No Superheroes Left in Labor Market, Richardson Says

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00:00Good morning. Good morning. Let's start with jobless claims. 227, just continued resilience,

00:05which is a thing that you keep going back to repeatedly. What underpins that resilience at

00:09the moment? Well, the labor market, if you look at it in a snapshot, is really, really stable.

00:15Companies are keeping their workforce. They're not letting them go. That's why we see the such

00:21low initial jobless claims. And workers are by and large staying put. So the snapshot of the U.S.

00:26labor market is solid. The problem is if you look at the labor market in motion, the churn is gone.

00:33People are not leaving. Firms are not hiring in mass. And so you don't see the dynamism that has

00:39defined not only the labor market, but productivity growth. And if you really want to look for the

00:45crack in the labor market, go back to the last measure of labor market productivity. Output per

00:52worker was down 1.4 percent year over year. That's a sign of the drag that's going on right now.

00:59When you see a low chain dynamic like the one you described start to grip the labor market,

01:02typically when you look back, how long is that sustained before things break one way or the other?

01:08I don't think we can go back to priors. I mean, if I look at the great financial crisis, for example,

01:14the unemployment rate was above 7 percent for several years. Now we're not even at the starting point

01:21of that great financial crisis. We're at 4.2 percent. The unemployment rate has been remarkably

01:27stable. And I think that's because there's so many demographics that are shaping that rate.

01:32Lots of retirees, a slowdown in immigration. There's going to be labor shortages that are

01:37persistent. So it's hard to really capture the labor market in one number harder than it has been in

01:43the past.

01:43When you think about immigration policy, do you see the unemployment rate actually going down?

01:46I don't see that, actually. I actually see the shortages in certain pockets of the labor

01:54market. What's interesting about this labor market versus 2022 or 2023 is that there are no

02:01superheroes. We could rely on leisure and hospitality to be the stalwart in the labor market or health

02:07care more recently. We're not seeing that now. So who's going to save the day and bolster jobs into

02:13the future? Well, there's no sector that's doing that. Immigration is actually the lack of the labor

02:18supply is likely to keep wages very tight and robust, which is a problem for the Fed who's looking to

02:25bring inflation down.

02:26If there was to be a superhero, though, wouldn't it be AI and the supply chains around that, these data

02:31center build-out?

02:32You know, that is a long-term play. I do think that AI increases what contributes to American

02:39exceptionalism, which is productivity growth. And so if AI can make workers more productive,

02:45then there is a chance that we grow our way out of some of these problems. But the problem is,

02:51it's not just the technology, it's the people. And right now there's a gap between the two.

02:57Is the technology hitting the workforce in a way that increases labor productivity? We have yet to see that.

03:02Okay.

03:03Okay.