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 two co-hosts and colleagues. Ryan Sweet and Chris deRitis. Hi, guys.

Cris deRitis:                       Hey, Mark.

Ryan Sweet:                      Hey, Mark.

Mark Zandi:                      How are things?

Ryan Sweet:                      I'm tired.

Cris deRitis:                       Good.

Mark Zandi:                      Yeah, I'm tired too. I know why I'm tired. Chris and I had a client dinner last night in New York. We're on a bit of a tour here. We were in Chicago, Toronto, DC and last night was New York and I had my first gin and tonic in quite some time.

Cris deRitis:                       That was a mistake.

Ryan Sweet:                      Just out of practice.

Mark Zandi:                      Huge mistake because I followed that with a fair amount of white wine. Maybe I shouldn't be saying any of this.

Ryan Sweet:                      Yeah, Moody's HR is going to be reaching out to you.

Mark Zandi:                      Yeah. I'll have to say the gin and tonic tasted good going down. Did you have any alcohol last night? No. You generally do not. You want to be sharp, right, Chris?

Ryan Sweet:                      I want to be sharp. I did have a little bit of white wine.

Mark Zandi:                      Little bit of white wine. Yeah. Good. And are you a gin and tonic kind of fellow, Ryan?

Ryan Sweet:                      No. I learned my lesson in college. I stay away from gin.

Mark Zandi:                      Oh really?

Ryan Sweet:                      Yeah.

Mark Zandi:                      You swear off gin. So do you have an alcohol of a choice?

Ryan Sweet:                      No, not really. I'm not a big drinker.

Mark Zandi:                      You're not.

Cris deRitis:                       Well, I think we established on a prior podcast that he's a Budweiser guy, right?

Mark Zandi:                      Oh no.

Cris deRitis:                       Bud Light.

Mark Zandi:                      Bud Light.

Ryan Sweet:                      Not a chance.

Mark Zandi:                      Wait, why?

Ryan Sweet:                      Beer's the best one to do.

Mark Zandi:                      You're pretty snooty. That sounds snooty to me.

Cris deRitis:                       What's going on there?

Mark Zandi:                      [inaudible 00:01:56] your nose up at Bud Light? What's that all about?

Ryan Sweet:                      That's what we drank in college.

Mark Zandi:                      Well it's back.

Ryan Sweet:                      I know it's back, but it brings me back to my college days and so I try to avoid it.

Mark Zandi:                      All right. We're going to bring in our guest because I want to know what he drinks.

Ryan Sweet:                      Yeah.

Mark Zandi:                      Nick Bunker from Indeed. Nick, welcome to Inside Economics.

Nick Bunker:                     Hi there. How are you doing?

Mark Zandi:                      So what's your drink of choice?

Nick Bunker:                     I'm a beer guy myself.

Mark Zandi:                      You are.

Nick Bunker:                     Not so much Bud Light. I am a bit snooty when it comes to beer. I'll admit to that.

Mark Zandi:                      Okay. I want to know how snooty. If you had your choice, it's only 10:30 AM Eastern time on Friday so I guess you don't want a beer right now, but let's say it's 5:00 PM Eastern time Friday. What's the beer that you're going to pull out of your refrigerator?

Nick Bunker:                     So I'll give a plug for a brewery that's based near where I am right now, which is the Tampa Bay Area. So I'll have [inaudible 00:02:57], which is this IPA from a brewery down here. Obviously named after the very Florida-esque Sport. It's a nice solid IPA, but it's not tons of hops. So it's not that bitter taste, but it's a smooth drink.

Mark Zandi:                      Guys, I get the sense he knows what he is talking about.

Ryan Sweet:                      Yeah, exactly.

Mark Zandi:                      He's commenting on the hops. Where in the world do they come from? Do you know that, Nick?

Nick Bunker:                     The hops for that beer?

Mark Zandi:                      Yeah.

Nick Bunker:                     I don't know. I know Oregon is a big producer of hops in general so I think a lot of the American based ones are out there, at least on the west coast. But I think there's some, maybe I'm conflating where the breweries are, but I think North Carolina has some as well.

Mark Zandi:                      Oh. Ryan, did you know that?

Ryan Sweet:                      No.

Mark Zandi:                      All the hops come from Oregon?

Ryan Sweet:                      I had no idea.

Mark Zandi:                      I had no idea.

Ryan Sweet:                      I'm a little surprised. I thought Nick was going to say vodka and Red Bull since he just had twins. So you need the energy and then you need a little numbing factor.

Mark Zandi:                      Oh, congratulations on the twins.

Nick Bunker:                     Thank you very much. Yeah, I've been drinking less beer and more coffee these days because it's definitely good. Caffeine is what I need.

Mark Zandi:                      Girl, boy? Boy, girl?

Nick Bunker:                     Two boys.

Mark Zandi:                      Two, okay.

Ryan Sweet:                      Oh boy.

Mark Zandi:                      Oh boy. As they say, "Oh boy." Very good.

Ryan Sweet:                      It's double coffee.

Mark Zandi:                      Congratulations. I should know this but I don't. Is Indeed HQ in Tampa?

Nick Bunker:                     It's not. So there's technically two headquarters of the company. It's Austin, Texas and then also Stanford, Connecticut. But there's offices throughout the country and lots of people, fittingly for one of our topics today, work remotely. So I used to be in based in the DC area when I started at the company about four years ago. So I've been remote from the beginning and lots of people at the company are as well.

Mark Zandi:                      Yeah. And we are going to talk about remote work because you've done a lot of work in this area and we were just commenting before we got on, our dinner last night with clients. All people can talk about is remote work. Who's for it, who's against it, why are they for it, why they're against it. And there seems to be this growing gap between what CEOs think and what economists think. I don't know if you noticed that, but CEOs hate remote work.

Cris deRitis:                       Well there's a generational divide it seems like.

Mark Zandi:                      Do you think that's what it is?

Cris deRitis:                       In part.

Mark Zandi:                      Maybe it's the office space, right? I got all this beautiful office space. I'm CEO, what am I going to do with it? Well that's a quite cynical comment.

Cris deRitis:                       Yeah. Logistics.

Mark Zandi:                      Yeah. So let's talk about that. We got to talk definitely. I know you've got some strong views on that topic, but we'll come back to that. We got a lot to talk about. But before we go down any path, Nick, can you just give us a sense of your path to Chief Economist of Indeed? And also I'd like to know a little bit more about Indeed if you are willing and able to do that.

Nick Bunker:                     Yeah. And while I appreciate the promo, I'm actually just a research director at Indeed.

Mark Zandi:                      Okay. Research Director, Chief Economist, Research Director, Chief. I like Research Director better. Which would you rather be, Ryan? Research Director or Chief Economist?

Ryan Sweet:                      Research director.

Mark Zandi:                      That's what I'm saying. Now Chris wants to be chief economist. We all know that. I can't turn my back to Chris, Nick. I got to be very careful when I'm around Chris.

Cris deRitis:                       I was thinking maybe chairman. Chair.

Mark Zandi:                      Chair. Yeah, right. Okay. So a research director. That sounds pretty cool. So can you just tell us a little bit about your work and your job?

Nick Bunker:                     Yeah, sure. So I think how I got to the position where I am. So I referenced earlier that I used to live in the DC area and when I was there I worked at a couple of think tanks in the policy world thinking about economic policy. And near the tail end of that part of my career [inaudible 00:06:55].

Mark Zandi:                      Can I ask who? Which think tanks?

Nick Bunker:                     Yeah. So the Center for American Progress. And then after that Washington Center for Equitable Growth.

Mark Zandi:                      Oh, they're both great. Yeah.

Nick Bunker:                     Yeah. No, I had really great experiences that both of them, learned a bunch of things. Including, the Washington Center for Equitable Growth was started in about 2013 and I actually was there from the beginning so it was really interesting to not only the substantive work of the research and economics, but being part of a very quickly growing organization was very interesting.

Mark Zandi:                      I'm on one of their advisory boards, The Washington Equitable Growth. Yeah, great new think tank. It's relatively recent in the think tank kind of world. Right?

Nick Bunker:                     Yeah. Less than 10 years old this year?

Mark Zandi:                      Yeah, something like that.

Nick Bunker:                     Compared to Brookings, that's nothing.

Mark Zandi:                      Yeah. Very good. So I didn't realize that. So you were at CAP and at Washington Equitable Growth and then you came over to Indeed?

Nick Bunker:                     Yeah, so I started focusing more and more on labor market issues and then there was an opening at Indeed for an economist position and I thought that'd be a really interesting place to go in part because of all the access to the data that they and now we have because we have lots of great data coming from the government and other sources that are publicly available. But the opportunity to see what was going on with Indeed's platform and doing research with that was super appealing. And now that I'm at the company, I've continued to find that to be super interesting and valuable.

Mark Zandi:                      Yeah, very cool. So tell us about Indeed.

Nick Bunker:                     Yeah, so Indeed, as folks hopefully know, is the world's largest job platform and hiring platform.

Mark Zandi:                      I did not know that. You're the largest in the world.

Nick Bunker:                     That is my understanding. That at least in the US.

Mark Zandi:                      That's not hyperbole, that's not marketing literature. You're the largest platform. Okay cool. In the world.

Nick Bunker:                     And that is one of the advantages of the team that I sit on, the hiring lab, is that we're doing research not just in the US but across, at this point, seven other markets as well. So we have folks in the US but also in Canada, the UK, Germany, France, Australia, and we just had a Japanese economist start last month. So what's enlightening is that we're all using the same data source so it's not like when you're trying to compare unemployment rates or job vacancy rates across different countries where you have to find some standardized data source or understand the difference in the definition. We know that things are consistent because we have the same platform. So it's always interesting to be able to compare very quickly what's happening in the US versus what's happening in Canada or even differences with, say, Australia.

                                             But then also we can see, given that we have users in, say, Australia, what's happening to, or other countries, their interests or search activity on job postings in the US. So we can see not only movements within a country, but also international interest or international intended migration moves. And that's actually something that my colleagues over in Europe looked at earliest year and released a report on. How the migration changes, mobility changes.

Cris deRitis:                       That's really interesting. Just to get a sense of the scale, how many job postings are on your platform today for the US or other markets? Give a sense.

Nick Bunker:                     Yes. So we do have a sense that's a number that we don't talk about really publicly for a variety of reasons.

Mark Zandi:                      [inaudible 00:10:27] for Inside Economics? I mean. Maybe just for us.

Nick Bunker:                     I think one way to think about it is the representativeness of it. We've done a few analyses trying to understand how representative our job postings are across industry or occupational group and also just do the time series trends map match up. And basically since the beginning of the pandemic, so March of 2020, we've been releasing high frequency data basically weekly on the growth in job postings on our platform in the US and then across the other markets as well. And the US, if you look at our measure, which starts in February of 2020, and you match it up with JOLTS job openings, they move pretty in sync. It's not perfect or one for one, but the growth trends there are very consistent with each other.

Mark Zandi:                      And JOLTS is job opening labor turnover survey, which is of great interest in the current context because of the very tight labor market and all the focus on unfilled positions as a kind of barometer of how tight that market is.

Nick Bunker:                     Exactly. And that one of the advantages of our data is that JOLTS is useful, but it's not as timely as other data sources so it lags quite some time. But our data is much more timely so that we usually update our weekly postings data on Monday or Tuesday morning. So next Monday or Tuesday, we'll all have data on what job postings were as of right now today. So we only have a couple days of lag when it comes to our metric as opposed to JOLTS, which in the first week of October will get data on the number of job openings the end of August.

Mark Zandi:                      Well we definitely want to come back to this, but can you just give us a quick hit? Is the market slowing at all? Is postings coming in at all or are they just still rip roaring?

Nick Bunker:                     So we're seeing, since the beginning of this year, pretty gradual pullback when it comes to job posting. It's far more concentrated in certain sectors than others. So software development jobs, which a lot of tech companies are hiring for, there's been a much more substantial pullback there. But if you were to look at job postings on Indeed compared to the pre-pandemic baseline, so beginning of February, 2020, that number's still up more than 50% from where it was then. So if you're using that longer timeframe, demand is still quite high. It's just come down from very, very high levels early this year, end of last year.

Mark Zandi:                      Can I ask what was the peak? Would that be appropriate?

Nick Bunker:                     So I could tell you the peak compared to that pre-pandemic baseline.

Mark Zandi:                      Yeah, exactly.

Nick Bunker:                     I'm pulling up the data right now. So for the US, the peak was actually roughly the end of last year, beginning of this year and it was up 62.9% from that pre-pandemic baseline and now it's closer to 50.

Mark Zandi:                      That feels like the JOLTS data unfilled positions, feels similar. Yeah.

Nick Bunker:                     I do think that JOLTS openings have been a bit more robust, especially with the latest day that we got where there was [inaudible 00:13:42].

Mark Zandi:                      Well that was weird, that latest data point. I don't believe it.

Nick Bunker:                     [inaudible 00:13:49]. They do get revised substantially and that was what we saw before. We got July and June and then June was revised up and July was higher than expected.

Mark Zandi:                      Okay. All right. Yeah, we'll definitely come back to that. But this week we've got to talk about inflation, consumer price inflation, CPI, came out this week for the month of August on Tuesday. I think it was Tuesday. So let's talk about, I'll have to say, I obviously look at a lot of economic statistics and almost always the statistics are consistent with my priors. They don't change anything about the way I think about the economy and where it's headed. But there are times when I get a release that really challenges my view of things and I'll have to say that CPI report did that. Very, very disconcerting I thought. But anyway, let me turn to Ryan. Ryan, you want to give us a sense of those numbers? And I'm really interested in how you do that decomposition of factors, forces driving the inflation. If you could do that for us too, that would be helpful. Thank you.

Ryan Sweet:                      Yeah, of course. So overall it was a very disappointing report. The headline, so the total consumer price index, rose just 1/10th. But we expected it, the consensus, for a small decline. And that 10th, while we got a lot of moderation in inflation month over month, was because of an enormous drop in retail gasoline prices. They were down more than 10% month over month. But when you strip out food and energy and look at core inflation, and this is a better barometer of where inflation's headed, it was up 6/10ths of a percent month over month and that was much stronger, double what the consensus was anticipating. And when you look up through the report, inflation is broadening out. So there's more price increases across different goods and services.

                                             And I think what's concerning is that inflation's becoming a little bit stickier than what we had anticipated. We were hoping that inflation would be rolling over by this time and it's just occurring more slowly. So if you look at some of the stickier components, rents were up a lot and they haven't peaked yet. The good news is they're probably going to peak later this year, early next if you look at the Zillow rent data, but inflation over the next few months could be stronger than what we anticipated in our baseline. So even with the small increase in the headline number, it was still up 8.3% year over year. And when you break it down...

Mark Zandi:                      Okay. Before you move on, before the breakdown, can I ask one quick question?

Ryan Sweet:                      Yeah, of course.

Mark Zandi:                      So in the July CPI report, that came in softer than what folks thought, we thought. 3/10ths of a percent on core CPI. Core being x, food, and energy. And we, just to remind everybody, we focus on that because that tends to be a better forecast of where inflation is going to be going forward. And obviously that's what the federal reserve looks at when setting monetary policy. It was 0.3 and that made me feel pretty good when that came out. And then, as you say, the August number was 0.6. We've all learned not to place too much weight on any given data point. Would it be fair, do you think, to take the 0.3, add the 0.6, divide by two and get 0.45 and that's the reality of where we are? Or not?

Ryan Sweet:                      I usually average over three months. So we're still at 0.4, 0.5. So I would agree with you that even in the inflation data, things can be a little bit choppy. So taking a moving average of a few months is probably the best approach.

Mark Zandi:                      And there was some things in the report, at least to my eye, that seemed kind of vagaries of the monthly data or measurement issues like the continued strong increase in new vehicle prices. That feels a little weird and maybe related to some methodological changes at the Bureau of Labor and Statistics.

Ryan Sweet:                      They changed their methodology I believe last year and now they're using transaction data by JD Power. The other thing that caught my eye was a very small decline in used vehicle prices. Other data was pointing towards a much larger decline in used vehicle prices. So there's a possibility that you get some revisions. We always warn about response rates and response rates for some of the components of the CPI are very, very low. So to your point, we could see some revisions and you got to really take each month with a grain salt. But the other thing that jumped out was college tuition.

Mark Zandi:                      Hold it. Revisions? There's no CPI revisions are there?

Ryan Sweet:                      They revise the seasonal factors.

Mark Zandi:                      Oh, the seasonal factors. Oh yeah, good point.

Ryan Sweet:                      I don't think it's going to make big changes, but it might smooth out some of the volatility. The other thing is the pandemic brought back volatility in inflation, so that's why I think you're seeing some of these big month to month swings in some of the components of the CPI.

Mark Zandi:                      Got it. Okay. So the decomposition. Can you decompose the 8.3% year over year CPI inflation number into what's driving it?

Ryan Sweet:                      Yeah, just one comment on college tuition. That rose more than I anticipated. And that's because in the last couple years colleges were trying to keep tuition down, the increases. So August is normally when the CPI for college tuition goes up and it rose more than the seasonal factor anticipated. So that [inaudible 00:19:31] even more and that's why we got a 0.6 on core inflation.

Mark Zandi:                      Okay.

Ryan Sweet:                      All right. So the decomposition. So 8.3. So just as a reminder, the CPI was up 8.3 year over year. Supply chains. So that's, poster child is new and used vehicles. It also includes children's apparel, electronics, things that are being disrupted by global supply chain stress. That added one percentage point to year over year growth in the CPI, which was identical to what it was in July. Energy added 2.1 percentage points, which is down from 2.9 percentage points contribution in July. And that's just a reflection of lower prices at the pump. Food is adding one and a half percentage points to growth in the CPI. And shelter is adding two percentage points. So that shelter one, that's the highest since, I think, the early nineties. So that's a significant contribution and that's sticky. That's going to hang around for a lot longer. Whereas energy and food and supply chains should start adding less and less over the next few months, shelter could add a little bit more.

Mark Zandi:                      Okay, so let me ask you this. So let's just assume oil prices stay roughly where they are, give or take, going forward. And that's a big assumption obviously, a lot related to the Russian invasion, what the European Union decides to do or not do with regard to sanctions on Russian oil, whether a hurricane blows through the Gulf and knocks out a refinery. Who knows? But that's our working assumption. And let's assume the supply chains continue to iron themselves out and that goes to the pandemic becoming less and less of an issue. Again, a big assumption given China's no COVID policy, maybe they have to shut down big parts of their economy again. But let's abstract from that. Let's just [inaudible 00:21:20].

Ryan Sweet:                      No railroad strike?

Mark Zandi:                      No railroad strike. Nothing like that. Which, thank goodness we averted that one, that would've been a disaster. Those are my two assumptions. So that basically says the energy contribution comes out of the CPI, the supply chain contribution comes out of the CPI, a big chunk of the food price inflation comes out of the CPI because a lot of that's just the cost of getting... Its diesel, getting the food from the farm to the store shelf. Where do we go on inflation? We were at 8.3, do you do your decomposition, that analysis, where are we going roughly?

Ryan Sweet:                      Down close to four.

Mark Zandi:                      Four. 4%. And I would characterize the fed's inflation target on the CPI probably high end two and a half percent because there's methodological differences between the CPI and the core consumer expenditure deflator, which is what the Fed targets at 2%. And right now the gap between the CPI and the PCE deflator are about a half a point. So let's say two and a half. So we have to go from four to two and a half.

Ryan Sweet:                      Correct.

Mark Zandi:                      And the road from four to two and a half runs through shelter, rent, medical care, those kinds of things.

Ryan Sweet:                      Especially for the PC deflator, medical care is a much bigger weight. So if you look at what is medical adding to the CPI, that's 50 basis points. So it's not an enormous contribution, but it will be larger in the PCE.

Mark Zandi:                      And I'm doing all this right now because we're going to... And, Nick, I don't think I mentioned this, but I'm going to ask you for your odds of recession at the end.

Nick Bunker:                     Got you.

Mark Zandi:                      And this is all kind of setting things up for that discussion. Because it is important to understand all this stuff.

Ryan Sweet:                      And, Nick, there's only one right answer.

Mark Zandi:                      Yeah, exactly.

Nick Bunker:                     How many significant digits do I have to respond out to?

Mark Zandi:                      As many as you desire, Nick. We take them all here at Inside Economics.

Nick Bunker:                     All right. Good to know.

Mark Zandi:                      We have to offset. Ryan is kind of wishy washy out there, doesn't give us real numbers. So we have to offset that with some real numbers.

Ryan Sweet:                      Mark guarantees things.

Mark Zandi:                      Apparently I did. This doesn't sound like me. That's a reference to another podcast. We're not going down that path. What was I going to say? Oh, anything else, Ryan, you want to bring up on the report? CPI?

Ryan Sweet:                      No I [inaudible 00:23:54].

Mark Zandi:                      Were you as disconcerted as, I've been depressed ever since Tuesday. Slightly depressed. Maybe it's the gin and tonic.

Cris deRitis:                       Well, that was the reason for the gin and tonic.

Mark Zandi:                      Oh that was the reason.

Ryan Sweet:                      Exactly.

Mark Zandi:                      [inaudible 00:24:07]. Yeah.

Ryan Sweet:                      Yeah. When I talked to you on the phone after the CPI report, we were both kind of glum about it.

Mark Zandi:                      Yeah. Bummer.

Ryan Sweet:                      I was hoping inflation be coming in faster than it is.

Mark Zandi:                      Okay. Hey the one thing... Oh sorry, go ahead.

Ryan Sweet:                      Oh no. It really altered market expectations for the next meeting.

Mark Zandi:                      Oh yeah, tell us about that. The Fed meeting.

Ryan Sweet:                      Yeah, so fully the markets are fully pricing in a 75 basis point rate hike. The odds of a 100 basis point rate hike went up to 25% and now they're back down to like 16%. So I think it's pretty much a slam dunk that they're going 75 next week.

Mark Zandi:                      Yeah. Okay. Hey, Nick, do you have any thoughts on the CPI report? Do you look at that as closely as we do?

Nick Bunker:                     I definitely do not look as closely at it as you all do.

Mark Zandi:                      Okay. That was a bad question because Ryan is definitely down and dirty with that report. You're right. No one is down into the bowels of that more than Ryan I'd say.

Nick Bunker:                     It's a high bar to clear. I think when the CPI numbers come out I basically just look at what happened to rent and shelter and just check in on that every month. So the number that we got in the latest data was obviously not great because that's still super high. So that's, for me, thinking about inflation, it's usually just what's happening to rent. And then also I keep track of this already, but just wage growth trends.

Mark Zandi:                      Yeah. And we're definitely coming back to that.

Ryan Sweet:                      The one thing I'd add on the rent, the CPI, you can break it down regionally as well. The BLS, Bureau of Labor Statistics, releases regional data, which I think is fascinating now because rent, shelter in the south is up almost double digits. So that's just a reflection of migration patterns and things like that. So if you rank order, I think, off the top of my head, to the Southwest, Midwest and then much lower is the Northeast.

Mark Zandi:                      Yeah. This is a good place for me to turn to you, Chris, and the housing markets because what I've heard anecdotally is that some of those previously high flying markets in the South and the West are now really cooling off and we are starting to see some real moderation, certainly in house prices, they're starting to fall, but also in rent growth. I've heard, again anecdotal, I haven't seen it in the data yet, but the rate of increase in market rents, what new renters need to pay to move into a rental unit, is coming in pretty quickly. And actually some places are actually now declining because of demand destruction. We're having rent so high that people can't form households, they can't leave their parent’s home, or they can't strike out on their own, they need roommates. So it's having a real impact. And of course the remote work dynamic is still playing out but not nearly as forcefully. We're not seen as many people from LA move out to Phoenix or from New York down to Tampa. That kind of thing. Have you been watching this? Are those anecdotes the same thing you're hearing?

Cris deRitis:                       Yes, definitely seeing a slow down across the board when it comes to housing. Now, you're right, the apartment market is also slowing but it's not nearly as dire as what we're seeing in the housing prices and the home prices because if people can't afford to buy homes, they rent. If they can't rent, then they just don't form the household, to your point. So there is still that dynamic. So things are slowing, but I haven't seen that or heard of really sharp declines in rents just yet.

                                             We are getting more supply and if you look at permits, the multi-family construction market is, I won't say healthy, but it's healthier than the single family. So builders are clearly responding to the demand. So that will also help. But that takes a bit of time for those multi-family properties to come online and actually help to reduce rents further. But yeah, I think the direction is clear at this point. There's really no opportunity for an apartment manager to raise rents very aggressively. The affordability is just out of reach.

Mark Zandi:                      Right. So we're getting more supply and we're getting...

Cris deRitis:                       Demand destruction.

Mark Zandi:                      Some demand destruction. So the net of all that feels like market rent growth is starting to moderate and that should start to show up in a moderation in the CPI rent. Not quickly, but perhaps by next spring or so we might be able to see some rolling over of the contribution of rent, cost of shelter, to the overall inflation. Is that sort of right?

Cris deRitis:                       Yeah. I think that's accurate.

Mark Zandi:                      Okay. That would be helpful.

Cris deRitis:                       Nothing quick.

Mark Zandi:                      Yeah. Okay. Of course the other aspect of inflation is service price inflation. And that is critically tied back to the labor market because the services are labor intensive. Labor markets are, by any measure, very tight. Wage growth has been very strong. Depending on the measure, it's five, six percent-ish. I think that's roughly consistent with the wage data. So, Nick, maybe we can turn back to you. Let's explore. Really how tight is this labor market? And let me just preface it by saying some of the tried and true measures of labor markets, Slack I've used in the past, they're not screaming... The labor market is at full employment, there's no doubt about it. Maybe a little bit beyond, but it's not screaming excruciatingly tight except for one statistic and that's the one you have a good view on and that's unfilled positions. That's different this time. So how do you think about all this? How tight is the labor market?

Nick Bunker:                     Yeah, I think if you were just to go back in time and say to someone in late 2019 say, "Okay, it's the early fall of 2022, the unemployment rate's three and a half percent," and then you start describing some of the wage growth statistics and some of the commentary about the labor markets, they will be pretty perplexed because it was basically the same unemployment rate. And if anything, the labor force participation rate has dropped. So the share of people with a job is actually a little bit lower than where it was. And even for prime age workers, the same thing. So I think, for me, the number one metric I always look at is nominal wage growth. And that number obviously is also pointing out a very, very tight labor market. And there is this question of the job openings and particularly that ratio of job openings or vacancies to unemployed workers.

                                             I follow the JOLTS report pretty closely and that's a statistic that I've tracked for quite some time, but it went from something that no one really talked about to now I feel like every other time or every time Chair Powell talks about the economy and labor market, that's a statistic he turns right to to talk about how tight the delayed market is.

                                             So I think part of what we're seeing is that economic growth and demand for workers just burst out of the gates in the spring of 2021. And that there's just been such a fervent demand for workers after we got mass vaccinations started rolling out, there was a lot of fiscal support for households, especially with the American Rescue Plan and that sort of turbocharged, at least consumer demand, and employers just thought, "Okay, now it's time to quickly staff back up." And we're just still in an environment where there's high level demand for new hires, but also at the same time we're seeing really high levels of quits. So there's this desire to backfill for the people who left. So we're just in some ways a self-sustaining environment of really high demand for workers. And that is, I think, different from what we're seeing back in 2018, 2019 when it was a more slow and gradual recovery. And that's why the labor market just feels and is much tighter than it was back then.

Mark Zandi:                      Okay. So right now, according to JOLTS, the, again, job opening labor turnover survey, there's a little over, I believe, 11 million unfilled positions and there are, I believe, 7 million number of unemployed. So you divide one by the other, it's not quite two times. What is that? One and a half times. Something like that.

Nick Bunker:                     Yeah, I think the latest data was it was just under two.

Mark Zandi:                      Was it just under two? What am I missing? Or maybe it's 5 million unemployed.

Nick Bunker:                     Yeah.

Mark Zandi:                      I think it's 5 million unemployed. Yeah, sorry I miscalculated. So it's around two, let's say. And then you're saying pre-pandemic it was elevated, it was probably like one and a half.

Nick Bunker:                     It was 1.2, 1.3. Which, JOLTS only goes back to the end of the year 2000. But 1.2 was the all-time high for that series over that almost 20 year period. And then obviously now it's even more elevated. I think what's also interesting is that if you look at that ratio, it obviously spiked or dropped significantly in the spring of 2020.

Mark Zandi:                      Pandemic.

Nick Bunker:                     The pandemic. But if you think about how the unemployment rate rose so much, it was lots of people on temporary layoff and those are people who get recalled and job openings are for, at least the way you think about it and BLS is trying to capture, is that it's demand for new hires. So recalls don't get counted when they ask employers about open positions they say, "But recalls don't count for this." So if anything, if you take away those temporary layoffs, that ratio didn't really dip that much because demand dropped, but the huge rise in unemployment was mostly for temporary unemployment. And you actually see it does line up with some of the wage growth measures like the ECI. It drops in 2020 but not to the extent that it dropped back after the global financial crisis.

Mark Zandi:                      The employment cost index, ECI, that's like the gold standard for wage growth because it controls for wages, because it controls for occupation, industry mix, that kind of thing, which is a little over 5% as well. Okay. So it sounds like your favorite go-to measure of labor market slack, how tight is the labor market, is that you look at unfilled positions, divide by unemployed, that's a pretty good rule of thumb for how tight the labor market is.

Nick Bunker:                     I'd say for thinking about the differences between 2019 to now, I think that's in my top tier. I would also put, and I think the one that would go slightly above that, is the quits rate. So the share of people who voluntarily left their job in a month. There's a pretty strong correlation between the openings rate and the quits rate and I think the quits rate has a clear pass through connection with wage growth. Because if you think about it, a lot of wage growth happens when people are leaving their old jobs and taking new ones. So I think that if you look at the different industries over the pandemic era who've seen some of the fastest gains in wages, it's also the sectors that've seen some of, proportionally, the biggest rises in their quits rate. So leisure and hospitality, which has seen tremendously fast wage growth also saw very large rise in quitting. So I think, of those metrics, I would weigh up or rank fairly highly and the quits rate I think would be up there near the tip top.

Mark Zandi:                      The other thing I've observed in the JOLTS, and I'm wondering if you see the same thing in your data, is the increase in unfilled positions is across the board. The only industry in the JOLTS where we haven't seen a huge increase in unfilled positions is construction I believe. But other than that it feels like it's up a lot. Healthcare, financial services, professional services, manufacturing, retailing, you mentioned leisure/hospitality. Do I have that right?

Nick Bunker:                     So in our data it is a very similar trend that the differentiation there, it's just how much things have grown, not whether or not they are above the pre-pandemic level or below it. And that I think was, that's the case now. Back in late 2020, early 2021, that was not so much the case, but really it was that spring of 2021 where you started to see things really explode when it came to job postings on our platform. But also I think that characterizes the JOLTS openings data pretty well.

Mark Zandi:                      What about regionally? Do you have any sense of this across the country? Is it uniformly coast to coast?

Nick Bunker:                     So we're able to look at our data by metropolitan area, so MSA, and one thing that we noted and is still the case now is that a lot of the larger metros have seen slightly weaker job posting growth than other parts of the country. And part of that is compositional. Some sectors have bounced back or occupational groups bounce back much quicker than others. And so some of the hospitality and tourism or even some of the loading and stocking. So that's warehousing jobs, those have bounce back quite a bit and they tend to not be concentrated in some of these bigger metros. But also one thing that we saw in our data fairly early on, the bounce back from the pandemic, was that we were seeing weaker growth in job postings for food service and retail jobs in some of these big metros, which also were metros that tended to have more uptake of remote work.

                                             And this is actually something we saw in, you can see in our UK data too, where basically cities or metropolitan areas where there was more remote work or even more direct measures of fewer people going into downtown business districts, you were seeing weaker growth in postings for food service and retail jobs. Where if you think about it, there's less demand for going to a lunch spot or an after work happy hour place if there's fewer people in the downtown area. So it looks like that sort of shift in movement of people within metro areas was having a spillover effect when it came to demand for positions that basically relied on people going to those areas.

Mark Zandi:                      So it's up everywhere, but you're saying not up as much in big urban centers where remote work might be an issue. That people have left those big cities and moved to other parts of the country

Nick Bunker:                     Essentially. Yeah.

Mark Zandi:                      Yeah. What about globally? Do you see the same thing? I think you mentioned you're in six or seven countries. Are you seeing the same thing across all six, seven countries?

Nick Bunker:                     Roughly.

Mark Zandi:                      Roughly.

Nick Bunker:                     So we are seeing that demand or postings on Indeed are elevated across the seven markets that we've been tracking throughout the pandemic, it's just the extent to which they have risen. The US definitely saw much more rapid growth early in 2021. So that initial stage of the reopening of the economy, but now I think we have seen some fading in the US in job postings on our platform. But Canadian job postings have held up more than others.

Mark Zandi:                      We know that. We were in Toronto and we were listening to clients in Toronto and some of the stories were pretty incredible. Trying to hold onto labor, talk about a quit rate. They were really having trouble.

Nick Bunker:                     Yeah. So especially in 2021, a lot of what we were seeing was that there were trends that were starting, you'd see it happen first in the US and then UK and Canada and then continental Europe where it was demand started surging, our posting started picking up, and sequentially went along the line. And even just anecdotally, because a lot of our economists also talk to clients of Indeed as well, and the stories about, "Hey, we're having hard time feeling a lot of positions," and then concerns about labor force participation. You start, again, it follows the same route of which markets it was happening in.

Mark Zandi:                      Let me ask you about a pet theory I have, which I can't prove one way or the other, but it doesn't mean I can't hold to the pet theory, but maybe you can disabuse me of this. Is that not all job postings are equal, I would call them soft openings. The economy reopened a year ago, now a little over a year ago, spring of '21, everyone back to work, posted a lot of job openings, and once you put up, as an employer, you put up openings, you're reluctant to take them down. You can do a lot of things to keep them up, but navigate around. So for example, just don't hire anybody until the next budget year or downgrade the position effectively from a high skilled to a medium skilled or a medium skilled to a low skilled. Not all job postings mean the same thing. Can you measure that or do you have any sense of that? Do you think that's having any impact on what we're observing?

Nick Bunker:                     Yeah, so I think I broadly agree that not every posting is equal to other postings, but I think there are ways that we've looked at our data to try to understand how much that has shifted. So on that first point, the idea that there are some, I've heard people refer to this as perma-postings, that people just put up a posting and let it sit on the platform.

Mark Zandi:                      Oh I like that. That's a great way of describing it. Perma-posting.

Nick Bunker:                     So one way that we try to account for that in our data is that, so I've been talking about the series that we create job postings, that's the total stock. We also do create a series that what we call new job postings. So it's postings that have been on Indeed for seven days or less. So it's more of a flow metric. So you imagine if there's those perma-postings, they're just not included in this metric because we can see how many days a posting's been on Indeed. So we track what that measure has done.

                                             And over the course of the pandemic it's been more volatile, it's a smaller share of postings, and it led the way down and it led the way up, but the trends are basically very similar where it follows the same course. So I think when it comes to recruiting, there's definitely some postings that endure for quite some time, but we have a metric there that shows when it comes to just new postings, it paints a very similar picture of what's happening to at least hiring intentions. And also that there could be those perma-postings, but even if we were to see an increase in the duration of job postings on our platform, it could be reflective of some of those tactics, it also could be reflective of just it's harder to hire for those positions in that there's a thinner or tighter market for a hire so it's going to take you more time to fill that position. So that could be one. But I do think that the new postings accounts for that.

Mark Zandi:                      So your sense is that that's not a significant phenomenon here, that we can't discount the level of postings compared to where we were a year ago or that that's not right. That the postings we're seeing now are as good a posting as was about a year ago, roughly speaking.

Nick Bunker:                     Yeah. And that that phenomenon existed back in 2019, existed now, and I've not seen any indication that it has become more common or more prevalent than it was back before the pandemic.

Mark Zandi:                      Okay, interesting.

Cris deRitis:                       Do you see any differences by sector or occupation along those lines? So is the banking sector more likely to have a lot of perma-postings or has that trend shifted than other sectors like services?

Nick Bunker:                     So we haven't done any direct analysis or coming up with a metric of the perma- posting share of Indeed postings or anything like that. We do look at those new postings by sector and for the most part, like the aggregate series, the new and total postings roughly move in line. So my read is that, at the sector level, it doesn't look like there's been a significant change in the cross section, or within a sector it doesn't look like there's been a material change there either.

Cris deRitis:                       So no real composition shift, that's what I'm hearing.

Nick Bunker:                     Doesn't look like it. Yeah.

Cris deRitis:                       Okay.

Mark Zandi:                      Yeah, we need an ECI for Indeed's job postings.

Nick Bunker:                     Yes. So that actually is something that we have not done. We have not released this for the US yet, but my colleagues in the UK have used data on salary and wage information in Indeed job postings and have calculated basically a compositionally adjusted measure of growth in offered wages in postings. And it does look like it sort of leads.

Mark Zandi:                      I have so many questions. I've got so many questions and I've got so much ground we want to cover. I'll ask one more in the weed kind of question.

Nick Bunker:                     Sure.

Mark Zandi:                      And this goes to my ignorance around your business model. Do employers pay you a fee for the posting? So they're, like Moody's could have a posting but we're not going through, I don't know if we go through Indeed or not, probably not, there's no penalty to keep that posting up there per se. But if I'm paying you a fee, Indeed, there's a penalty and therefore you might not see the perma-postings. Do you see where I'm going with this?

Nick Bunker:                     So the idea being that if you're not a paying customer of Indeed... Let put it this way. The way that a posting shows up on Indeed, you could be a paying customer or not, what Indeed's trying to do is capture all the job postings on the internet, putting it in one spot so job seekers can find it. So if paying customer or not, it's going to show up on our platform and there's rules for the platform, that try to be applied consistently, so that if there has been a posting on the platform, even if it's not put on the platform by an employer, someone at Indeed's saying, "That's been up there for X period of time. Let's [inaudible 00:47:51] something about it."

Mark Zandi:                      I have to say now I'm getting the real sense of why you took that job. This really is interesting. You've got a lot of really cool stuff to look at. I got two more things I want to.

Ryan Sweet:                      Hey, Mark, Moody's does have postings on Indeed.

Mark Zandi:                      Oh do we?

Ryan Sweet:                      Mm-hmm.

Nick Bunker:                     Well thank you.

Mark Zandi:                      That's great.

Cris deRitis:                       Maybe unpaid is what I'm hearing.

Mark Zandi:                      It could be unpaid. I don't know actually. I have no idea.

Cris deRitis:                       We don't know.

Mark Zandi:                      I have no idea. I have two more questions about this then I'd like to play the statistics game and I have a sense you're going to be really good at that. I can feel it in my bones. There you go. Fingers crossed. And then I want to come back and talk about remote work and we got to all do that. We've almost been talking for an hour, I can't believe it. It feels like this is going so fast. But my two questions. First question is how do you square that compared to other measures of labor market slack? Like Ryan's favorite measure is the employment population ratio for prime age workers, the rule of thumb there is 80% EPOP, prime age 25 to 54, we're at 80.3, which says, "okay, you're within spitting distance of where we should be." Or labor force participation. Or the other one is the fact that we're just creating so many jobs. How can the economy have a problem with labor market slack if it's creating three, 400, 500,000 jobs a month? I mean that doesn't feel like a labor market that's running out of people. So how do you square that in your thinking about this?

Nick Bunker:                     So earlier in our conversation you said you were confused about this data of the labor market and I have to admit that I think about this a lot and there's lots of conflicting signals. But I have a story in my head that tries to square as much of that as possible. So I'll say that like Ryan I'm a big fan of the prime age employment to population ratio. I think before the pandemic, back in 2018, 2019, if you'd ask me what would be my top measure of labor market slack, I would've said that.

                                             But I think what happened is we just entered a dynamic where the recovery we saw after the global financial crisis in the labor market was sort of a slow and steady one where demand was growing slowly but steadily and supply was coming back with a lag. And I think that's happening right now. Just everything has been turbocharged and sped up. So that demand, which leads supply in labor market, just went firing ahead really quickly and there have been a variety of factors, especially in the depth of the pandemic and the immediate aftermath, as we transition out of the acute phase that really held back participation. And some of them are fading.

                                             So fear of the virus itself, even after vaccination, looked like there's evidence there. There's some of these excess savings or financial cushions that seem to have helped some people ride out not working. And then also some childcare issues, which at least compared to pre-pandemic baselines, have faded. So it was a very quick rise in demand and that is why I think measures that account for either the level of demand for workers or job to job flows are better capturing what's happening in the labor market right now rather than a recovery that's a slow and steady drawdown of supply.

                                             So I think that is the story that I tell myself. That it's just the speed of the recovery. Even if there's the destination, we're not quite at the level. So I think it's more of, to put in another way, is the tightness or the temperature of the labor market is being driven now by the speed at which it's moving, not its distance from its final destination. So that, as things slow down, you might get a fading in the tightness of the labor market or that temperature might decline a little bit, but it'll get back to where you would've expected if the prime age employment to population ratio gets back to that pre-pandemic or a little bit higher. So it's overshot what you would think given supply at the level of supply or level of employment because of the speed of the recovery.

Mark Zandi:                      Okay. Very interesting. So now last question on this, unless Chris or Ryan want to explore something in more depth, but the crux of the matter, wage growth and ultimately inflation. And if you go back before the pandemic, you do a nice scatter plot over time comparing employment cost, index growth vis-a-vis EPOP 25 to 54, just one axis is EPOP, the other axis is ECI, this is the Adam Ozimek, if you know Adam.

Nick Bunker:                     I do.

Mark Zandi:                      I'll call it the Adam Ozimek line or relationship.

Nick Bunker:                     The Ozimek curve. Yeah.

Mark Zandi:                      He'll love that. He'll love that. The Ozimek curve. It did a beautiful job. The relationship was very strong, you could see it. Now you put the pandemic quarters in the chart, it's like a level shift up. It's like just a literal level shift up. And my theory up to this point has been, well that's a one-time level shift. Gas prices, oil prices surge, gas prices surge, food prices surge, going back to the Russian invasion. We had all these shortages because of the supply chain issues, vehicle prices, workers said to employers, "Hey, look what's happening here. Give me a bump to my wage." And so you see this level shift up in wage growth, and if that narrative is correct, that diagnosis is correct, then now that oil prices are back in and we start to see the inflation for food and vehicle prices, all the things that we're pretty confident are going to happen here, assuming the invasion doesn't go down a dark path or we get another problem with the pandemic, we're going to see that wage growth come right back to the Ozimek curve. And life is good. We don't need to see the Fed jack up interest rates to a place where we're going to push [inaudible 00:54:24] economy. What do you think of that theory?

Nick Bunker:                     So I have similar thoughts, but I think for me, the story of how we get back the Ozimek curve, and I hope Adam really enjoys this, is that [inaudible 00:54:37].

Mark Zandi:                      Oh he will.

Nick Bunker:                     Oh he will.

Mark Zandi:                      Oh he will. He's going to tweet about this. I can feel it.

Nick Bunker:                     He better.

Mark Zandi:                      He better tweet about it.

Nick Bunker:                     Yeah, he better.

Mark Zandi:                      Because you're a big Twitter guy too I believe.

Nick Bunker:                     I am unfortunately.

Mark Zandi:                      What's your Twitter handle?

Nick Bunker:                     It's just Nick Bunker.

Mark Zandi:                      Okay. You see how I'm helping you advertise here, Nick.

Nick Bunker:                     I appreciate that. Thank you.

Mark Zandi:                      And I'm @MarkZandi. I'm just saying.

Nick Bunker:                     Plug everyone.

Mark Zandi:                      Ryan's rolling his eyes.

Cris deRitis:                       Knew that was coming.

Mark Zandi:                      Yeah, absolutely.

Cris deRitis:                       It's been awhile.

Mark Zandi:                      Anyway, sorry, Nick, I interrupted you. Go ahead.

Nick Bunker:                     No worries. So I think that my view of that is that one of the things that differentiates 2019 and 2022 labor markets, even if they have somewhat similar employment to population ratios for prime age workers, is that the quits rate's much higher. That within employment there's far more churn. And particularly in sectors that already had lots of voluntary churn, so quits. So leisure, hospitality, retail. So I think some of that dynamic is those sectors that's not reflected in that metric. Because an employed person is an employed person in that metric, doesn't account for lots of churn within that metric.

Mark Zandi:                      I see.

Nick Bunker:                     A story I could tell is that we start to see the quits rate start to really fade from the still high levels we're seeing right now. It has faded a little bit this year, but still well above pre-pandemic levels. That could start to come down. I think the issue there is that some of the sectors that have seen the biggest rise in churn, that have seen some of the strong wage growth, are in sectors that aren't necessarily directly affected by interest rates. So if the Federal Reserve trying to cool down wage growth, their tools might not be well equipped just because a lot of staffing in leisure and hospitality, it's hard to see the direct pass through from higher interest rates necessarily to fewer people going out to restaurants.

Mark Zandi:                      I have this bad feeling when we get to the odds of recession where Nick is going to land on this. I'm just getting that dark foreboding feeling. Okay.

Cris deRitis:                       All right.

Ryan Sweet:                      I don't think you need to worry about Nick, I think you got to worry about Chris.

Mark Zandi:                      Oh yeah.

Cris deRitis:                       Oh, we already had a conversation last night.

Mark Zandi:                      We already had a lengthy conversation about this. Yeah. What was I going to say? Oh, the game. We're going to play the statistics game now and that is, just to remind everyone, I know people get annoyed who've listened to the podcast before, but tough. I'm the moderator. How do you play the game? Oh, the game. Each of us give a statistic, the rest of us try to figure it out with the clues and questions, deductive reasoning. The best statistic is one that's not so easy that we get it slam dunk, not so hard that we never get it. And this is where I go off the rails a little bit. It has to be related to what we're talking about and the statistics of the week sort of. That would be nice. Okay. Chris, I'm going with you first. Let Nick absorb this. You're up. What's your statistic?

Cris deRitis:                       You want easy but clearly highly relevant or hard and [inaudible 00:57:55]?

Mark Zandi:                      I want one that I can get, Chris. Before Ryan gets it.

Ryan Sweet:                      I want one you guys didn't talk about last night.

Cris deRitis:                       I'm going to go hard. [inaudible 00:58:06]. Nick is tough so I'm going to go tough.

Mark Zandi:                      No we didn't collude. There's no collusion in this thing. Every man for himself.

Cris deRitis:                       Okay. I'm going to give you [inaudible 00:58:18].

Mark Zandi:                      Or women.

Cris deRitis:                       Three. This is a tough one.

Mark Zandi:                      What?

Cris deRitis:                       Three related statistics.

Mark Zandi:                      Oh, okay. I thought the statistic was three. Okay.

Cris deRitis:                       No. 15.8%, 61.2%, and 188.8%.

Mark Zandi:                      Oh goodness. And they're related.

Ryan Sweet:                      My guess is Chris is going different CPIs by country?

Cris deRitis:                       It is CPI. No, not by country.

Mark Zandi:                      Oh, oh, oh.

Ryan Sweet:                      By country. 188.8.

Mark Zandi:                      Kind of sort of, but not all CPIs. One of them is a CPI.

Ryan Sweet:                      Are these natural gas prices?

Cris deRitis:                       Oh, you got natural gas price. Which one? Which one's natural gas?

Mark Zandi:                      108.

Cris deRitis:                       188 is natural gas. For which area?

Mark Zandi:                      Europe.

Cris deRitis:                       Yes.

Mark Zandi:                      I'd say that's the price at the Dutch port. You know what I'm talking about?

Cris deRitis:                       Yeah. That's the standard if you will.

Mark Zandi:                      The [inaudible 00:59:15]. I get some credit for that, don't I?

Cris deRitis:                       No.

Mark Zandi:                      Damn. Okay. But that's only one of the two.

Cris deRitis:                       That's only one.

Nick Bunker:                     Are the other two also energy price related?

Cris deRitis:                       They're all energy price related.

Mark Zandi:                      Okay. Got you.

Ryan Sweet:                      What were the numbers again?

Mark Zandi:                      15.8 is the increase in US natural gas prices.

Cris deRitis:                       Oh no, but you're close. You're getting...

Mark Zandi:                      It's the middle one. What was the middle one?

Cris deRitis:                       Yes.

Mark Zandi:                      It's the middle one.

Cris deRitis:                       61.2

Mark Zandi:                      61.

Cris deRitis:                       The year over year increase in US natural gas.

Nick Bunker:                     15.8%?

Mark Zandi:                      [inaudible 00:59:52] oil? No?

Nick Bunker:                     It's not US gas. Is it US related?

Cris deRitis:                       It is US and it's CPI related. This is [inaudible 00:59:57].

Mark Zandi:                      Oh, back to CPIs.

Ryan Sweet:                      Oh is this food?

Cris deRitis:                       No.

Mark Zandi:                      It's got to be energy related, right? Electricity prices or something?

Cris deRitis:                       Yes.

Mark Zandi:                      Oh, okay. I get credit for that. Geez.

Cris deRitis:                       Yeah, you get that one. Yeah.

Mark Zandi:                      Oh my gosh. That's amazing. Who got that? Okay.

Cris deRitis:                       I think it was a team effort there.

Mark Zandi:                      Team effort. Yeah. Nick, Nick, where were you? Come on, man.

Nick Bunker:                     I clearly need to read up more on energy prices. Cover that well enough.

Mark Zandi:                      No, the trick here is not to read anything.

Cris deRitis:                       Deductive reasoning.

Mark Zandi:                      Deductive reasoning. Yeah.

Cris deRitis:                       So 15.8% electricity price year over year. That's big, right? That's not inconsequential. And on top of that, the natural gas prices are even higher than that. 61% in the US, 188, 189% in Europe. So consumers haven't even really felt the full effect of the higher gas prices on electricity prices. About 40% of US electric generation is from natural gas. But because we have regulated utilities or limits on how high the prices could go. So my fear is that this is one of those other factors that is going to continue to weigh on inflation going forward. Even as gas prices normalize, if they do, at a higher level still utility prices could continue to rise as those rate hikes filter in. [inaudible 01:01:27].

Mark Zandi:                      Oh sorry. Go ahead, Chris. Go ahead. Sorry.

Cris deRitis:                       The other statistic related to this that came out this week was a study that about 20 million households are behind on their utility bills. So that is certainly an ominous sign.

Mark Zandi:                      Well what's it typically, Chris? Do you know?

Cris deRitis:                       I don't.

Mark Zandi:                      Okay.

Cris deRitis:                       It sounded like it's elevated.

Mark Zandi:                      Sounds elevated. Yeah. Well, because I look at things glass half full I should say, is that it feels like natural gas prices have peaked here. They can't go much higher, at least in the United States, because of the capacity constraints on LNG, liquefied natural gas. Because the natural gas prices have risen here a lot because we've been shipping natural gas to Europe where they're obviously very high because they got cut off from Russian natural gas. But there's a physical constraint on how much can be shipped. We're at that constraint and therefore the natural gas is now bottled up here in the US, you can't do any more arbitrage, and therefore the price has peaked. Does that resonate?

Cris deRitis:                       I think for now. And also the demand maybe is moderating in Europe to some degree. They are at or close to their capacity.

Mark Zandi:                      [inaudible 01:02:37]. Yeah. Right.

Cris deRitis:                       Yeah. So I'm not particularly concerned. Obviously you should be concerned about anything that could happen, but I think we're in reasonably good shape now as we go into this winter. I'm actually more concerned as on the other side of this as we get to the spring and summer of next year. Europe would usually be filling up their tanks with Russian gas at that point. Much of the gas in their tanks today is already Russian gas. So what happens then if we are still in this situation where there's no gas provided by Russia? The US is going to try to supply the world at that point, but I think that will continue to put significant demand on prices. Maybe prices don't go up significantly, but I don't see them coming back down anytime soon as well.

Mark Zandi:                      Yeah. Makes sense. Hey, Nick, you want to go next?

Nick Bunker:                     Sure thing. So my statistic is 17.9%.

Mark Zandi:                      Is it labor market related?

Nick Bunker:                     Yes.

Ryan Sweet:                      Did it come out this week?

Nick Bunker:                     It did.

Ryan Sweet:                      Ooh.

Cris deRitis:                       Oh.

Mark Zandi:                      Is it an Indeed number or is it a government statistic?

Nick Bunker:                     It's a government statistic.

Mark Zandi:                      Okay. 17 point.

Ryan Sweet:                      That would've been good though, to use an Indeed number.

Nick Bunker:                     Yeah, I thought about it, but I didn't want to be that much of a shill.

Mark Zandi:                      That's all we do here.

Cris deRitis:                       You would've gotten quite a bit of harassment.

Nick Bunker:                     Yes, I figured that as well.

Cris deRitis:                       Sort of like cheating.

Mark Zandi:                      17.9%. Labor market related. Came out this week.

Cris deRitis:                       Unemployment insurance claims related?

Nick Bunker:                     Nope.

Cris deRitis:                       No. That's a stab.

Mark Zandi:                      Did it come from the NFIB survey? The small business survey?

Nick Bunker:                     Nope.

Mark Zandi:                      Nope. Okay.

Ryan Sweet:                      Nick might be going like the American Time Use survey.

Mark Zandi:                      Oh really? That came out this week?

Ryan Sweet:                      I don't know. I'm just [inaudible 01:04:24]. I don't know. Not much came out. Labor market related.

Mark Zandi:                      [inaudible 01:04:27]. That's why I'm a little flummoxed.

Cris deRitis:                       That's where we're struggling.

Mark Zandi:                      Labor market related. With the rail strike?

Nick Bunker:                     Not with the rail strike.

Mark Zandi:                      Any other strike? It's related to strike action.

Nick Bunker:                     It's not related to strike actions.

Mark Zandi:                      Gosh.

Cris deRitis:                       Unions.

Ryan Sweet:                      Mark was getting excited there.

Mark Zandi:                      I was getting so excited. Yeah.

Nick Bunker:                     Almost had it.

Cris deRitis:                       It came out this week.

Mark Zandi:                      Yeah. Can you give us another hint?

Cris deRitis:                       It's a regular series? It gets released regularly.

Nick Bunker:                     So it is a new statistic from a regular series.

Mark Zandi:                      Oh, that's interesting.

Cris deRitis:                       Oh, it's going to be good.

Mark Zandi:                      Yeah. We're going to learn something here.

Cris deRitis:                       Used it [inaudible 01:05:05]. Claims not.

Mark Zandi:                      Oh. Can you give us another rough hint?

Ryan Sweet:                      Yeah.

Cris deRitis:                       It came out from the Census Bureau.

Mark Zandi:                      That's a good one. That's another good one. Yeah. I don't know.

Ryan Sweet:                      I'm stumped.

Mark Zandi:                      You're stumped.

Cris deRitis:                       Drawing a blank.

Mark Zandi:                      Drawing a blank. What is it, Nick?

Nick Bunker:                     Yeah, so this is from the Census Bureau released a new data from the American Community Survey. So 17.9% was the share of people who worked primarily from home in 2021, which is up from 5.7% back in 2019.

Mark Zandi:                      Oh that's a great statistic.

Ryan Sweet:                      That's an awesome one.

Cris deRitis:                       That's excellent. You should get a cowbell just for that.

Ryan Sweet:                      We'll give you a cowbell.

Mark Zandi:                      Yeah.

Nick Bunker:                     Thank you. Thank you.

Mark Zandi:                      Very, very well done.

Ryan Sweet:                      Very deserved.

Mark Zandi:                      In fact, I feel [inaudible 01:05:48].

Nick Bunker:                     It met all the criteria. All the criteria.

Mark Zandi:                      I feel a little ashamed for Ryan and Chris for not getting that.

Nick Bunker:                     So I thought this one was relevant for obviously remote work, which is something on the docket for us to talk about. But also the fact that when it comes to official statistics on the number of people actually working remotely, it's been a bit tricky to track that because in May of 2020 the BLS and Census added this question to the household survey on the jobs report asking about people working remotely, but the way they phrased that question was because of the pandemic. So that number has been drifting down over time, but mostly that's probably people saying, "Well I'm not doing it because of the pandemic anymore." So this metric accounts for that by asking people do you work primarily from home. And it's more than triple. It's tripled over a two year period. And I also like that it's phrasing about primarily at home as opposed to just working remotely, which I think is a bit more wishy washy.

Mark Zandi:                      So this is from the American Community survey.

Nick Bunker:                     Correct.

Mark Zandi:                      And we only have two data points? One from 2021 and one from...

Nick Bunker:                     2019.

Mark Zandi:                      Oh, 2019. Sorry.

Nick Bunker:                     Yeah. It was 2019 to 2021. That is the number that was in the press release from the census and I was trying to find the actual underlying data but I couldn't find it quite yet. But I imagine there'll be micro data sometimes soon.

Mark Zandi:                      Yeah, we take a close look at that. That's fantastic. Okay, well let's do one more because we got 15 minutes left and I do want to talk a little bit about remote work. Can I ask Nick though, can we have you back? Because we're running out of time.

Nick Bunker:                     I would love to be back.

Mark Zandi:                      We're not going to have time to dig into the remote work thing as much as I'd like. Is that okay? Would you come back relatively soon?

Nick Bunker:                     Totally.

Mark Zandi:                      Okay. All right. You wouldn't tell me otherwise on. He's going to send me an e-mail. Mark, I'm not so sure I want to come back.

Nick Bunker:                     I'm not going to reverse my opinion on this. I'd be happy to come back.

Mark Zandi:                      Okay. Very good. One more. We'll do Ryan. Ryan, you go next.

Ryan Sweet:                      All right. So it's a goose egg. Zero. 0%.

Mark Zandi:                      Okay.

Nick Bunker:                     CPI related?

Ryan Sweet:                      It is not. Prices affect this thing, but it's not directly in the CPI.

Mark Zandi:                      It's price related.

Ryan Sweet:                      It's not price related.

Cris deRitis:                       Retail sales related?

Ryan Sweet:                      It is retail sales related.

Nick Bunker:                     Is this the control the group for retail sales?

Ryan Sweet:                      Yep.

Nick Bunker:                     Yeah.

Mark Zandi:                      0%.

Cris deRitis:                       Oh I told you he's a rock star.

Mark Zandi:                      He's on fire.

Cris deRitis:                       He's a rockstar.

Nick Bunker:                     Thank you. Thank you.

Ryan Sweet:                      [inaudible 01:08:21] unchanged and July was revised lower. So it was up 0.8% initially, now it's up 0.4. And why this is important, this feeds into the zero.

Mark Zandi:                      Can you just explain?

Ryan Sweet:                      Oh yeah. So control retail sales is total retail sales excluding autos, building materials, gasoline, and restaurants. So this feeds into the government's estimate of real consumer spending. So with the revision to July, the new August data, real consumer spending is on track to rise less than 1% annualized in the third quarter. This might not be a very good reflection of the entire state of the consumer, because we're shifting away from goods, stuff, which is retail sales, into services. So we'll get services data later this month, but right now spending looks a little soft in the third quarter and that lowered our tracking estimate for GDP from 1.7 to 1.1% annualized. So it's kind of the same pattern that we've seen in each of the last two quarters. We started off and then as the source data came in, we just started nose diving. So you know what I'm going to say? You get a third quarter.

Mark Zandi:                      Oh no. [inaudible 01:09:28] kill me. Then, oh geez.

Ryan Sweet:                      So if it declines, I got this question at a presentation I gave and it was an interesting question. If we get three consecutive. And I said it depends on what drove the decline. If it's inventories in trade again, then no I wouldn't say it's a recession, but it's going to be harder and harder.

Mark Zandi:                      Oh my gosh. Oh right. Okay.

Cris deRitis:                       The job [inaudible 01:09:57] recession.

Mark Zandi:                      One question you might not know the answer to, quickly, is retail price inflation. Because for retail goods, inflation can be very different than for the CPI. They're obviously going to be tied to each other, but do you have any sense of that? What's the inflation rate for retail goods in the retail sales report?

Ryan Sweet:                      That's a great question. I don't know off the top of my head, but I can look it up for you.

Mark Zandi:                      Yeah. We should start seeing some weakness there because of all the...

Ryan Sweet:                      I think we have.

Mark Zandi:                      Yeah, we have. Okay.

Ryan Sweet:                      So that goods disinflation is happening, it's just not as significant as I think we were anticipating.

Mark Zandi:                      And this is really into the bowels, but quickly, in the tracking GDP tracking, are you using overall inflation or are you using retail goods inflation?

Ryan Sweet:                      We use retail goods inflation.

Cris deRitis:                       You are? Okay.

Ryan Sweet:                      So the model, I run it and it spits out the number and I can go into the model and look at what the retail inflation is, but we map it too. The high frequency model is a bean counting approach. We use a similar methodology as the BEA uses to calculate GDP.

Mark Zandi:                      Okay. All right. Okay, let's move on. Just for sake of time, I had a great statistic but I'm not going to give it to you because I want to get to remote work. So, Nick, maybe you can just riff a little bit here and just give us a general sense of your take on remote work. Obviously it's becoming more of a deal, 17.9% in, I think you said that in 2021. That's a pretty significant rising. So what do you think? Is this here to stay and what does it mean?

Nick Bunker:                     I think it's very much here to stay. That I think what we saw, prior to the pandemic, I think for a lot of jobs there was this potential for jobs to be done remotely. And by remotely, I mean totally untethered from location within the US or the situation I'm in, but also more hybrid work. So people working more days remotely but still going into the office from day to day. The potential was there, it just took... Zoom existed, I've been using Zoom since like 2018, video conferencing. The technology was there, we just needed a shock and unfortunately the shock that we got was the pandemic.

                                             But what we've seen is that at least the acute phase of the pandemic is now over, people are starting to leave their homes, go to offices, but we're still seeing remote work endure. And this is something that we can see in Indeed data that we have. We've been tracking the share of postings across a number of markets that mention terms related to remote work. So the share of postings that are advertising remote work and that jumped up significantly in the early days of the pandemic, but has not drifted down. It's come down a little bit, but still very elevated. In the US in 2019, it's about two and a half percent, somewhere in the two, two and a half percent of postings mentioned those terms, now it's 8.8%. And so it's been a significant rise. And that's something that we're seeing hold up across markets.

                                             Some of my colleagues did a joint report with the OECD on this and you look across 20 different markets that Indeed has coverage of and you can see a similar trend that restrictions and lockdowns happen in the spring of 2020, remote work really rose, that there has been some gradual shift down, but there's been no significant retreat of it even as we're starting to get closer to a post pandemic life. It looks like the adoption is pretty sticky.

Mark Zandi:                      Yeah, I don't see this. I think it feels like a game changer to me. It's going to happen, it's going to flow. I assume as office buildings reopen now here in New York and LA, San Francisco, and CEOs are adamant that they get their folks back into those towers, that we're going to see maybe some unwinding, but that doesn't feel like that's the trend. The trend feels like we're going to continue to see more remote. And people want it, workers want it. And given the state of the labor market and given it feels like we're going to have labor supply issues for a long time to come given demographics, workers have the upper hand in these kind of negotiations, they're going to get it.

Nick Bunker:                     Yeah. And what we can see is we're also tracking searches on the Indeed platform, the share of those searches that are for those remote work key terms to understand job seekers' interest. And that is a little under 10% of all searches on Indeed right now in the US. Again, I think that's more than four times what it was before the pandemic and that has not directed down nearly as much.

                                             But what's also interesting is that there has been a decline in the share of postings that mention remote work or advertise remote work beginning of this year. But a lot of that is a compositional shift. That we've just seen postings pull back more in software development, other tech related jobs. But if you look inside of those kinds of jobs, the share of those postings that advertise remote work has basically held constant over time. And for software development it's just south of 40% advertised remote work and there's a possibility that more of those jobs are remote or flexible in some way, but just don't advertise it.

                                             So it does look like it's one sector, it's one particular remote friendly sector, but even as demand for workers or as postings have come down, there hasn't been a shift within that sector. So it's not as though some of those employers are recruiting and becoming less willing to advertise remote work, it's just that they're pulling back in general.

Mark Zandi:                      Yeah. The other narrative I have in my mind, I'm just curious what you think, is that with technology, as it continues to improve, and also as businesses form, they're more likely going to optimize around remote work. They're not going to optimize around the cube or an office space. That those two dynamics, the technology and business formation, that's just going to reinforce this move towards remote work over time.

Nick Bunker:                     Yeah. If you think about it, I think one of the barriers still at this point to remote work is just for incumbent or existing businesses. They had a way of doing business before the pandemic that was pretty reliant on people being in the same spot and having face to face meetings. So if you have new companies and all they know is a remote first or hybrid first world, there's ways they can set up the structure of their company to be more remote friendly. And maybe some of that is even within a company, there's distinction within certain job types that yeah there's some jobs within a company that need to come into the office just because face to face interaction with clients is really important, but there might be some jobs within the same firm that management decides it's fine if you just video conference in for certain calls or just visit the office a few times a year.

                                             So I think that distinction between, even within a company, the certain kinds of jobs or occupations that could be done and then also how much of the future of remote is hybrid. So just stay in the same metro area versus fully remote. Because for the most part the rise has been a lot of hybrid work even if there has been an increase in people who have, myself included, moved to different metro areas over the past two plus years.

Mark Zandi:                      Well here's the money question. Is this positive for productivity or negative for productivity? I mean you've got the CEOs on one side of this, seemingly, and I'm painting with a broad brush office, not every CEO, but you've got some pretty vocal CEOs saying people are taking advantage, they're shirking, it's hurting productivity, it's hurting young workers because of a lack of mentoring, you miss the kind of serendipity, it's the water cooler. I have a hard time saying that because there's no such thing. But anyway. And then you got the economist saying, "Oh, well you look at the data and we don't have a whole lot of data points yet, but they're pretty..." So what do you think? Is this productivity enhancing or productivity impeding?

Nick Bunker:                     So I think if I had to come down one way, I'd be on enhancing. There's the research that I've read and also personal experience has indicated that it's not really been a huge hindrance to productivity. I think Nick Bloom and his guy, Nick Bloom was at Stanford and his co-authors have done some research on the productivity of wider effects and it definitely doesn't look like it has held back productivity.

                                             Again, this is more personal experience, but in terms of serendipity or the digital water cooler, I think that just requires a shift in people's perspective about how you do work. Now my bias is that even before the pandemic I was on a team where very few of us were in the same city, but there's ways that you can do things digitally. It's actually really easy to just chat with someone, be like, "Hey, you want to jump on a call really quickly to talk something through?" And also there's the fact that just because you're based in one area doesn't mean you can't from time to time all meet in person. Our team has done that. Back in July we did a meeting where we all convened for the first time from the pandemic and it was really generative for ideas and lots of great research possibilities came out of it. But you don't need to do team brainstorms every week or every day. You can plan that out and have some of the benefits of those in-person contact, but getting some of the benefits also of more of the day to day work being remotely or done at home.

Mark Zandi:                      Let me ask, because we are running out of time and I have a hard stop, is there an economist out there, or economists out there, that are coming up with opposite results? You mentioned Nick Bloom, I've seen stuff out of the University of Chicago, I've seen your great work on this and others. I've not seen the other side of this, have you?

Nick Bunker:                     I have not.

Mark Zandi:                      Okay.

Nick Bunker:                     I do wonder if part of it is that if there are potential issues, and that's the sort of thing that has been highlighted by, again, broad brush CEOs or senior management, it might be something that doesn't pop up for quite some time. One thing potentially, mentoring or career advancement. Maybe that's something that doesn't show up in the data a few years down line. So maybe it's less, there is no [inaudible 01:20:40].

Mark Zandi:                      Unintended consequences you don't know.

Nick Bunker:                     Unintended consequences. Just reality needs to [inaudible 01:20:46] for us to see that.

Mark Zandi:                      We need time. Yeah. Okay. Definitely I'm going to book you right away to come back on and we're going dig deeper into the remote work. And I had just had a brilliant idea. I don't know what you think. Why don't we get Ozimek on at the same time? Wouldn't that be fun?

Nick Bunker:                     That would be fun.

Mark Zandi:                      Yeah, that'd be fun. Or maybe we can get you two to argue with each other somehow. We'll figure that out.

Nick Bunker:                     I'm happy to do that.

Mark Zandi:                      Okay. I knew you would be. And here's the other thing.

Nick Bunker:                     Adam and I do agree on a lot so it might be less of a situation [inaudible 01:21:21] than you're looking for.

Mark Zandi:                      Okay. Then I'll pick a fight with both of you. I'm really good at that.

Nick Bunker:                     Okay. Cool.

Mark Zandi:                      Yeah, I can do that no problem. And what was I going to say? Oh, probabilities of recession. We can't do it. We ran out of time.

Cris deRitis:                       Oh how convenient.

Nick Bunker:                     The world will never know.

Mark Zandi:                      No, wait. On Monday, don't we have a podcast live in person Podcast? Don't we?

Cris deRitis:                       We do.

Mark Zandi:                      Okay.

Ryan Sweet:                      We'll do it then?

Mark Zandi:                      We'll do it then. Nick, are you really bummed that you couldn't tell us your probabilities of recession? Or do would you like?

Nick Bunker:                     I'll survive. I'll be fine.

Mark Zandi:                      Well, you're coming back and don't worry, this thing about recession's not going away anytime soon.

Nick Bunker:                     I'll refine my estimate so there's four decimal points instead just two.

Mark Zandi:                      All right. You got it.

Ryan Sweet:                      Well, next time you're back we'll probably be in a recession.

Nick Bunker:                     Maybe book me before [inaudible 01:22:13] GDP report.

Mark Zandi:                      Oh yeah, with that GDP number. You're scaring me with that, Ryan.

Ryan Sweet:                      I'm getting scared.

Mark Zandi:                      Gosh. Okay. All right. With that, we're going to call it a podcast. This was a great podcast. Thank you, Nick Bunker, thank you so much for coming on and really enjoyed the conversation. And I'll see you guys on Monday, right? See you on Monday in the office.

Ryan Sweet:                      In the office.

Mark Zandi:                      Yeah, don't get used to it now. We're remote now. Okay. Alrighty.

Ryan Sweet:                      All right.

Mark Zandi:                      All right, guys. Take care. Have a good weekend.