Fed officials will eventually decide that they have raised interest rates enough. How they make that call is of great importance, and the Fed should share its thinking.
I agree. The Fed is an “independent” department that should be more transparent and communicate clearly so that the public can understand its rationale. Instead, we get plain-spoken comments from the Minneapolis Fed Governor such as how he’s “going to teach Wall Street a hard lesson.” That strikes me as in productive, as well as an expression of ego.
We have a solution to the coming long-term shortage of labor:
The U.S., far and away, imprisons a higher percentage of its people when compared to other advanced economies. Instead of complaining about a lack of workers or qualified workers, prisoners who pose no threat to society should be treated for behavioral problems and trained for employment that best fits their aptitude. The amount of money spent to imprison people is far greater than releasing them into a system of counseling and skills training. I’ve hired and worked with former felons. Many are smart and hard-working. People on a variety of spectrums (e.g., ADD, Asperger’s, Autism) have been hired and trained to work in all levels of employment. The shortage of legitimate labor required to keep growing the economy exists in the prison system -- and we’re paying through the teeth to keep it there?
I completely agree but that’s an argument that loses by double digits in polls to “tough on crime”. Our prison system is a disgusting waste of human capital and a transfer of money from the public sector to private contractors.
I had just shared this article on Twitter and yes I agree that the fed could be more transparent regarding rate hikes, but you also have to give the jobs market some credit for solid job growth despite the aggressive rate hikes from the federal reserve. I also agree with one of your previous articles from before in which if you want to solve this so-called shortage of workers then you solve it with labor, not rate hikes. Better pay, more benefits, and hours would go a long way towards bringing those workers back, especially since so many have left due to covid. I'm excited to read parts two and three coming up.
We still live in the real world where "the best way to solve a labor shortage is with more workers, not fewer customers." No post on these matters would be complete without reflecting how the federal government as a whole, in policy and program, is increasing the labor supply. Inaction, as in immigration puts more responsibility in the hands of the Fed. Programs and action as in CHIPS, IRA etc produce domestic jobs (? how many, how quickly) and have ? effect? This all must be on the table now.
We’d get better information from the Oracle of Delphi. The Fed Governors act like the Doges of Renaissance Venice. Who could forget the obfuscation of Alan “The Maestro” Greenspan? Financial reporters were so desperate for clarity some judged what Greenspan was going to to by looking at the thickness of his briefcase to see if it was overstuffed or understuffed with papers/files. This is absurd. Millions of jobs and small businesses hang in the balance.
Claudia, I have heard that there is the unemployment rate and another rate referred to as something like "labor pool participation rate". My understanding is unemployment is a measure of those who are looking for work but can't find it and where as the actual labor pool may include those designated as "unemployed" but also those who are unemployed but not currently looking for work for one reason or another. If my understanding is correct and there is a larger pool out there once we include those not working and not looking for work, what policy suggestions would you make to lure more people into the active labor pool? And as always, correct any misunderstandings I present.
To be in the labor force you either just have work or be looking for work. It is true that we need to bring people back into the labor force. It’s currently smaller than pre-Covid due in large part to retirements. We do not have to bring those people back: there are plenty of other people who have been discouraged from working.
1) Why doesn’t the Fed use U-6 from the BLS which includes part-time (but seeking ft) and discouraged workers? January was 6.6%
2) How are job openings measured? With 20 years in the corporate world, I can say that the hiring (demand) is often very disconnected from the posting. Posting job 30 years ago had a cost. Now the cost is zero. So, there are likely many postings that are placeholders (for budget or next year). There are also postings, often for sales and support that never get taken down.
1) U-6 and U-3 tend to move together, so can use U-3 and get a similar picture. 2) deserves its own post. I’ll work on that soon. And then would love to hear your reactions.
My hunch: software used by 75% of employers is part of the 'tight labor market' and explains a good portion of the 'we can't find good candidates'.
2) Some companies keep posts up or repost jobs without actual intent to hire. Example of a small company where I am friends with the owner: https://dailynutmeg.com/jobs/
shows 3 job postings. I called my friend and asked if he was hiring. He replied, "No. If an amazing candidate applies, we might consider, but not actively seeking."
The only industry specific tightness that I have personal knowledge of is the food service industry problems related to local/state restrictions put in place during the pandemic.
I agree. The Fed is an “independent” department that should be more transparent and communicate clearly so that the public can understand its rationale. Instead, we get plain-spoken comments from the Minneapolis Fed Governor such as how he’s “going to teach Wall Street a hard lesson.” That strikes me as in productive, as well as an expression of ego.
We have a solution to the coming long-term shortage of labor:
https://www.prisonpolicy.org/reports/pie2022.html
The U.S., far and away, imprisons a higher percentage of its people when compared to other advanced economies. Instead of complaining about a lack of workers or qualified workers, prisoners who pose no threat to society should be treated for behavioral problems and trained for employment that best fits their aptitude. The amount of money spent to imprison people is far greater than releasing them into a system of counseling and skills training. I’ve hired and worked with former felons. Many are smart and hard-working. People on a variety of spectrums (e.g., ADD, Asperger’s, Autism) have been hired and trained to work in all levels of employment. The shortage of legitimate labor required to keep growing the economy exists in the prison system -- and we’re paying through the teeth to keep it there?
I completely agree but that’s an argument that loses by double digits in polls to “tough on crime”. Our prison system is a disgusting waste of human capital and a transfer of money from the public sector to private contractors.
I had just shared this article on Twitter and yes I agree that the fed could be more transparent regarding rate hikes, but you also have to give the jobs market some credit for solid job growth despite the aggressive rate hikes from the federal reserve. I also agree with one of your previous articles from before in which if you want to solve this so-called shortage of workers then you solve it with labor, not rate hikes. Better pay, more benefits, and hours would go a long way towards bringing those workers back, especially since so many have left due to covid. I'm excited to read parts two and three coming up.
I give the labor market a lot of credit!
I stand corrected. The labor market does deserve a lot of credit.
I agree - the Fed needs to be more transparent and communicative of its decisions.
We still live in the real world where "the best way to solve a labor shortage is with more workers, not fewer customers." No post on these matters would be complete without reflecting how the federal government as a whole, in policy and program, is increasing the labor supply. Inaction, as in immigration puts more responsibility in the hands of the Fed. Programs and action as in CHIPS, IRA etc produce domestic jobs (? how many, how quickly) and have ? effect? This all must be on the table now.
Tremendous insights Claudia. Thank you. No wonder Kelton recommends people to subscribe to you.
We’d get better information from the Oracle of Delphi. The Fed Governors act like the Doges of Renaissance Venice. Who could forget the obfuscation of Alan “The Maestro” Greenspan? Financial reporters were so desperate for clarity some judged what Greenspan was going to to by looking at the thickness of his briefcase to see if it was overstuffed or understuffed with papers/files. This is absurd. Millions of jobs and small businesses hang in the balance.
The Fed has come a very long way from Greenspan. Even so. plenty of room for improvement.
Claudia, I have heard that there is the unemployment rate and another rate referred to as something like "labor pool participation rate". My understanding is unemployment is a measure of those who are looking for work but can't find it and where as the actual labor pool may include those designated as "unemployed" but also those who are unemployed but not currently looking for work for one reason or another. If my understanding is correct and there is a larger pool out there once we include those not working and not looking for work, what policy suggestions would you make to lure more people into the active labor pool? And as always, correct any misunderstandings I present.
To be in the labor force you either just have work or be looking for work. It is true that we need to bring people back into the labor force. It’s currently smaller than pre-Covid due in large part to retirements. We do not have to bring those people back: there are plenty of other people who have been discouraged from working.
Thanks Claudia.
How do we get this message across loud and clear to this who make and influence policy?
Keep getting the word out. That’s what I do …
Two questions:
1) Why doesn’t the Fed use U-6 from the BLS which includes part-time (but seeking ft) and discouraged workers? January was 6.6%
2) How are job openings measured? With 20 years in the corporate world, I can say that the hiring (demand) is often very disconnected from the posting. Posting job 30 years ago had a cost. Now the cost is zero. So, there are likely many postings that are placeholders (for budget or next year). There are also postings, often for sales and support that never get taken down.
1) U-6 and U-3 tend to move together, so can use U-3 and get a similar picture. 2) deserves its own post. I’ll work on that soon. And then would love to hear your reactions.
Let me know how I can help. The job opening/posting problem is huge and not specific to company size or industry.
1) This is a great summary of how recruiting software has created a gap between demand and supply. https://www.theverge.com/2021/9/6/22659225/automated-hiring-software-rejecting-viable-candidates-harvard-business-school
My hunch: software used by 75% of employers is part of the 'tight labor market' and explains a good portion of the 'we can't find good candidates'.
2) Some companies keep posts up or repost jobs without actual intent to hire. Example of a small company where I am friends with the owner: https://dailynutmeg.com/jobs/
shows 3 job postings. I called my friend and asked if he was hiring. He replied, "No. If an amazing candidate applies, we might consider, but not actively seeking."
The only industry specific tightness that I have personal knowledge of is the food service industry problems related to local/state restrictions put in place during the pandemic.
super, thank you!