economies and honestly I used computers more in the 1980s than 1990s! People thought a desktop was a glorified typewriter before Y2K.
Boomers didn’t start turning 65 until 2011 and it’s not just Trump that is working past 80. So the union membership/manufacturing employment peaked in 1979 (btw, no Trump supporters want a return to 1979 even though that is apparently the economic period that had the most manufacturing jobs) and so many of those boomers with pensions would have been retired or on easier second careers. So boomers are significantly healthier than the generations that came before and so “peak boomer” should have been closer to 2008 than 2000 but 2008 is when the economy was crashing.
Ahhh, Tr__p is working? Doubtful that he has ever soiled those hands of his. Tr__P has not worked a day in his life where he had to worry about the job he has and whether he will be kept on a job.
This is mostly the problem. He does not know and he does not care if he knows.
Gene Frenkle: ”2002-2012 is one of the worst economic periods in American history” - ask George W Bush and his AIPAC-advisors of whom the #1 was his ”Vice-Defense Secretary” (not sure of the professional title, but he was the ”second defense minister”), Paul Wolfowitz. So you see where the focus of America of that period was. The wellbeing of the Americans was not an important subject at the leaders meetings. Neither did America care much of the international laws et rules. America was pushed by its baby to destroy nations in the Middle-East. And declared "war on terror" i.e. give itself freedom to act as a terrorist against the whole world. By the time, in the wake of this hatred politics, the European extrem right wing politicians and mouvements felt a renewed "raison d'être". And other countries (inclusive the baby), have now no reason to respect any international law. We are back to the primates' jungle.
I would look to Greenspan and his irrational exuberance.
"excessive and unwarranted enthusiasm in markets, often leading to inflated asset prices and speculative bubbles. It describes a situation where investors, driven by emotions and a desire for quick profits, ignore fundamental values and overestimate potential returns while underestimating risks."
Pennies on the dollar was the security until Goldman Sachs called in on AIG to ante up on CDS and the market was coming apart. Goldman (and other banks) called for more collateral from AIG to cover their potential losses on these swaps. They could not ante up. How quick we forget the history.
My theory about 2001-2008 is that energy prices were an issue in 2000 and then the mild recession and 9/11 delayed an inevitable energy crisis. So Bush/Cheney were looking for an excuse to depose Saddam because of the huge oil reserves of Iraq. So it’s not a coincidence the high energy prices led to 4 years of elevated CPI that peaked at 5.6% in July 2008 that put pressure on the subprime consumers. Oh, and Bush/Cheney had a huge success that most Americans don’t know about—Qatar LNG export infrastructure which was an important aspect of their plan to supply America with cheaper energy.
I think George W Bush is the worst president in history…worse than Buchanan because Bush inherited a very strong America while Buchanan inherited a dumpster fire. That said, Qatar is a Bush success with Tillerson having taken the lead and invested $250 billion into it 20 years ago when that was a lot of moolah! The great irony is that I had friends in the energy industry that worked for Tillerson and they were globetrotting trying to find new energy sources when 20 miles west of Houston was more oil and gas than they found in the rest of the world!?! Oh well, maybe their kids picked up a second language! 😉
1- I guess it is a Trump effect. 1st at his election, 2nd his protectionist custom fees (economic war to the whole world).
2- The dark clouds of all wars around and...
3- The genocide a live
4- The already low growth, of which the deep structures changed to a more speculative economics, make the economy more difficult to revive and relaunch.
5- These factors all together make investments nearly impossible. Even banks do not know how to handle the economic war: paus-bargaining-sanctioning-paus again, and redo the same process in cycles again and again.... - nothing is stable anymore. No visibility for any investment. No one is secure, not even the "experts" of banks. The exports are affected - totally canceled.
The US is in the process of deporting literally millions of people. Filling the jobs those people held slows the creation of new jobs. Since there are fewer people, there is less need for overall job growth.
Thanks for the time, effort, and wisdom you put into this, Dr. Sahm. I've read a few reports on this topic since last Friday. This seems to me to easily be the most clearly thought out and written one I've seen. I especially was struck by how one's view of subtle details in the current labor force makeup has serious implications for how the Fed responds. I then noted your closing comment on how the Fed will be carefully looking at the data at their next meeting. In light of Trump's firing of the BLS chief, that was not a reassuring thought. :-)
Unfortunately, Trump's silly shortsighted decision to get rid of the head of the BLS makes in my opinion any labor market report from here on forward very difficult to trust. Trump has nobody to blame but himself. His silly policies from tariffs to mass deportations have led to unnecessary supply shocks to the downside and he thinks for whatever reason that rate cuts will save him. It won't.
Is there peer reviewed studies that validate this claim. No talk of those no longer counted in the labor force and if the premises that growth is slowing due to less immigration, why are those long term unemployed re-entering. A topic completely untouched in this article…
COLA went the way of the Dodo long ago ago. COLA contributed to the spiral but employers are not responsive to cost of living needs for employees in this day and age.
Lots of state minimum wages seem to go up automatically with CPI or other inflation measures. Some of the most salient and important expenses - childcare, groceries, prepared food - are provided by workers getting paid at or near the minimum wage. Minimum wages may also impact shelter costs as workers packed four to a room may decide to live it up only three workers to a bedroom in housing markets with inelastic supply
I also request for insight into inflation data and what kind of lag is there. People were saying that shelves will be empty and prices will be greatly distorted by tariffs. Undoubtedly, the tariffs are problematic but so far they have not fed into CPI. Also there are no significant shortages as earlier predicted. What's happening with inflation & prices?
And if inflation data starts to come bad, now it's possible that some heads will roll again in stats office.
Thank for the excellent analysis Claudia. I think the downward revision to state and local teachers also might have given us a clue to what happened in July with the surge in unemployed: non-entrants. Unemployed non entrants jumped nearly 39% in July, nearly a record if not for the early months of the pandemic. Of that surge in unemployed: non-entrants, 18-19 year olds (seasonally-adjusted by Haver) accounted for nearly 60% - again, record jump for that age cohort. At the same time 18-19 employment plunged nearly 10% over June/July - another historic move outside of the pandemic. Looking at the change in the unemployment rate for each age cohort from May to July, the 18-19 year old group jumped almost 3ppts, compared to UR for 20-24yr olds which was down 30bps and the UR for 25-plus (including prime age) which was flat from May.
Though I don't have a slam dunk case - my sneaking suspicion is that high school graduation for a sizeable population group (perhaps in a disaster declared area in a large state) was delayed just beyond the June survey week, which had the effect of not only distorting the initial June state and local teachers print in the establishment survey (subsequently revised down by 109k), but also the July unemployment rate - i.e. those graduates would have normally reported in June that they were previously not in the labor force (in school) but now looking for jobs but instead did so in July. Since the household survey also does concurrent seasonals but only for the current month's print and not the lagged prints until the annual benchmark, it's plausible this was a fluke of circumstances and the seasonal. To be sure, this just might also just be one of the weird statistical quirks of the household survey, as well ;-)
I also find it interesting that establishment survey private payroll gains have averaged 43k across June/ July vs 100k Jan- May. The 57% drop off is nearly identical to what happened in 2024 when private NFP gains averaged 138k Jan - May and then dropped to 53k Jun/July. In addition, as you noted, the immigration crackdown could easily be depressing breakeven payroll gains to sub 50k.
My take is that this simply reflects the same low hiring / low firing dynamics that have been in place for some time. Better to average the June/July URs which when you do so gives 4.18%, below the May level of 4.24. In short, as you rightly pointed out - there's no smoking gun in the data that definitively points to the recent slowdown being purely demand driven or suggests that the balance of risks to Fed's employment mandate has materially changed with the July employment report. Not saying that there aren't risks, and some aspects of ADP worry me - like the recent drop in health care hiring - but from a policymaker standpoint, if you said in May labor market was "solid" though uneasy equilibrium, what's different now - a couple of payroll prints where the 90% confidence interval is +/- 136k on any given month?
Great article Claudia! I have subscribed to you! Please do subscribe back! I write about financial markets and macroeconomics! So we got some stuff in common. Let’s help one another build and create. I look forward to more of your literature! 👌🤝
Thank you for this analysis. In my industry (transportation infrastructure) we’re seeing a lot of delayed or canceled RFPs, which will cause a delayed reaction of reduced demand for engineering and construction labor. But it’s a bit complicated: in the long term I imagine much of the work will eventually get done, just delayed. Some of the near term problem is a supply concern: state and local governments worried that tight labor supply will cause higher bid prices and lower industry capacity (fewer bids). In the long term both the supply problem and the delay (in addition to tariffs of course) cause higher costs to taxpayers.
Very good point on delayed timing. That’s often the effect of uncertainty.
Very good point on delayed timing. That’s often the effect of uncertainty.
I am not a transportation expert by any means, but you do not mention the role of federal dollars which seems to be omnipresent in transportation projects. I suppose it might make a difference if you live in a "red" or "blue" state, but the net effect of cutting back federal expenditures on transportation has to have some ripple effects.
Thank you, Claudia! Putting the numbers in perspective is quite helpful.
I would say that the firing of the BLS Director goes deeper than many folks are saying. Changing out the leader because of some pretense is something that many institutions can handle. What is of greater concern is the relentless and coordinated attacks on trust. The effectiveness of our institutions and our democracy depends on trust.
For some reason Americans don’t know when certain developments occurred. So the internet boom actually happened closer to 2010 but people conflate the dot-com bubble with the actual economic benefits of the internet/iPhone. The China Shock happened right before the internet boom while Americans conflate NAFTA with the China Shock/globalization. Anyway, my point is 2002-2012 is one of the worst economic periods in American history and two major developments that were supposed to make the American economy stronger actually made our economy not just weaker but we had a lost economic decade!?! 1992-2001 was one of America’s strongest economies and honestly I used computers more in the 1980s than 1990s! People thought a desktop was a glorified typewriter before Y2K.
More about Baby Boomers hitting their stride at work and raising babies/buying homes than about technical advance?
Boomers didn’t start turning 65 until 2011 and it’s not just Trump that is working past 80. So the union membership/manufacturing employment peaked in 1979 (btw, no Trump supporters want a return to 1979 even though that is apparently the economic period that had the most manufacturing jobs) and so many of those boomers with pensions would have been retired or on easier second careers. So boomers are significantly healthier than the generations that came before and so “peak boomer” should have been closer to 2008 than 2000 but 2008 is when the economy was crashing.
Ahhh, Tr__p is working? Doubtful that he has ever soiled those hands of his. Tr__P has not worked a day in his life where he had to worry about the job he has and whether he will be kept on a job.
This is mostly the problem. He does not know and he does not care if he knows.
Gene Frenkle: ”2002-2012 is one of the worst economic periods in American history” - ask George W Bush and his AIPAC-advisors of whom the #1 was his ”Vice-Defense Secretary” (not sure of the professional title, but he was the ”second defense minister”), Paul Wolfowitz. So you see where the focus of America of that period was. The wellbeing of the Americans was not an important subject at the leaders meetings. Neither did America care much of the international laws et rules. America was pushed by its baby to destroy nations in the Middle-East. And declared "war on terror" i.e. give itself freedom to act as a terrorist against the whole world. By the time, in the wake of this hatred politics, the European extrem right wing politicians and mouvements felt a renewed "raison d'être". And other countries (inclusive the baby), have now no reason to respect any international law. We are back to the primates' jungle.
I would look to Greenspan and his irrational exuberance.
"excessive and unwarranted enthusiasm in markets, often leading to inflated asset prices and speculative bubbles. It describes a situation where investors, driven by emotions and a desire for quick profits, ignore fundamental values and overestimate potential returns while underestimating risks."
Pennies on the dollar was the security until Goldman Sachs called in on AIG to ante up on CDS and the market was coming apart. Goldman (and other banks) called for more collateral from AIG to cover their potential losses on these swaps. They could not ante up. How quick we forget the history.
Greenspan could have taken a different approach.
My theory about 2001-2008 is that energy prices were an issue in 2000 and then the mild recession and 9/11 delayed an inevitable energy crisis. So Bush/Cheney were looking for an excuse to depose Saddam because of the huge oil reserves of Iraq. So it’s not a coincidence the high energy prices led to 4 years of elevated CPI that peaked at 5.6% in July 2008 that put pressure on the subprime consumers. Oh, and Bush/Cheney had a huge success that most Americans don’t know about—Qatar LNG export infrastructure which was an important aspect of their plan to supply America with cheaper energy.
Are you possible from the same group people as P. Wolfowitz?
I think George W Bush is the worst president in history…worse than Buchanan because Bush inherited a very strong America while Buchanan inherited a dumpster fire. That said, Qatar is a Bush success with Tillerson having taken the lead and invested $250 billion into it 20 years ago when that was a lot of moolah! The great irony is that I had friends in the energy industry that worked for Tillerson and they were globetrotting trying to find new energy sources when 20 miles west of Houston was more oil and gas than they found in the rest of the world!?! Oh well, maybe their kids picked up a second language! 😉
My dear friend, you are holding a monologue.
Dialog is to answer, elaborate what is om the table.
1- I guess it is a Trump effect. 1st at his election, 2nd his protectionist custom fees (economic war to the whole world).
2- The dark clouds of all wars around and...
3- The genocide a live
4- The already low growth, of which the deep structures changed to a more speculative economics, make the economy more difficult to revive and relaunch.
5- These factors all together make investments nearly impossible. Even banks do not know how to handle the economic war: paus-bargaining-sanctioning-paus again, and redo the same process in cycles again and again.... - nothing is stable anymore. No visibility for any investment. No one is secure, not even the "experts" of banks. The exports are affected - totally canceled.
Idiot hack comments. Congrats on your stupidity
The US is in the process of deporting literally millions of people. Filling the jobs those people held slows the creation of new jobs. Since there are fewer people, there is less need for overall job growth.
Thanks for the time, effort, and wisdom you put into this, Dr. Sahm. I've read a few reports on this topic since last Friday. This seems to me to easily be the most clearly thought out and written one I've seen. I especially was struck by how one's view of subtle details in the current labor force makeup has serious implications for how the Fed responds. I then noted your closing comment on how the Fed will be carefully looking at the data at their next meeting. In light of Trump's firing of the BLS chief, that was not a reassuring thought. :-)
Unfortunately, Trump's silly shortsighted decision to get rid of the head of the BLS makes in my opinion any labor market report from here on forward very difficult to trust. Trump has nobody to blame but himself. His silly policies from tariffs to mass deportations have led to unnecessary supply shocks to the downside and he thinks for whatever reason that rate cuts will save him. It won't.
Tariffs
In that case, lower interest rates could boost demand and reduce the slack.
Is there peer reviewed studies that validate this claim. No talk of those no longer counted in the labor force and if the premises that growth is slowing due to less immigration, why are those long term unemployed re-entering. A topic completely untouched in this article…
I’ve read a number of articles on this subject and this is the first that outlines the seasonality v data collection issue. Thanks for that insight.
I have thought we might be hitting stagflation but will the shrinking of the workforce actually set off a wage/price spiral?
COLA went the way of the Dodo long ago ago. COLA contributed to the spiral but employers are not responsive to cost of living needs for employees in this day and age.
Lots of state minimum wages seem to go up automatically with CPI or other inflation measures. Some of the most salient and important expenses - childcare, groceries, prepared food - are provided by workers getting paid at or near the minimum wage. Minimum wages may also impact shelter costs as workers packed four to a room may decide to live it up only three workers to a bedroom in housing markets with inelastic supply
Thank you Dr Sahm for insight.
I also request for insight into inflation data and what kind of lag is there. People were saying that shelves will be empty and prices will be greatly distorted by tariffs. Undoubtedly, the tariffs are problematic but so far they have not fed into CPI. Also there are no significant shortages as earlier predicted. What's happening with inflation & prices?
And if inflation data starts to come bad, now it's possible that some heads will roll again in stats office.
Thank for the excellent analysis Claudia. I think the downward revision to state and local teachers also might have given us a clue to what happened in July with the surge in unemployed: non-entrants. Unemployed non entrants jumped nearly 39% in July, nearly a record if not for the early months of the pandemic. Of that surge in unemployed: non-entrants, 18-19 year olds (seasonally-adjusted by Haver) accounted for nearly 60% - again, record jump for that age cohort. At the same time 18-19 employment plunged nearly 10% over June/July - another historic move outside of the pandemic. Looking at the change in the unemployment rate for each age cohort from May to July, the 18-19 year old group jumped almost 3ppts, compared to UR for 20-24yr olds which was down 30bps and the UR for 25-plus (including prime age) which was flat from May.
Though I don't have a slam dunk case - my sneaking suspicion is that high school graduation for a sizeable population group (perhaps in a disaster declared area in a large state) was delayed just beyond the June survey week, which had the effect of not only distorting the initial June state and local teachers print in the establishment survey (subsequently revised down by 109k), but also the July unemployment rate - i.e. those graduates would have normally reported in June that they were previously not in the labor force (in school) but now looking for jobs but instead did so in July. Since the household survey also does concurrent seasonals but only for the current month's print and not the lagged prints until the annual benchmark, it's plausible this was a fluke of circumstances and the seasonal. To be sure, this just might also just be one of the weird statistical quirks of the household survey, as well ;-)
I also find it interesting that establishment survey private payroll gains have averaged 43k across June/ July vs 100k Jan- May. The 57% drop off is nearly identical to what happened in 2024 when private NFP gains averaged 138k Jan - May and then dropped to 53k Jun/July. In addition, as you noted, the immigration crackdown could easily be depressing breakeven payroll gains to sub 50k.
My take is that this simply reflects the same low hiring / low firing dynamics that have been in place for some time. Better to average the June/July URs which when you do so gives 4.18%, below the May level of 4.24. In short, as you rightly pointed out - there's no smoking gun in the data that definitively points to the recent slowdown being purely demand driven or suggests that the balance of risks to Fed's employment mandate has materially changed with the July employment report. Not saying that there aren't risks, and some aspects of ADP worry me - like the recent drop in health care hiring - but from a policymaker standpoint, if you said in May labor market was "solid" though uneasy equilibrium, what's different now - a couple of payroll prints where the 90% confidence interval is +/- 136k on any given month?
Thanks
More facts
Bring it 🇺🇸
Great article Claudia! I have subscribed to you! Please do subscribe back! I write about financial markets and macroeconomics! So we got some stuff in common. Let’s help one another build and create. I look forward to more of your literature! 👌🤝
Because rates are still high crippling small businesses from hiring and making investments
I think policy and tariff uncertainty are a greater contributor to the hold back in investment and hiring.
Further many corps are cash rich and investing in stock buy backs. The appetite for risk is very low right now.
Let's just hope that the data from now until the September meeting isn't cooked, although I wouldn't count on it.