INSIDE ECONOMICS

Mark Zandi:                       Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by my regular team of colleagues here for Jobs Friday. This is, what is today? The September Friday, September 1st. We've got the August jobs numbers and we've got Dante. Ooh, I botched that, didn't I? Dante DeAntonio. Hi, Dante.

Dante DeAntonio:           Hi Mark, how you doing?

Mark Zandi:                       Good to have you. You're a regular here on Jobs Friday, and we will get back to you in just a second to get the rundown on the jobs report. And we've got Marisa, Marisa DiNatale. How are you, Marisa?

Marisa DiNatale:              Hi, Mark. I'm good. How are you?

Mark Zandi:                       You're feeling better?

Marisa DiNatale:              I am, yeah.

Mark Zandi:                       Yeah. We were just commiserating over COVID. We've all had another bout of it and lost smell and taste.

Marisa DiNatale:              Yeah, which I was reading is a rare symptom these days. In the early days of COVID, it was very prominent, but with these latest variants, I read an article that said only 5% of people are losing smell and taste now. So I'm in that lucky minority.

Mark Zandi:                       I must know all 5%.

Cristian deRitis:                Yeah.

Mark Zandi:                       Everyone I'm talking to has lost taste and smell.

Marisa DiNatale:              Recently?

Mark Zandi:                       Yeah, recently. Very recently.

Marisa DiNatale:              Really? Okay.

Mark Zandi:                       With this recent bout, yeah. I can't, here's my Wawa coffee. This is pumpkin spice. Don't ask me why.

Dante DeAntonio:           Pumpkin spice.

Mark Zandi:                       I can't tell if that's pumpkin spice or hazelnut or vanilla or regular. I can't tell, yeah.

Cristian deRitis:                So why bother? Just stick with the regular.

Mark Zandi:                       I got the pumpkin spice because I thought maybe I could taste it.

Marisa DiNatale:              That's the thing. You keep chasing the flavor, hoping [inaudible].

Mark Zandi:                       Yeah, I was thinking maybe-

Marisa DiNatale:              Taste the next thing.

Dante DeAntonio:           Going to retrain the brain.

Mark Zandi:                       Give me something really weird so I can taste it.

Cristian deRitis:                Okay. All right.

Mark Zandi:                       That was the logic, but to no end. And of course there's Cris. Cris deRitis, Cris, how are you?

Cristian deRitis:                I'm doing all right, still can't smell, but.

Mark Zandi:                       Oh, see what I'm saying, right? Everyone, yeah.

Dante DeAntonio:           It's really bizarre.

Mark Zandi:                       Anyway, it wasn't bad though. I mean for me, it was a day or two, like a bad cold, right? Was that same for you, Marisa, or?

Marisa DiNatale:              Yeah, there was one day where I had flu symptoms, but it lasted maybe a few hours really, and then it was just a bad cold congestion. I still have a little bit of congestion, but that's been the main symptom.

Mark Zandi:                       Right. Okay, well, good to have you back.

Marisa DiNatale:              Thank you.

Mark Zandi:                       The full team. Dante, let's get the rundown. Give us the gory details here. I don't want to influence your thinking, but I thought it was a very good report, so I'm just saying, but I don't want you to-

Dante DeAntonio:           I was going to say I think it's mostly good news, at least from my reading of things. If anything, the top line number, it wasn't strong at 187,000, but maybe a little bit stronger than we expected given some of the known headwinds that were out there with large business closure and some strike activity going on so came in probably a little bit stronger than we would've thought. But the details were still fairly weak in terms of revisions to prior months. The combined revision in July and June was 110,000, so that brings the three-month downward by 110,000, and that brings the three-month average to 150 K, which is the lowest that it's been since the pandemic recovery started in terms of average monthly job gains.

                                                Across industries, the weakness was where we would expect it to be given that strike activity and given the large business closure, so transportation warehousing was down, a little over 34,000, but most of that can be attributed to shutting down of Yellow Corporation, big trucking company. I think it was about 30,000 jobs that were lost. Information was down again, but again, that's where the Hollywood actor strike falls into, and so down 15,000, it's roughly in line with the expected size of that strike, at least the impact for August.

                                                The other big negative was in temp help services, and again, that's not a new story. That's been the case for most of the last year at this point. It's a signal that firm labor demand is certainly getting pulled back a bit. Firms are cutting their need for temp help as they pull back on hiring more broadly. And then most other industries were roughly in line with where they've been. Healthcare continues to be the strongest performer, manufacturing actually rebounded a little bit this month. Came back from a small loss last month to post a decent gain. Construction keeps holding up in the face of expectations that it might slow down, it's still adding roughly 20,000 jobs a month. So across the board, employment, payroll, employment wise, I think things looked pretty good in line with what we've seen in recent months.

Mark Zandi:                       Government, what happened to government?

Dante DeAntonio:           Government was up a little bit, 8 K, it's definitely slowed in the second quarter, it was averaging something around 30,000 jobs a month, and that's come in dramatically here in the last two months. So it's not been nearly as big of a contribution. Wage growth.

Mark Zandi:                       Just going to say that's the one sector, big sector that has not even come close to fully recovering the jobs lost during the pandemic. All the other major sectors have recovered and then some.

Dante DeAntonio:           Yeah, and it looked like they were making some inroads there in the second quarter. The story seemed to be that as private sector hiring was starting to cool off as government was finally starting to catch up a little bit and being able to compete for workers, and that may still be the case, but it seems to have slowed a little bit here over the summer. There's also some pretty big seasonal adjustment. Quirk sometimes in the summer with government payrolls, with all the education hiring, rehiring, so probably wouldn't read too much into that in July and August. Earnings was a positive story, it's the weakest gain on a monthly basis since back in early 2021. Year over year hasn't changed much, it's still north of 4%, but certainly it's a positive sign that wage growth might continue to come in here in the near term.

Mark Zandi:                       And just because someone listening to that from another world would say, "What the heck are you talking about? Why is that a good thing?" So why is that a good thing?

Dante DeAntonio:           Yeah, obviously the Fed's worried that wage growth is still too strong and there's some pass through effect there to inflation, particularly for service inflation. So slower wage growth would be a positive in terms of getting inflation, that last mile back down to target.

Mark Zandi:                       Got it.

Dante DeAntonio:           The household survey was, I would say, a little bit confusing. The unemployment rate jumped by three-tenths of a percent up to 3.8%. That was mostly because of a huge jump in the size of the labor force. So again, it rose, but really for the reasons that we want it to be rising at this point, it's that the labor force is growing more quickly than we're adding jobs. So that's not a negative, even though the unemployment rate went up. Again, that signals some softness in the labor market, but that's actually what we and the Fed want to see at this point. So it's one of those where bad news is good news, and I think we expect that to continue to happen here through the rest of the year where the unemployment rate might creep a little bit higher, close to or even slightly above 4% by the end of the year.

Mark Zandi:                       When you say mostly because of an increase in the labor force, the unemployment rate jumped 3.5 to 3.8%. Mostly it looked like it was all labor force growth because household employment, employment is measured by the household survey also increased pretty solidly, I think, right?

Dante DeAntonio:           Yeah, it was up by about the same as the payroll survey. I think it was about 200 K. So yeah, it's probably almost entirely from that increase in labor force because we still had job growth in the household survey.

Mark Zandi:                       And the participation rate jumped, right?

Dante DeAntonio:           Finally moved, yeah. I mean, it had been stuck at 62.6% I believe for five or six months, and then it jumped up to 62.8%, which is the highest it's been this cycle. Still a little bit below the February 2020 mark, which I don't think there's any expectation that we get back to given aging of baby boomers, but certainly a marked improvement there. Other participation measures, employment to population ratio, there wasn't a whole lot of change, particularly for prime age workers. Those measures are already high. They're at cycle highs, close to historic highs. So there's not an expectation that those participation measures are going to move a whole lot higher at this point, but certainly nothing negative to read on that side of things.

Mark Zandi:                       Anything else? Anything else you want to point to? Anything you would consider to be a real blemish then? Except the revisions, I guess. Even that though, we're looking for slower job growth, so that is not such a bad thing, right?

Dante DeAntonio:           Yeah, I mean, I view the downward visions as a positive, right? I mean, we want job growth to be closer to 100,000 than 200,000 at this point, I think if we're going to get some additional softening in the labor market so I think that's a positive. Anything, I think the headline number is the negative, maybe being a little bit stronger than you'd want it to be, given that the business closure and strike activity should have shaved about 50,000 off of that headline number. So if you add that back, you're at whatever, 235,000, which feels a little bit strong, but I think we'll talk about later August tends to have some quirkiness in terms of its reliability.

Mark Zandi:                       That might be revised given the revisions we're getting here, they're consistently down, so this may get revised. It wouldn't be surprising if this got revised down.

Dante DeAntonio:           Right. So yeah, it's not a huge concern to me that number's a little bit strong at this point because it may very well change.

Mark Zandi:                       Okay, so that's a great rundown. Broadly speaking, how do you feel about the report? Is it good, bad? How should someone out there interpret this?

Dante DeAntonio:           I say good. I mean, yeah, the faults are very minimal, if any. So I-

Mark Zandi:                       For Dante to say it as plainly as that without the qualifiers and everything else, because he's such a careful economist, unlike me, that's saying something. He said, "I think it's good." I heard him say that. Did you hear him say that, Cris?

Cristian deRitis:                I sure did. I sure did.

Mark Zandi:                       You did, okay. Okay.

Dante DeAntonio:           On record.

Mark Zandi:                       Yeah, very good. Okay, well good. Marisa, let me turn to you then. Any gaps there in the rundown? Anything else you want to point out and how do you characterize the report?

Marisa DiNatale:              I would agree that it's good, and I think it's pretty much in line with expectations so there's nothing shocking here. It's continuation of the slowing that we've seen for the last few months that's corroborated by other reads on the labor market from other surveys that we got this week and over the past couple of weeks. As Dante said, if you add in the actors' strike and you add in the bankruptcy in trucking, you'd get about 230 K, which is a bit stronger than we were expecting, but that's still below the three-month moving average we had previously seen. The revisions were substantial and downward, that seems to be a trend. Yeah, I don't see anything concerning. It's in line with what we want to see, I think.

Mark Zandi:                       Yeah, okay. And the 3.8%, it feels like we've gotten a couple months here recently where we get these big moves and then it comes back into two and a half percent because obviously this growth in labor force, correct me if I'm wrong, but I think it was 700,000, 800,000.

Marisa DiNatale:              It was 700,000.

Mark Zandi:                       Yeah, I mean obviously that's not reality. That's not what actually happened. So if it stands to reason next month you'll get things moving back in again. I'm not sure it's going to stay at 3.8, but it does feel like the labor market is easing up. Okay, so you're in the camp that this was a good report?

Marisa DiNatale:              Yeah.

Mark Zandi:                       Could I stretch it and say it was a very good report? I'm just asking on this.

Marisa DiNatale:              Sure, yeah, you could stretch.

Mark Zandi:                       Is there any qualifiers you want to put on the good or just good?

Marisa DiNatale:              I think it's good. I think there's a good change.

Mark Zandi:                       Good with an emphasis, [inaudible] accent.

Marisa DiNatale:              I think there's a good chance that it gets revised.

Mark Zandi:                       Go ahead, sorry. I'm sorry, I'm playing.

Marisa DiNatale:              I was just saying I think there's a good chance this gets a substantial revision in subsequent months, so I don't want to hang too much on this one report, but yeah, I think it's a very good report.

Mark Zandi:                       Oh, okay. Good. Very good. Now we go to Cris. Here we go. Cris, any gaps in the rundown? Any detail you want to add? And again, what's your broad characterization of the report?

Cristian deRitis:                I wouldn't add anything necessary. I think Dante, Marisa did a great job highlighting everything. The one area I would focus on is the revisions. I think we said that a couple of times, and the size of their revisions are substantial here, right? June job growth went from 185,000 to 105,000. That's pretty big, and that's actually more consistent with my script. So I think the revised data is important to watch because it does suggest this labor market hasn't been as strong perhaps as originally reported so I'm a little suspicious of the top line number this month as well. That 187, I think traditionally, or maybe over the last decade, August, has actually been revised upward typically but this might break the streak and we might actually see a downward revision given what's happened recently. So I put an asterisk on that headline number there. But yeah, overall I think this matches with the Fed's objective of seeing a slowing but not falling apart labor market.

Mark Zandi:                       Okay. So good, very good. What would you say?

Cristian deRitis:                Good.

Mark Zandi:                       Good. Okay, good report.

Cristian deRitis:                Two goods, yeah.

Mark Zandi:                       Yeah. Two goods. Two goods and a very good, okay. The one statistic you didn't mention in the rundown was hours worked per week, which I think we need to start watching more carefully because it feels like businesses are, they may not be laying off workers, but if they have some weakness in their sales, they are adjusting by scaling back temp help. So we are as, Dante, you pointed out, the number of people in the temp help industry continues to steadily decline, but they're also calibrating the hours worked per week and that actually ticked up a little bit. It had fallen the month before back in July, now it's back up again. But it's very consistent where it has been pre-pandemic in that very good labor market pre-pandemic, but that adds a little bit more to the strength of demand. It's the jobs, the 185, even if they do get revised down, but you get a little bit of juice from the hours worked.

                                                Yeah, I look at that report and I go, I mean, you couldn't write a better report if you were at the Federal Reserve or you were the administration, right? Yeah, it's slowing, but that's exactly what you want it to see and it's coming in. Even if the underlying job growth is 100 K, that's okay. That's where you want it to be given underlying labor force growth. I mean, labor force growth has been much stronger than that, but we're getting to a place where I think that labor force growth is going to slow just given demographics, participation rates aren't going to keep on rising, and we are going to see much slower labor force growth going forward, something that is closer to 100 K, maybe even a little south of 100 K. And so we do need to see job growth modulate back into that. And it feels like that's exactly what's happening here. So I'd go with a very good. Good, good, very good, very good. I mean, it was a very good report. I am hard-pressed to find a blemish.

                                                The one thing that I will point out, and I think Cris, you're alluding to this, is as the economy's starting to slow, the concern you have is, and I think it's just intuitive concern, is well, is it going to slow and then stop slowing? Or is it going to continue to slow and start turning negative, right? I mean, that's the word. If you're using the soft landing metaphor, the plane's coming into the tarmac, but as it's coming in, you're going, ah, is it actually going to soft land? Or is it going to slide off the runway here? But I think that's just a natural concern that you would have as this process is unfolding. It doesn't say anything about actually what is happening, it's just your inherent concern that maybe this thing isn't going to throttle back as gracefully as we think it is, did I characterize that correctly, your thinking, Cris, or your sentiment?

Cristian deRitis:                Yeah, that's right. And I mean, the economy is not typically a plane. We usually do have some cyclical, we overshoot a bit and then undershoot, right?

Mark Zandi:                       Right.

Cristian deRitis:                So I expect that. But yeah, I think as you get closer and closer, the risks of something else going wrong, certainly.

Mark Zandi:                       I guess the way to add that metaphor to express what you just, or I think what you're saying is, okay, you're coming in for a landing and that's when the plane is most vulnerable to a big gust of wind coming along and shoving you to the side of the runway. That's what you're saying.

Cristian deRitis:                Yeah. Have you ever had the bounce?

Mark Zandi:                       Yeah.

Cristian deRitis:                Sometimes an out.

Mark Zandi:                       Yeah. Maybe the soft landing metaphor isn't a good one, or maybe it is, but we should use a rocket ship, like one of those Starlinks, Tesla, what do they call it? SpaceX. SpaceX ships that are coming, they fired off the satellite. Now the rocket engines coming back down to the platform, and I'm saying this because I'm in Florida and I just saw a rocket launch. They have a camera on whatever it is, the rockets, it comes back and lands on a platform in the ocean. And so you can see it coming in and it's like as it's coming in, you're going, "Oh, please, don't crash." And that's when you are vulnerable to something going wrong because you are exposed to whatever could go wrong. That's what you're saying, right?

Cristian deRitis:                Yeah, exactly.

Mark Zandi:                       Okay. Let's take a little bit of a diversion and go into the weeds a little bit. A lot of technical things going on that we've already talked a little bit about, but I want to go into them in a little bit more detail. And for the listeners, if you are uncomfortable with going down into the DNA of this stuff, you could tune out for a little bit. But yeah, I think it's important and we've mentioned these revisions a few times. So Dante or maybe Marisa, I'll go to you. Maybe you can explain these revisions. There's different kinds of revisions, these monthly revisions, there's the benchmark revisions, and actually we got a read on that coming as well. So can you just and give us a sense of what these revisions are, why they happen, and in your view, why are we seeing these so-called downward revisions right now?

Marisa DiNatale:              Yeah, I'll try to do this in a way that sense. So this from the payroll survey, it is a survey that the government is sending surveys out to businesses. They ask businesses to respond by a certain date, not all of those businesses do respond by a certain date. So in the first month that they're producing a statistic like this past month for the August report, they only get, I think Dante, I don't know what the number was. It was like 60% of the respondents come back to them with their count of payrolls. And that's pretty typical. It's somewhere between 50 and 70% say the first time they send out the survey.

                                                They keep collecting responses though for another two months after the initial survey. So what will happen is that next month when we get the jobs data for September, they will have more responses in from the August survey, and they'll revise that August number again, and then they'll do it again the following month. So every time they produce a payroll statistic, they revise it in the subsequent two months after that as they get more responses in. So that by the "final response" two months after the fact, they have about 90% of businesses responding. So it's a firmer number.

                                                Then every single year they benchmark, this is the benchmark revisions you were alluding to, they take the payroll survey of businesses and they benchmark that to actual unemployment insurance records where something like 90% of businesses, pretty much every private sector and government business other than railroad workers have to pay into the unemployment insurance federal system. So they have a very hard count of employees that they get once a month, and they benchmark that every single year. They do it with the release of the January employment data that comes out in February, and they give us a sneak peek of this every year and they did that last month, and they told us that the data for March of 2023 looks like it's going to be revised down by about 300,000 employees.

Mark Zandi:                       I think it's 400,000 right, Dante? I think it's 400.

Dante DeAntonio:           I think it was closer to 300,000.

Mark Zandi:                       Oh, was it? I'm wrong. Okay. I may have forecasted 400,000.

Dante DeAntonio:           You forecasted 400,000, yeah.

Marisa DiNatale:              You wanted it to be 400,000.

Mark Zandi:                       Okay, it's 300,000. Okay, there you go.

Marisa DiNatale:              Yeah. So it's somewhere between three and 400,000. 300-something thousand lower than what the establishment survey, the payroll survey is actually telling us. So the BLS will go back and they will revise the historical data to reflect that benchmark revision. So what it's looking like is that the data between basically March of 2022 and March of 2023 is probably going to show something like 25,000 fewer employees on the payrolls and every month in that year. So two revisions happen after the initial release of the data. That's just because of more survey responses. And then once a year, BLS does a hard benchmarking of the survey data to actual unemployment insurance claims. And I mean, you can really dig into the revisions and look at how they've trended in the business cycle.

                                                There are certain industries we know that are more difficult to count employees. One we always look at is construction, right? Because there's a lot of people that come off and on payrolls very frequently. There are undocumented workers. There's all kinds of things going on in the construction industry that makes it historically difficult to give a hard count of employment in that industry. So that's an industry that typically gets a large revision a lot of the time. And there's other industries where there's strange things going on. Ironically, government is one that typically gets a very large revision. Even though it is a government survey, the government is notoriously bad at sending in their survey responses so that a lot of times gets big revisions. And sometimes you see larger revisions at the turn of a business cycle too, because there are businesses opening and closing at a faster rate, and that becomes more difficult to capture in a survey environment.

Mark Zandi:                       So these revisions that we're getting have been now on a monthly basis consistently down. So the BLS is lowering the job, the gain that is occurring in the month. And we also got a read on this so-called benchmark revision that will be released at the start of next year, and that benchmark is for March of '23, and that's also downwardly revised, so that'll be in the data with the January job report released in February.

Marisa DiNatale:              Yeah.

Mark Zandi:                       So when you add this all up, it feels like job growth probably is actually even a little bit softer than the current data would suggest. Would you concur?

Marisa DiNatale:              That's right. So it's probably closer to, it's certainly sub 200,000 a month. Somewhere between probably 150 and 175,000 a month.

Mark Zandi:                       Yeah, okay. That's where you put underlying job growth right now?

Marisa DiNatale:              Yeah.

Mark Zandi:                       150 to 175, okay. Okay, very good. Dante, the response rates. Historically, I have in my mind that August is always a squirrely month. We've had some, it seems to me the jobs numbers generally are pretty close to expectations, give or take, except for one, two, or three times every year you get this off the wall where did that come from kind of number, and often that is the August number because I think the response rates are even lower than typical. Is that the case this go around? Do you know? Do you have have any sense of that?

Dante DeAntonio:           Yeah, so the August response rates, at least for the first release of data, tend to be lower on average than other months. And for this month it was actually exceedingly low. It was just under 60%.

Mark Zandi:                       Oh, okay.

Dante DeAntonio:           That's the lowest in August since I think 2006. So even in a month where a response tends to be a little bit low, it was very, very low. As you mentioned, August tends to, historically, if you go back to 2000 and you exclude 2020 for obvious reasons, August has the highest average absolute difference in terms of revisions out of any month of the year. And that's in part, not necessarily because the revisions are large all the time, but it's that they were almost always in the same direction for the last 20 years, right? August, I think 17 out of 20 years was revised higher and not lower. And so that gives you that big absolute difference, whereas in most of the other months you get a more closely even split between revisions that go up and revisions that go down. I'm curious to see what happens because you have this converging trends here where August almost always gets revised higher, but we've seen almost every month get revised lower this year so it'd be interesting to see what happens over the next couple months.

Mark Zandi:                       Right. We've been talking about the payroll survey, that's the survey of businesses. The household survey, which is used to calculate unemployment participation, labor force scores, that kind of thing. That does not get revised.

Marisa DiNatale:              Right.

Cristian deRitis:                Correct.

Dante DeAntonio:           Right, yeah.

Mark Zandi:                       You can get some revisions because of seasonal adjustment, because the Bureau of Labor statistics seasonally adjust the day they have to because the labor market is very seasonal and they'll adjust those seasonal factors, correct? And so you could see some changes, but they don't have these revisions we're talking about that we're having with the payroll survey. Do I have that right?

Dante DeAntonio:           Right, they don't introduce new sample once the sample they get at the initial release is the sample that they use. They don't add any more respondents as months go on like they do on the payroll survey.

Mark Zandi:                       So Marisa is thinking, given all their expertise, you are a former BLS economist, your sense is that, let's call it underlying job growth, abstracting from the vagaries of the data, the revisions and all the seasonal adjustment and timing and all the things that can affect the actual number for a month. Your sense is that underlying job growth, monthly job growth is about 150 to 175 K, that's Marisa's view. Dante, what do you think?

Dante DeAntonio:           I think that's fair. I mean, I might even go a shade lower than that, but I think yeah, I'm in that same ballpark.

Mark Zandi:                       And Cris?

Cristian deRitis:                Yeah, that's mine. Lower end as well. Probably closer to 150, but.

Mark Zandi:                       Yeah.

Cristian deRitis:                Sounds like a reasonable estimate.

Mark Zandi:                       Yeah, I'd say 125 to 150. I think in that ballpark, including the benchmark provisions that are going to come in. Yeah, and just for context, again, once the labor force actually settles down to something consistent with underlying demographics, and we've seen a lot of labor force growth because the pandemic really messed things up and still normalizing because of that shock. But once we get to the other side of the shock and it feels like we're getting there here, that labor force growth would be somewhere between 50 and 100 K per month. So you would think that job growth has to get into that ballpark on 50 to 100 K on a consistent basis to ensure that the labor market doesn't get overly tight. Yeah, okay. Everyone agree with that, those heuristics as rules of thumb?

Dante DeAntonio:           Yep.

Mark Zandi:                       Yeah. Okay. All right. Okay, very good. Let me ask another set of questions before we play the game, the statistics game. And that is what one or two or three measures are you looking at in the labor market or elsewhere to gauge if things are moving in the right direction here? In the sense that we are going to continue to see positive job creation consistent with the non-recessionary economy, but slow enough job growth and wage growth so that inflation continues to moderate, goes back to the Fed's target and the Fed doesn't need to raise interest rates anymore. So what indicators are you looking at to try to gauge whether that script is being written here? Cris, maybe I'll go to you first on that. Do you have any one or two or three favorite measures that you're looking at?

Cristian deRitis:                Yeah, so the top of the list would be earnings. So whether it's average hour earnings in this report or the ECI, Employment Cost Index, we think as a better measure of that earnings growth, it's a controls for the population itself, we're looking at the same workers over time. I think that's key to the Fed's decision at the end of the day, right? That that's driving or potentially driving the service sector inflation that they're worried about. So that'd be my number one. The employment, I think the hours worked right. That mentioned earlier, that's certainly an important one as well. That's probably the first place where you would see businesses making their adjustments and maybe we can measure that a bit better than the overall labor market numbers or the payroll numbers themselves. But I do look at the indices. The BLS produces these aggregate payroll and aggregate hour hours worked indices. I found this useful as well to gauge how strong a labor market is.

Mark Zandi:                       I'm sorry, what was that last set? What was the last?

Cristian deRitis:                These aggregate indices of payrolls and hours worked.

Mark Zandi:                       Oh, you mean like a total aggregate hours worked.

Cristian deRitis:                Correct, that's right.

Mark Zandi:                       Oh, I see.

Cristian deRitis:                That's right.

Mark Zandi:                       Yeah, I didn't even look at that. Did you look at it this month?

Cristian deRitis:                I did. It's kind of consistent.

Mark Zandi:                       Consistent, okay.

Cristian deRitis:                Some positive growth, but not overly excessive either, right?

Mark Zandi:                       Yeah, okay. Okay, good. Dante? One or two or three measures are you looking at?

Dante DeAntonio:           Yeah, I mean, I think Cris, I think the earnings measure is obviously important right now. I think for me, UI claims are still towards the top of the list, even though they've been uninteresting lately in that they haven't moved a whole lot, which is good in this context, but I still think we're talking about this either rocket ship or plane landing or whatever metaphor you want to use. I think it's easier to imagine a world where we get that soft landing if layoffs stay pretty steady and you just have this slow reduction in hiring that's causing job growth to slow.

                                                If you've got hiring, getting pulled back and layoffs going up at the same time, I think that obviously makes that soft landing more complicated. It's much more likely that you tip into job losses in that environment. So if we continue to see claims or pick your other measure of layoffs, the challenger report, whatever it may be, if we continue to see those hold steady and layoffs not increase in any material way, I think it dramatically increases the likelihood that we can see that steady slowing of job growth and not a crash

Mark Zandi:                       And UI, unemployment insurance claims. So every week we get data from the labor department on initial claims for unemployment insurance. That's a read on people losing their jobs saying, "Hey, help me out." And I think last week, what was it? 225, 230, something like that?

Dante DeAntonio:           228, yep. Right there.

Mark Zandi:                       228. And do you have a rule of thumb there in terms of what's good, what's bad?

Dante DeAntonio:           I mean, if we start to get north of 250 on a consistent basis, I would start to get a little bit worried. There's always week to week volatility. So if you get one week that's at 260, that's not a whole lot to worry about. But if you start to get the four-week moving average north of 250, if you get consistent readings that are starting to move that high, I would start to get a little concerned. Again, that's not full-blown recessionary territory by any means, but I think given how consistently they've been at roughly 2 225, 230, 235 for a couple of months now, I think if you got that uptick on a sustained basis, it would catch my attention.

Mark Zandi:                       Yeah, okay. So 200 is really, really low. That's where we were before the tech layoffs back. They started late last year. They've abated now. We saw a rash of tech layoffs late last year, early this, and they're gone. But we were at, and I think seasonal adjustment issues probably played something of a role. We were probably at 200 K, we're now at 225. And you're saying if you get north of 250 on a consistent basis, then yellow flares start to go off if it's, I'm putting words in your mouth, but 275, 300, you're saying, "Okay, I got a problem." That's a problem. Same with negative jobs, that's losing jobs at that point.

Dante DeAntonio:           Right, I think, yeah, if you get up that high, that would signal that we're probably going to see negative prints on the payroll employment report. So that would be bad.

Mark Zandi:                       When we're losing jobs, okay. So you are claims. Okay. Marisa, what about you? Do you have any one or two, three indicators you look at to gauge whether we're sticking the script here or not?

Marisa DiNatale:              Yeah, the same as Dante and Cris, so I won't repeat them. I'm looking at wage growth. I'm looking at the labor force too to see if that continues to grow month after month, which it has remarkably. There's still supply out there clearly. But the other thing I noted in this report that I didn't mention before was the diffusion index in the payroll survey. Gains were very broad based across industries, so there's been a lot of talk about could you have recessions in certain industries of the economy? Could you have a rolling recession where there are industries that are losing jobs?

                                                And we've seen weakness in some industries over the past year or so. But the breadth of job growth was quite wide this past month. In the private sector, it was almost two thirds of industries were either adding to payrolls or holding them steady. So there's nothing red flag-like there either. We don't see industries that are shedding tens of thousands of workers month after month, and that's a good sign as well. So things are just slowing in a broad-based way, but nothing alarming coming out of any one or two industries really.

Mark Zandi:                       That's a great point. And adding to that, going back to job growth in construction, in manufacturing, those are the two most rate sensitive sectors by orders of magnitude. And if you're going to see a recession, you've got to see job loss in those two sectors, right?

Marisa DiNatale:              Right.

Mark Zandi:                       Actually, the most interesting, one of the most interesting things is we're getting a slowing, a graceful slowing in job growth. And those two sectors are still adding to payroll is on a pretty consistent basis. I mean, it's pretty amazing.

Marisa DiNatale:              I mean, you can dig into some of the manufacturing detail and see some sub industries that have wavered from month to month, but nothing extremely concerning. The housing market obviously, the residential side of construction is not doing great given high interest rates, but we're not seeing massive layoffs in the construction industry. There's plenty of non-residential work to be done. There's plenty of remodeling and infrastructure work, public work, so it's being made up for in other areas.

Mark Zandi:                       So if I had to pick a few indicators to gauge where the wrong script, the one I would focus on, a lot of it would come from the JOLTS report, the Job Openings and Labor Turnover Survey report, even though it's got its problems, it's a month lag, it's talk about response rates. I think the response rates to the JOLTS are low, so you have to take that into consideration. But it's such a nice report because it gives you a sense of the underlying dynamics in the labor market. And key there is the quit rate, right? That actually is really critical to the wage growth that you guys identified as indicators you watch, because if you have high quit rates, if people are quitting their jobs at a high rate, that tends to push up measured wage growth because when people switch jobs, that's when they get the biggest pay increases. And so if you go back a year, year and a half ago when the quit rate was very high, that's when the wage growth was at its peak.

                                                Now the quit rate, according to the last JOLTS numbers is really all the way back to where it was pre-pandemic. So it's completely normalized, and that would be consistent with getting wage growth back into something that's in the bottom, more consistent with the Fed's 2% inflation target. So I think that's really important to watch. A good indicator. Dante mentioned UI claims as a window into layoffs, but there's actual counts of layoffs in the JOLTS numbers. Again, a month lag, it's not as timely as the UI claims, but that remains, it's pushed up a little bit from the bottom like UI claims, but it remains very low. Below pre-pandemic levels and I think that's really critical.

                                                It's the layoffs that cause recessions, right? Because when you have a layoffs, I think Dante, you mentioned this, just to reiterate. That's what spooks people, consumers, they pull back on their spending and you get that self-reinforcing vicious cycle called a recession. So you don't have the layoff, very difficult to see how you get a recession. So we've got, those two measures give you a read on the strength of the economy broadly and recession risk, and the other gives you a sense of wage and price pressures, and they both are pointing in the right direction here. And then just to round it out, I do think it is important to watch the hiring rate.

                                                It looks like the key reason why job growth is slowing is because businesses are just hiring at a slower rate and the hiring rate is completely normalized back to pre-pandemic levels. The last measure in there that people were all apoplectic about, you don't hear much hand wringing any more recently is the number of open job positions. That was incredibly elevated a year ago, a year and a half ago. It's come in quite dramatically. In fact, the last report, it came in very sharply. I tend to put less weight on that just because very difficult to measure. And I do think businesses are managing their open positions very differently today than they have historically because it's costless to have an open position. So I place less weight on it, but certainly something to watch. So if you watch those, that JOLTS data gives you a really good internal sense of the labor market. They all feel like they're... If they're not in the right place, they're moving in the right direction very quickly. Any reaction to that? Agree, disagree? What do you think? Dante?

Dante DeAntonio:           Yeah, I agree. I avoided mentioning the quits rate because I was going to use it for my stat.

Mark Zandi:                       Oh, sorry.

Cristian deRitis:                Knew it. I knew it.

Dante DeAntonio:           But yeah, I think-

Marisa DiNatale:              It was also my statistic.

Cristian deRitis:                Oh, no.

Dante DeAntonio:           I was going to say, when we do our real-time forecast of the employment cost index, the quit rate is it, that's basically what gives you-

Cristian deRitis:                That's it.

Dante DeAntonio:           The measure. On a one or two quarter lag, the quit rate is almost a hundred percent in predicting what wage growth will be. So the fact that it is continuing to come down signals that we're going to get weaker readings on the ECI and things are moving in the right direction with almost certainty, I think.

Mark Zandi:                       Oh, that's interesting. I didn't realize the correlations were that high.

Dante DeAntonio:           Yeah, it's very strong. I think it's the only thing that's the only variable we use when we look at ECI.

Mark Zandi:                       Sorry about that. Sorry, I didn't mean, yeah. But it sounds like Marisa was going to say the same statistics, so I'm glad I took it away from.

Marisa DiNatale:              Well, it goes to the importance of those statistics, right?

Mark Zandi:                       Yeah. That's the point. Yeah, great point. Hey Cris, before we go to the stats game, how's the market react? The markets react, the bonds stock market reacting to all this? Do you have a sense of that?

Cristian deRitis:                Yeah, as seems usual these days, there was a little bit of a whipsaw in the reaction first. The interest rates went down in the 10-year, then they've crept back up. So pretty flat. I think this is largely in line with expectations. I look at the FOMC FedWatch tool to see how market expects the Fed to react, and that now is pretty firmly in the hold camp that the Fed will not increase rates or decrease rates potentially at the September meeting. I think November is still maybe on the table, December, a little bit more split, but the consensus still seems more aligned with this is it. We're holding here throughout much of 2024 before the first cut comes, but we'll see. There's still of course, lots of script to be written, but the immediate reaction seems to be this report is in line with the Fed pausing here, or continuing to pause.

Mark Zandi:                       Perfect. Okay. So the market says a good report.

Cristian deRitis:                Yeah.

Mark Zandi:                       Or going on. Not quite very good, but good.

Cristian deRitis:                Good.

Mark Zandi:                       Good, good report. It feels like that should be somehow the title of this podcast. We'll come back to that.

Cristian deRitis:                Good, maybe great.

Mark Zandi:                       Good maybe great, but maybe very good. Something like that. Hey, Marisa, we're going to play the game, statistics game. You're going to go first. And of course the game is we put forward a statistic. The rest of us try to figure that out through questions, deductive reasoning and clues. Best stat is one that's not so easy we get it immediately, which is actually getting harder to do these days.

Marisa DiNatale:              Yeah, I think this is going to be an easy one.

Mark Zandi:                       Yeah. Well, now we'll never get it because that's the other thing, you don't want to be too hard.

Marisa DiNatale:              You'll get it.

Mark Zandi:                       And you want it to be apropos to the topic at hand or a recent release. So what's your statistic, Marisa?

Marisa DiNatale:              3.7%.

Mark Zandi:                       3.7%.

Cristian deRitis:                Is it a demographic unemployment rate?

Marisa DiNatale:              No.

Dante DeAntonio:           Is that from Jolts?

Marisa DiNatale:              Yeah.

Dante DeAntonio:           I think that's the hires rate, isn't it?

Marisa DiNatale:              It is, it's the hires rate. Yeah, I was going to go with the quits rate, but we talked about that. I was going to go with the diffusion index. I talked about that. So I ran out of things to be really interesting. It's the hires rate that you mentioned, 3.7%. This is the lowest hires rate since April of 2020. So it's basically back to pre-pandemic levels now. And the quits rate was going to be my first statistic. That's 2.3%, and that's the lowest since January of 2021 so coming out of the depths of the pandemic there too. So these things are all coming back to earth, coming back to normal.

                                                The quits rate, as Dante said, is key to wage growth because that's when wages change is when people change jobs. Most people don't see a change in their wage unless they take a new job. So that's really critical to getting wage growth down. So the JOLTS data, as you mentioned, is a little bit fraught because response rates are down to a third month after month. The sampling error is very, very high on these now. But nevertheless, if you look at the rates and you look over a period of time, they're coming back to Earth.

Mark Zandi:                       And just to make clear, the quit rate is, the numerator's the number of people quitting their job, denominator is the labor force, is that right?

Marisa DiNatale:              No, the denominator is the number of people on payrolls during the course of the month.

Mark Zandi:                       Oh, because it comes from the payroll survey.

Marisa DiNatale:              It's an establishment-

Mark Zandi:                       Establishment.

Marisa DiNatale:              Survey, yeah.

Mark Zandi:                       All right. Okay. And the hiring rate is the numerator, the number of people hired in.

Marisa DiNatale:              It's a cumulative number of people hired over the course of a month as a share of a company's payrolls.

Mark Zandi:                       And denominator's the quit rate.

Marisa DiNatale:              Yeah.

Mark Zandi:                       Okay. Very good. That was good. Dante, you want to go next?

Dante DeAntonio:           Yeah, I'm going to go a little bit deep in the weeds here. I think yeah, first three were off the table so 106.1.

Mark Zandi:                       6.1?

Dante DeAntonio:           106.1.

Cristian deRitis:                That's Mark's favorite radio station.

Mark Zandi:                       Is that like an old fogey?

Cristian deRitis:                I don't know.

Marisa DiNatale:              Classic rock.

Mark Zandi:                       Classic rock, yeah.

Marisa DiNatale:              Zero beach.

Mark Zandi:                       Yeah. Led Zeppelin and Queen and yeah. Those are classics though. I'm actually proud to be a 106.1 listener. Okay.

Cristian deRitis:                A fictional 106.1, isn't it?

Mark Zandi:                       Fictional 106.1, yeah. Is that an index?

Dante DeAntonio:           It is an index, yeah.

Mark Zandi:                       It is not the aggregate hours worked index.

Dante DeAntonio:           It's not.

Mark Zandi:                       But it is in the employment report.

Dante DeAntonio:           It's not, no, I go way off script here.

Mark Zandi:                       Okay. That is a little bit.

Marisa DiNatale:              Yeah. Oh, is it from the ISM?

Mark Zandi:                       I don't think so.

Dante DeAntonio:           It's not, that would've been really mean because that came out just before we got on. I did not do that, earlier this week.

Mark Zandi:                       It's not pending home sales or something like that, is it?

Dante DeAntonio:           No, I'm not Cris. I didn't bring up the housing market on Jobs Friday.

Marisa DiNatale:              It's labor market related.

Dante DeAntonio:           It is.

Mark Zandi:                       Oh, it is?

Dante DeAntonio:           Well.

Mark Zandi:                       Oh, is it from the conference board survey?

Dante DeAntonio:           It is, yeah.

Mark Zandi:                       Oh, is it the actuals? The survey.

Cristian deRitis:                Isn't that the overall index?

Mark Zandi:                       Survey number. It's the aggregate-

Dante DeAntonio:           I gave you the headline. The point I want to make is more in the weeds, but I didn't want you to get too mad at me.

Mark Zandi:                       I was thinking the labor market, I think the job's easy, job's hard to get right?

Dante DeAntonio:           That's actually where I was going, yeah. The labor market differential within the conference board survey. So the difference between people who think that jobs are plentiful and people who think that jobs are hard to get, that differential has come in quite a bit in recent months. I think that's part of the reason for the headline decline in that consumer confidence measure. And it's another sign that points in alignment with what we see in JOLTS that job openings are coming in, hiring is slowing. There's still a lot of opportunities, but fewer opportunities than there were six months or a year ago. So I think it's just another notch in that argument that things are definitely tightening up a little bit.

Mark Zandi:                       Yeah, it's funny. It does feel like, so the conference board survey is a really good survey in that, particularly in terms of gauging the unemployment rate, right? Because they ask a question, are jobs easy or hard to get? And then they take the difference between the two, the percentages that response to the two. And that gap is a pretty good leading indicator of unemployment for the month. And that did show that unemployment was going to rise. So I think it was easy to say that unemployment rate was going to rise this month, but the 3.8 was more than anticipated. But directionally we knew it felt like it was going to rise. It does feel like, to me, things are slowing a little bit more than, things seem like they're rip-roaring. And now they do seem like everything is easing up here pretty quickly.

                                                Back to Cris's angst about this, it does feel like things are really starting to cool off. And that conference board survey is a good example of that. If you look at the switch from July survey results to the August survey results, they felt like there was something pretty significant shift there. I mean, I don't want to overstate the case because 106 is back where it was three months ago, so I don't want to.

Dante DeAntonio:           Right.

Mark Zandi:                       And of course a lot of it's related to gasoline prices and they're back up again. And that plays a big role in these confidence measures. But nonetheless, it did feel I felt softer than I expected.

Dante DeAntonio:           And I think to Cris's point earlier too, I think just given the size of how big revisions have been across lots of data lately, but particularly with payroll employment, I think it puts you a little bit more on edge when you start to get those lower readings because who knows what it'll look like in two months. Yeah.

Mark Zandi:                       All these things though add up to basically, just to make the obvious point, no more Fed rate hikes, please. I mean, come on. Yeah. Although the one counter to all of this, I'm going to throw it out there because this is your, and hopefully I'm not taking anyone's statistic, but that tracking estimate for Q3 GDP growth, what is it? It's strong, right?

Dante DeAntonio:           It's 4.9, yeah.

Marisa DiNatale:              Oh, wow.

Dante DeAntonio:           After the big spending number yesterday.

Mark Zandi:                       And ultimately it feels like GDP growth leads job growth by about a quarter or two. So this job growth we're seeing now reflects the first half GDP growth, which was 2%. And that Q3 number is coming in, I suspect, right as we get more data here, this thing will come, the tracking estimate will come down. But I mean, it's held up a lot better than I would've thought up to this point.

Dante DeAntonio:           The Atlanta Fed's number's even higher than that. It was up to 5.9 and came down a little bit. But it's north of 5% still which, yeah.

Mark Zandi:                       But still early on in the quarter, given the data flow, right? All we're getting right now, all the data we've gotten is for the month of July really, we haven't gotten.

Dante DeAntonio:           Correct, yeah. We're just getting July data in, yeah.

Mark Zandi:                       Right. So in July it looks like it was a very strong month, but August weaker. Okay. Very good. Cris, you want to go next?

Cristian deRitis:                Sure, my number is not labor market related.

Mark Zandi:                       Okay.

Cristian deRitis:                I'll lay that out.

Mark Zandi:                       Housing related?

Cristian deRitis:                What's that?

Mark Zandi:                       Housing?

Cristian deRitis:                Maybe.

Mark Zandi:                       Okay, go ahead.

Cristian deRitis:                I'm going to give a shout-out to a listener. This is, it was suggested by a listener, James.

Mark Zandi:                       That's unfair.

Cristian deRitis:                I won't use the last name to act the innocent, but it was a good number, -1.2%.

Mark Zandi:                       And it's not labor market related?

Cristian deRitis:                No.

Marisa DiNatale:              It's housing related.

Cristian deRitis:                It is.

Dante DeAntonio:           Did it come out this week?

Cristian deRitis:                It did. And there are actually two housing related numbers that were -1.2% so I'll give you credit for either one.

Mark Zandi:                       Is it an house price measure?

Cristian deRitis:                One of them is.

Mark Zandi:                       One of them.

Marisa DiNatale:              What do you mean one of them?

Cristian deRitis:                Well, like I said, there are two statistics that were -1.2. The one I'm thinking of is not the house price, but.

Mark Zandi:                       I think the-

Cristian deRitis:                I'll give you credit.

Mark Zandi:                       I think the S&P Case-Shiller was down 1.2% year over year, wasn't it?

Cristian deRitis:                That's correct so I'll give you partial cowbell for that.

Mark Zandi:                       Partial cowbell.

Cristian deRitis:                Because the 1.2% I'm thinking of is different.

Mark Zandi:                       Oh. Oh, that wasn't the one you were thinking of.

Cristian deRitis:                The more important one, I would say.

Dante DeAntonio:           Does it have something to do with pending sales? That's the other.

Cristian deRitis:                Nope.

Dante DeAntonio:           No?

Mark Zandi:                       And I'm sorry, this one is not related to house prices.

Cristian deRitis:                It is.

Mark Zandi:                       Oh.

Cristian deRitis:                It's related to housing, but not prices, not house prices. It's something.

Mark Zandi:                       It's a release that came out this past week.

Cristian deRitis:                Yes, but it's a private company. It's not a government source.

Mark Zandi:                       Oh, goodness. Okay. Is it a Fannie Mae, one of those wack-

Cristian deRitis:                No.

Mark Zandi:                       Fannie Mae surveys you always dredge up.

Cristian deRitis:                No, it's another one I'm dredging up that you need to pay attention to.

Mark Zandi:                       Oh, really? Okay. Is it a Black Knight survey? CoreLogic survey?

Cristian deRitis:                Nope. No.

Mark Zandi:                       Is it a government survey?

Cristian deRitis:                It is not.

Mark Zandi:                       No, you said, I'm sorry, you said it was a private sector survey. Is it a Moody's Analytics survey?

Cristian deRitis:                It's not.

Mark Zandi:                       That would be bad.

Marisa DiNatale:              Is it construction related?

Cristian deRitis:                Nope, it's another price.

Mark Zandi:                       Oh, okay.

Cristian deRitis:                If you will. It's arguably the more important.

Mark Zandi:                       Lumber prices are down 1.2%.

Cristian deRitis:                No.

Mark Zandi:                       No, okay.

Cristian deRitis:                I'll put you out of your misery.

Mark Zandi:                       Okay, go ahead.

Cristian deRitis:                It is the year-over-year change in rents. This is from Apartment List.

Mark Zandi:                       Oh, that's interesting.

Cristian deRitis:                Interesting, right? Because arguably this is the more important number to watch.

Mark Zandi:                       That's really important, yeah.

Cristian deRitis:                So down 1.2%.

Mark Zandi:                       Can you explain that? I don't know that data well, can you just give us a sense of that data? The Apartment?

Cristian deRitis:                Yeah, it's apartmentlist.com. So it's one of the numerous services that posts apartments online, and they have an index of apartment prices, the rents, so asking rents. And based on their index there, the prices are down 1.2% nationally and they had been up as much as 18% year over year, back in 2021, '22. So things are certainly coming around. And this arguably is a leading indicator for the housing shelter component in the CPI or in the PCE inflation indices that the Fed is watching. So this continues to suggests that the script is here for housing inflation to deflate going forward.

Mark Zandi:                       And you may have said this and I missed it. Is it July to July? July '22 to '23?

Cristian deRitis:                Yes, that's right. Oh, I'm sorry, no. It's August.

Mark Zandi:                       It's August. Oh, okay. And can you tell sequentially, month to month, is it stable down? What's happening down?

Cristian deRitis:                It's down on the month.

Mark Zandi:                       Maybe you can send out, I'd love, can you send me the link too?

Cristian deRitis:                Yeah, I will. Down 0.1% on the month.

Mark Zandi:                       Okay. Do they give you any across different markets? Do they show you any?

Cristian deRitis:                They do. They have actually a lot of detail in this report.

Mark Zandi:                       Okay. So do you have any sense of where the prices, where rents are down most? Are they down soft everywhere, I guess in the northeast based on my experience with my children's rent, it's not down a whole lot, but go ahead.

Cristian deRitis:                Yeah, a little bit more in the West.

Mark Zandi:                       More in the West, yeah.

Cristian deRitis:                And some of the hotter markets, if you will. So if I look over the past 12 months, it's Austin, Las Vegas, Portland, Phoenix, San Francisco, Seattle are at the top of the list. So some of these were markets that were particularly hot, so not terribly surprising that they're giving back some of those gains.

Mark Zandi:                       Right.

Cristian deRitis:                But the national number is down, so pretty much across the board. But you're right, I think New York isn't quite as soft as other areas.

Mark Zandi:                       I'm just saying I'm pretty sure probably even Philly and DC, but okay. Well, given the lags between rents, market rents, which is what we're talking about here, and when that shows up in the CPI for housing, the next six, 12 months, we should see some pretty meaningful weakness in that measure.

Cristian deRitis:                That's right. That's a good leading indicator. You want to keep an eye on to understand where the CPI is eventually going to head.

Mark Zandi:                       Yeah, okay. And that's over a third of the overall consumer price index, less expenditure, consumer expenditure, 15% of the consumer expenditure to player, but still very significant. Okay. That was a good one. That was really good. Yeah, I need to follow that more regularly. Here's my statistic. I think it's pretty easy. 83.3.

Cristian deRitis:                That's Marisa's favorite radio station.

Mark Zandi:                       Yeah, that's right.

Dante DeAntonio:           More of the NPR.

Marisa DiNatale:              On your AM dial.

Mark Zandi:                       On the AM dial. Yeah.

Cristian deRitis:                No, no.

Mark Zandi:                       What kind of music do you listen to? What's your favorite group? This is going to be very revealing because she'll probably say, I'm not going to tell you now. What's your favorite group right now? I'm going to go around, I'm going to ask everybody this question.

Marisa DiNatale:              Question. Oh, really? Okay.

Mark Zandi:                       I'm so curious now that I ask this question. Yeah.

Marisa DiNatale:              Pearl Jam has been my favorite band since I was 14.

Mark Zandi:                       Still Pearl Jam?

Marisa DiNatale:              Yeah. I've been to 20 Pearl Jam shows.

Cristian deRitis:                Shocking.

Marisa DiNatale:              You're shocked?

Cristian deRitis:                Yeah. I would not have guessed that.

Marisa DiNatale:              Really?

Mark Zandi:                       Would not.

Cristian deRitis:                Yeah.

Mark Zandi:                       Uh oh, now I've got to ask him. What would you have guessed, Cris?

Marisa DiNatale:              Yeah, what would you?

Dante DeAntonio:           What sort of stereotyping were you doing, Cris?

Mark Zandi:                       Very stylish.

Cristian deRitis:                I don't know what I would've guessed, but it wouldn't have been Pearl Jam.

Mark Zandi:                       Okay. What's your favorite, Cris?

Cristian deRitis:                Well, my favorite song?

Mark Zandi:                       No. Favorite group.

Cristian deRitis:                Of all time?

Mark Zandi:                       Favorite group.

Cristian deRitis:                It has to be the group as well, I guess.

Mark Zandi:                       Okay. Give me the favorite song of all.

Cristian deRitis:                It's Toto Africa.

Mark Zandi:                       I like.

Marisa DiNatale:              Really?

Cristian deRitis:                Yeah. Now you're shocked, now you're shocked.

Mark Zandi:                       Toto isn't your favorite group, but Africa is your favorite song.

Cristian deRitis:                Yes.

Mark Zandi:                       Why is that?

Cristian deRitis:                I guess like Marisa, from very young age.

Mark Zandi:                       Young age. That's very good. Dante?

Dante DeAntonio:           I don't know that I have a favorite. I'd probably say Red Hot Chili Peppers.

Mark Zandi:                       Oh, they're great. I love Red Hot Chili Peppers. They're Pearl Jam-esque, aren't they?

Marisa DiNatale:              Same era.

Mark Zandi:                       Same era, yeah. And they're still making music, aren't they?

Dante DeAntonio:           Mm-hmm.

Marisa DiNatale:              Yeah.

Mark Zandi:                       Yeah, they're good. All right. You want to know mine?

Dante DeAntonio:           Yeah.

Cristian deRitis:                Yours is Guns N' Roses, we already know this.

Mark Zandi:                       No, no, not Guns N' Roses.

Marisa DiNatale:              No. Mark just discovered them a year ago.

Mark Zandi:                       I just discovered them, and I blew through them very quickly. Yeah, they were okay. I liked a few of the songs, yeah. They're good when you're in the gym. They're good when you're pumping iron. When you're 63 year old man pumping iron. So no, I like The Revivalists. You know The Revivalists? Oh, you haven't heard The Revivalists? They are. Do you guys know The Revivalists?

Marisa DiNatale:              I don't.

Mark Zandi:                       You don't know The Revivalists? Oh my gosh. It's going to be earth-shattering for you.

Cristian deRitis:                When you listen to these.

Dante DeAntonio:           This is your favorite band of all time?

Mark Zandi:                       Well, no. I said not all time. I said my current favorite because my-

Cristian deRitis:                Oh, okay.

Mark Zandi:                       I blow through music so fast, so that's why I'm always hunting. You guys are useless because you're giving me all this stuff from the past, Toto Africa. It doesn't do me any good. Yeah. All right but.

Dante DeAntonio:           Still a good song.

Cristian deRitis:                Get a [inaudible] in there.

Mark Zandi:                       Yeah. All right, we digress back to 83.3. 83.3.

Dante DeAntonio:           83.3.

Marisa DiNatale:              Is that a employment population ratio of a specific group?

Mark Zandi:                       It's in the genre, but it's not an employment to population ratio.

Dante DeAntonio:           Is it a participation rate?

Cristian deRitis:                Participation rate?

Mark Zandi:                       Yes, it is.

Dante DeAntonio:           Prime age?

Mark Zandi:                       Prime age participation rate. Yeah, very good.

Marisa DiNatale:              That's what it is?

Mark Zandi:                       Yeah, 83.3. Yeah. I just bring this up in the context of labor force growth. I mean that jump in participation. Participation, I didn't look at all of the ages and demographic cuts that is available, but pretty much everything is back to pre-pandemic and then some except just the one, the over 65-year old is still depressed and I don't think that's ever coming back. I think that's just not going to happen.

                                                My guess is because unless the economy goes really south and people can't afford to stay retired and they come back into the labor force, but it feels like we're not going to get that participation rate back up, that people that have retired feel pretty good about their financial situation in retirement and we're not going to get a bounce there. But all the other participation rates are fully recovered, back. Everybody's working. We are seeing a lot of the labor supply has been very strong. And just adding to that story, if you look at the other number I was going to say was 3.1 million. Do you know what 3.1 million is? Consistent, same part of the labor market?

Marisa DiNatale:              Is it the gap in, is it missing labor force participants or something?

Mark Zandi:                       No, it's the year-over-year change in the labor force. The labor force has increased by 3.1 million people. So divide by 12, that gives you average monthly labor force growth. That's a lot of labor force growth. That's a lot of labor force growth so labor supply is really good. People are backdoor. Okay.

Cristian deRitis:                Interesting.

Mark Zandi:                       That was, I thought was very instructive, particularly the part about.

Cristian deRitis:                Pearl Jam.

Marisa DiNatale:              Everyone's favorite band.

Mark Zandi:                       I thought that was very instructive. But let's end the conversation we've typically done here over the past year or so, probabilities of recession in the coming year. What is the probability that the economy will enter into recession at some point between now and this time next year as defined by the National Bureau of Economic Research? So let me begin with you, Marisa. What's your probability? I think you were at one-third, weren't you?

Marisa DiNatale:              I'm still at a third.

Mark Zandi:                       Still a third. No change there. Yeah. Okay. And I think, I'm sure I've asked this before, but what would change your mind? What needs to happen to get you down below one-third?

Marisa DiNatale:              I think a not soft landing in the job market, evidence that this is going sharply into negative territory.

Mark Zandi:                       No. What would make you lower the probability?

Marisa DiNatale:              Oh, lower the probability.

Mark Zandi:                       Yeah. I mean, it's not at this point, it feels like the bar is really high for you to lower your probability to a significant degree.

Marisa DiNatale:              So I think a few more months of inflation coming in and the job market staying roughly where it is may make me lower my probability.

Mark Zandi:                       Okay. All right, Dante?

Dante DeAntonio:           I think last time I said 35. I'm still there. My feelings haven't really changed.

Mark Zandi:                       Your bar is high too. What?

Marisa DiNatale:              35.

Dante DeAntonio:           Yeah. I think if we can get a clear sense that the Fed is done, I think it's closer to that sort of signal that they're probably done, but it's still not a certain, I still think there's some chance that we get one more rate hike here before the end of the year, and I think that would be bad. So I think if we get a clearer sense that we're finished with rate hikes, I think that would probably make me come down a little bit.

Mark Zandi:                       Okay. So you're still at 35?

Dante DeAntonio:           Yeah.

Mark Zandi:                       Marisa's at one-third, you're at 35%. Basically the same thing. Okay. Cris, what do you say? You're at 45, you were?

Cristian deRitis:                Was at 45, I'm going to lower that to 42.

Mark Zandi:                       Really?

Marisa DiNatale:              Big moves happening here on inside.

Cristian deRitis:                42 is a little Easter egg for listeners there, meaning of life.

Mark Zandi:                       Yeah, 42. Very good. Okay. And today's numbers push you from 45 to 42 or was it a preponderance of things?

Cristian deRitis:                Today's number, the revisions again. Weaker numbers there make me believe that the Fed may in fact be done, may not make a mistake, but still lots to be worried about so.

Mark Zandi:                       That's your number one concern that the Fed just overdoes it here?

Cristian deRitis:                Yeah.

Mark Zandi:                       Yeah.

Cristian deRitis:                They're in the fog, right?

Mark Zandi:                       They're in the fog.

Cristian deRitis:                We're looking at all these data revisions. Clearly, we might get some data that they react to that they isn't real, so.

Mark Zandi:                       Yeah. Okay. And I think I was at 35%, wasn't I? Or around?

Cristian deRitis:                Yes, I think so.

Mark Zandi:                       Yeah. I'm going to 30, going down to 30 with a little down arrow. Like the rating agencies, it's on watch for a lower probability.

Cristian deRitis:                But negative watch is a good thing here.

Mark Zandi:                       I guess. Yeah, negative watch is a good thing here.

Cristian deRitis:                Yeah.

Mark Zandi:                       Yeah. Well, I can make up whatever I want here, right? This is my indicator, not.

Cristian deRitis:                Yes. We are not the rating agency.

Mark Zandi:                       We're not the rating agency.

Cristian deRitis:                I'll make that very clear.

Mark Zandi:                       Very good. So yeah, so I'm at 30 with a tilt toward something lower than that. It feels pretty good to me. I'll have to say, the thing that now really worries me, and I look at it five times a day, is the price of oil. Just makes me so nervous because that thing is so important. We talked about that at the last podcast, but I think that's a really important thing to watch. Very difficult to gauge. Okay.

Cristian deRitis:                Price of oil or price of gas?

Mark Zandi:                       Yeah, you're right. It's really the price of gas, but I just look at the price of oil that leads the price of gas. Of course, there's-

Cristian deRitis:                There's been things, disconnect recently.

Mark Zandi:                       Yeah. No, that's true. Yeah, the crack spreads I guess that's the margin that the refiners are getting a little bit wider. And now we're in the middle of hurricane season, so that's.

Cristian deRitis:                Exactly.

Mark Zandi:                       Something to watch. Yeah. So I really worry about that. Okay. Anything else you want to mention? Oh, we do want to make a plug for the business competence survey. Cris, you want to make that plug? You're better at advertising than I am.

Cristian deRitis:                You think so?

Mark Zandi:                       I think so.

Cristian deRitis:                I think we've mentioned on the podcast before, but we do have a survey of business confidence that's free for everyone to participate in. And it's a long-standing survey, I think 25 years, Mark, is that right?

Mark Zandi:                       It's 2003. I can remember actually the first time we did it. It's actually, I find it a very useful survey. We'll have to talk about that a little bit more, why I find it so useful. But it's a weekly survey.

Cristian deRitis:                Yeah, so unique from that perspective. So 20 years. If you go to economy.com, you'll find a link to the survey, and the benefit to you is that if you fill out the survey, you'll get the results. You'll be able to compare and see what the business mood is each week. And then we do plan to have exclusive webinars where you can ask Mark Zandi anything you'd like from what the state of the economy is to his favorite musical tastes.

Mark Zandi:                       That'll be a lot of fun, I think.

Cristian deRitis:                Absolutely. But you have to participate to get the invitations.

Mark Zandi:                       You have to participate. Yeah, you have to participate. Okay, very good. Anything else, Dante?

Dante DeAntonio:           No. I'm going to fill out the survey now so I can ask you questions though when it comes around so I have homework to do.

Mark Zandi:                       Oh, now I'm nervous. Now I'm nervous. Yeah. Marisa, anything?

Marisa DiNatale:              No.

Mark Zandi:                       Cris, anything more?

Cristian deRitis:                I've said enough I think.

Mark Zandi:                       Going, going, gone. Okay. Well dear listener, thank you for listening in this month, or this week I should say, and we'll talk to you next week. Take care now everyone.