00:00They don't seem to have a labor market problem. Is there an inflation problem they need to respond to?
00:04I don't think they necessarily need to respond in a big way. I think, of course, we have to be
00:07watching it.
00:08But it doesn't seem like inflation is accelerating in a material way.
00:11Now, we have to, of course, keep an eye out on does this labor market create inflationary pressures?
00:16And perhaps that is, you know, the very early start of it.
00:19But before that becomes abundantly clear, inflation will probably likely start to cool a little bit.
00:23So it will probably all work out from a timing perspective such that the Fed can do nothing.
00:27We'll see a labor market that's quite strong and they can kind of wait it out for a period of
00:32time.
00:32But, of course, you know, the data show that the labor market is continuing to hum along quite well, even
00:36though AI is still impacting some of those industries.
00:38Well, let's stay on the potential price pressure coming from the labor market just for a moment.
00:42Lisa went straight to the three-month average, which is pretty punchy at 188, particularly when people are telling us
00:48that the break-even rate is closer to zero.
00:49So my question would be just looking at that, how are we able to push through that kind of job
00:54growth without generating the wage growth alongside it, given that people are telling us the break-even rate is closer
01:00to zero?
01:01Well, so I actually don't think the break-even rate is closer to zero.
01:03Our estimates suggest it's closer to 65,000.
01:06You saw labor force growth in this report was in the 80s.
01:09So it's possible that labor force growth is a bit stronger than people think in terms of what the steady
01:15state can actually be, which then allows payrolls to run higher than that.
01:18Now, of course, it's run even beyond that.
01:20Perhaps payrolls are overstating to some extent.
01:23Household survey has been a little bit softer in recent months.
01:25So that's one reason why the unemployment rate has kind of been steady.
01:27I think the message from the labor market is your steady state break-even pace, the pace that you can
01:33go without really generating inflation in a big way, is probably in the 70-ish thousand range, which is likely
01:39where the trend in payrolls is actually settling.
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