How to speed up labor

At Inspire Brands' Innovation Center in Atlanta, the Flippy robot is taking on a new challenge. The automated worker, made by Miso Robotics, first came onto the scene as a burger solution. Now, it's frying wings for the first time.

The bots, known as Flippy 1 and 2, have been in development for nearly five years, taking on pilots at brands such as CaliBurger and White Castle. The wings iteration is being tested at Inspire's Buffalo Wild Wings brand as a way to ramp up production and speed. The hope is to scale up its usage in 2022 and beyond.

"Our strategy and our vision for automation at Inspire is really not about the labor shortage, it is all about how we increase our capacity," said Stephanie Sentell, SVP of restaurant operations and innovation at Inspire. "The automation that we are looking at will allow us to unlock that and provide faster food to our guests."

But the labor shortage is unavoidable. The National Restaurant Association recently reported that 4 in 5 operators are understaffed. This includes 81% of full-service operators and 75% of limited-service operators. Robotics can help ease the staffing challenges and speed up operations.

A fix for the fry station

Miso said its Flippy 2 can help fill a tough role in kitchens — the fry station.

"The fry station is one of those jobs, it's tough to do," said Mike Bell, Miso Robotics CEO. "It's monotonous, sometimes it's dangerous, and it's pretty repetitive. So it was a perfect opportunity for automation robotics to step in and help brands like Buffalo Wild Wings."

The robot can cost up to $3,000 a month. Miso expects to participate in a dozen pilots with top restaurant chains in the next few months.

And while Flippy gets to work in the back of the house, the Matradee from Richtech can wait and bus tables. The bot, which retails for up to $20,000, has been tested at restaurants including California Pizza Kitchen.

Richtech Chief Operating Officer Phil Zheng told CNBC the company has been signing up large chains for pilots weekly in this tough environment.

"Our food runner [robot] basically allows servers to serve a lot more tables, and customers get their food faster," Zheng said. "Restaurants are able to boost revenue, because servers are able to have more time communicating with the customer. . They can upsell drinks or specials and things like that as well as drive more revenue for the business."

The company also has a hospitality robot for cleaning and foresees opportunities ahead in airports and even senior living facilities as the labor shortage is expected to continue for years to come.

Robotics usage also extends beyond just in-house operations for food companies. Ghost and virtual kitchen companies are also leaning into using robots to deliver food to customers.

Kitchen United this week launched a five-day pilot program using the Kiwibot to take restaurant orders from its site at the Westfield Valley Fair mall in the Bay Area to homes within a half-mile radius. Reef Virtual Kitchens has a similar program with Cartken in Miami.

Fast-food companies Domino's and Chipotle are also both involved with Softbank-backed Nuro. Domino's launched a pilot in Houston with Nuro's autonomous car this past spring. And Chipotle disclosed in March it had made an investment in Nuro as a part of its funding round in late 2020.

Challenges ahead with robotics

A recent report from EMSI, "The Demographic Drought," noted that while automation can help alleviate labor pains, it faces two challenges. First, robots can't fully replace people. And second, the current labor shortage isn't going anywhere, and workers will be needed to actually build robots and other automated technology solutions.

"Companies trying to invest in AI development already face significant worker and skill shortages. As for robotic automation, analysis of market share for robotic automation has shown that the industries already most invested in it (automotive, electronics and metal) are still the ones driving the market, while collaborative robots are not meeting the standards needed for market penetration," the report said.

Ron Hetrick, a labor economist at EMSI and one of the report's authors, said that as a whole the industry is not yet able to bring robotics in at a meaningful level. But future restaurant business models will continue to evolve as labor challenges remain. He expects business models could change so that the amount of service customers need drops.

"You will probably lose out on the amount of restaurants that you can go sit in," Hetrick said.

Miso's Bell said that software engineers are always in high demand, but the company is facing "normal challenges" in terms of worker availability. The current supply chain crunch is more of an immediate concern.

"We don't have supply shortages at this time and we don't really foresee them in the next six months. But long term, there's a lot of things we need to get worked out. And hopefully this global supply chain straightens itself out in the months ahead," he said.

Federal Opposition Leader Anthony Albanese has pledged to roll out high speed internet to a million homes if he wins the next election.

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Labor leader Anthony Albanese is promising to roll out high speed internet to over one million households and premises in the outer suburbs areas in a major election pledge.

As the countdown starts to a federal election that is now expected in March or May, voters are getting their first real taste of the big policy announcements.

“Covid-19 has demonstrated that reliable, quality, high speed internet is not a luxury or a nice-to-have,’’ Mr Albanese said.

“Our plan will run fibre into the street and give Australians who rely on copper wire connections the choice of having fibre connected into their home, if they want faster speeds than their NBN copper can deliver.

“Owners of these properties, mainly in the outer suburbs of our cities and in regional areas, were dudded by the Coalition when it took an axe to Labor’s original NBN design in 2013. It is estimated 660,000 premises in the regions will benefit from this plan, and 840,000 in the suburbs.”

Under an Albanese government, the Labor Party is promising that 90 per cent of Australians in the fixed line footprint — over 10 million premises — will have access to world-class gigabit speeds by 2025.

“Labor will also keep the NBN in public hands, keeping internet costs for families affordable while ensuring improvements to the network,’’ he said.

“Families need reliable, fast connections for school and work, small businesses and entrepreneurs need it to stay competitive, regional communities need it for all those reasons, and as a matter of safety.

“Our plan will give Australians who now rely on copper wire connections the choice of having fibre connected directly into their homes if they want a faster NBN speed than their copper can deliver.

Labor estimates the plan will also help create 12,000 jobs for construction workers, engineers and project managers.

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The policy is also likely to annoy former Prime Minister Malcolm Turnbull, with Mr Albanse accusing him of going for a cut-price NBN rollout that short-changed Australia.

“The LNP’s decision to abandon the original vision of the NBN and instead rollout of second-rate technology has suffered multiple cost blowouts and delays and, as it stands, is $28 billion over budget,’’ he said.

How to speed up labor

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First we had the Great Depression, then came the Great Moderation, followed by the Great Recession and now the Great Resignation. The term applies to the elevated number of workers who have left their jobs in 2021.

The pandemic has made it difficult to interpret typical measures of the labor market such as the unemployment rate (number of unemployed/labor force) and labor force participation (labor force/population). For example, the national unemployment rate of 4.6% puts the economy very close to what the Congressional Budget Office considers to be full employment (4.5% unemployment rate). However, nonfarm jobs in October are still 4.2 million (3%) below pre-pandemic levels. Hidden behind the low unemployment rate figure lies a deeper problem within the labor force: the labor force only edged up very slowly in recent months when you would have expected a larger bounce back given economic growth rates. The labor force is still roughly 2% below the level in February 2020, the end of the previous expansion. What you need to decipher is which aspects reflect an economy in recovery mode, and which have been uniquely caused by the coronavirus pandemic such as difficulty finding child care and being worried about COVID-19 and its spread at work.

The Job Openings and Labor Turnover Survey, provides information on aspects of the labor market beyond the employment/unemployment numbers given by the Current Population Survey. Looking at the data, what stands out immediately is the number of job openings relative to the number of unemployed workers: there were 3 million more positions open (10.4 million) than the number of unemployed workers. Think of this situation as two partners trying to find each other to form a personal relationship. For argument’s sake, let the workers be males and the firms females. The current situation resembles a dating match problem where there are many males and females looking for a relationship, but the females cannot find the males that they like, perhaps because they do not have the desirable attributes they are looking for. On the other hand, there were a large number of males who decided to “divorce” from the partner they were with. These males cannot find a suitable new partner either because they are not looking for a new relationship (out of the labor force) or because the females do not have the attributes they would like to see (remain unemployed). As a result, both will stay single (large number of openings and large number of unemployed).

Also note that despite the claims by some, the males do not remain single because we have made it easier to not search due to unemployment benefits that were too generous. Twenty-five states with Republican governors terminated those early, without visible effect on more workers finding suitable jobs because of the resulting higher search intensity.

As a ratio, there were 0.7 workers per opening in September, just 18 months after the labor market began to recover. By comparison, it took nine years to reach a similar ratio after the Great Recession. But perhaps this is an unfair comparison since the Great Recession was the result of a financial crisis and was very different in nature compared to the other 10 post World War II recessions.

As a matter of fact, job recovery since the end of the current recession in April 2021 has been slower compared to any of the other downturns with the exception of 2008/2009. Then again, the pandemic was also marked by a severe and sudden contraction, one that was much more pronounced than other post-WWII downturns. The only one that comes close is the Great Recession. Because of this, and because it still lingers in recent memory of many people, we think the comparison is a useful and effective one.

JOLTS reports the number of quits/resignations and the quit rate for the U.S. and its regions, where a quit refers to a voluntary separation generally initiated by the employee. Quits typically accelerate when an economic recovery is well underway, indicating that workers have the ability to easily transition from one job to another in a timely manner. The number of quits and the quit rate both reached record highs in September, at 4.4 million (up from 4.0 million in June) and stood at 3%, with the quit rate up sharply from 2.1% a year earlier. The easiest way to justify such large numbers would be if it primarily involved workers close to retiring age. But according to a Harvard Business Review study, the greatest increases in resignaton rates came in the 30- to 45-year-old age group. Also, younger workers, say in the 20- to 25-year-old group, typically have higher resignation rates than their older peers, however, this group saw decreases in the resignation rate.

While the pandemic has likely brought about changes in the “social contract” between workers and firms, the job gains of recent months have apparently involved workers that can move from job to job with relative ease. This is a good thing. The experience of the Great Recession was quite different. Job growth was weak during the first few years, not months, of recovery, and as a result, the quit rate averaged just 1.5 for a full four years from 2009 through 2012.

Note that the pandemic has caused unprecedented upheaval in the labor market and the economy, even when compared to the Great Recession. While 8.7 million jobs were lost in the Great Recession, that number pales in comparison to the 22 million jobs lost almost overnight with the spring 2020 shutdown. But the pandemic recovery has been disruptive as well, restoring more than 18 million jobs in just 18 months. By comparison, six years passed before the job losses of the Great Recession were erased by 2014.

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The trajectory of the quit rate during the recent business cycle was also unparalleled, falling sharply at the pandemic’s onset and rebounding along a trajectory that roughly follows that of nonfarm jobs over the past 15 months. By comparison, the quit rate fell during the Great Recession but showed little upward movement during the ensuing months. Put differently, for both episodes, the quit-rate trend followed very closely that of the nonfarm jobs.

So while some part of the recent record quit rates may be attributed to the disruption brought by the pandemic, the fact that the quit rate tracks closely with the job numbers suggests that much of the recent increase in the quit rate is simply due to the recovery itself, the speed of which looks faster if we focus on only one recent downturn, namely the Great Recession.

Manfred Keil is chief economist, Inland Empire Economic Partnership, director, Lowe Institute for Political Economy, Robert Day School of Economics and Finance, Claremont McKenna College.

Robert Kleinhenz is CEO, Kleinheinz Economics, Cal State Long Beach

The Inland Empire Economic Partnership’s mission is to help create a regional voice for business and quality of life in Riverside and San Bernardino counties. Its membership includes organizations in the private and public sector.

(Reuters) – The ink had barely dried on the Federal Reserve's November policy decision to begin reducing bond purchases when Chair Jerome Powell became persuaded they'd need to push even harder against inflation.

It was the culmination of a volatile few weeks in which inflation went from an academic threat – Powell offered a lengthy discourse on it at the Fed's Jackson Hole symposium – to a clear danger to the economy and sent the Fed chair charting out the central bank's next move.

Leading up to the November meeting, a few policymakers – St. Louis Fed President James Bullard among them – had been pressing for a faster "taper" to make room for an earlier rate hike if needed. But their voices hadn't carried the day, and Fed policymakers had for weeks been prepping markets and the public to expect the exercise of bringing its bond purchases from $120 billion a month to zero would extend into mid-2022.

(Graphic: Wage and benefit costs Wage and benefit costs, https://graphics.reuters.com/USA-FED/INFLATION/zdvxorebnpx/chart.png)

Just days before the Fed's November meeting, however, when the plan was to be announced, Powell got his first inkling that the pace might be too slow: The Labor Department reported labor costs in the third quarter had shot up by the most since 2004.

"I thought for a second there whether we should increase our taper," Powell said at a press conference on Wednesday, but decided to go ahead with the pace that had been "socialized."

The Fed announced at the end of the meeting on Nov. 3 that it would begin reducing its purchases of Treasury securities by $10 billion monthly and of mortgage-backed securities by $5 billion starting in mid-November, a tapering rate that if sustained would have wrapped up the program by June.

(Graphic: Labor market progress, https://graphics.reuters.com/USA-FED/POWELL-PIVOT/byvrjqdjdve/chart.png)

Another jolt came just two days after the meeting when employment gains for October came in much higher than expected, and the Labor Department said nearly a quarter million more jobs had been created in the prior two months than initially thought.

It was the next week's inflation data, though, that carried Powell fully over the line: The Consumer Price Index showed inflation surging at a rate not seen in three decades and growing increasingly broadbased, data that made it untenable to continue characterizing it as "transitory."

"I honestly at that point really decided that I thought we needed to look at speeding up the taper and we went to work on that," he said.

(Graphic: The COVID inflation surge The COVID inflation surge, https://graphics.reuters.com/USA-FED/INFLATION/akvezawxopr/chart.png)

From there, Powell moved to build consensus among policymakers that they should double the taper pace to conclude asset purchases by March – a decision approved unanimously at this week's meeting. That gives officials more leeway to raise interest rates next year if needed to tackle the higher inflation, a step they would not want to take until after they've stopped purchasing bonds.

"It was essentially higher inflation and, and faster – turns out much faster – progress in the labor market," Powell said.

Taming higher inflation will also help to remove one of the biggest "threats" to the Fed's goal of achieving maximum employment because it could allow for a potentially longer expansion, Powell said.

"That's what it would really take to get back to the kind of labor market that we'd like to see," Powell said. "And to have that happen, we need to make sure that we maintain price stability."

(Reporting by Jonnelle Marte, Howard Schneider and Ann Saphir; editing by Dan Burns and Richard Pullin)

The LA28 logo in a mural at the Delano Recreation Center.

Start your day with LAist

The draft contract between the city of Los Angeles and LA28, the local group organizing the 2028 Olympic and Paralympic Games, moved closer to final approval Monday with a few changes intended to improve transparency and coordination with labor and community groups.

The contract was modified during a public hearing of the council’s Olympics committee to include conditions sought by City Council President Nury Martinez. The committee vote of 6-0 sends the contract draft, including Martinez’s recommendations, to the full City Council for final approval by Dec. 8.

The draft agreement is a framework for the city and LA28’s relationship, but the details will be hashed out by working groups on various topics including transportation, public safety, art, business and jobs.

Martinez wrote to the committee, asking it to require the city’s executive team to set benchmarks and deadlines for when LA28 must establish these working groups.

She wanted those groups to include labor and community group representatives.

Martinez also asked for more frequent progress reports from LA28 than the annual reports called for in the contract. She wants them every six months. And she wants LA28 to list the names of all the groups the organizing committee is contacting about important aspects of the games. Those include making contracts and jobs available to local businesses and workers and making the games environmentally sustainable.

‘Belt and Suspenders’ vs. Disaster Risk

The issue of the city’s financial risk remains a concern for some members. Councilmember Paul Koretz prodded LA28 Chair Casey Wasserman for reassurance that if a fire, earthquake or other disaster cancels the games, it would not lead to a billion-dollar debt for Los Angeles.

“I still think we are underestimating the worst-case scenarios,” said Koretz.

Wasserman replied that as in 1984, the 2028 games will take place using venues that already exist, and that other host cities that suffered cost overruns had extensive building projects that put them in the red.

The city does have a measure of control over the venues because it must approve any location changes. The city also controls half the votes on the LA28 board.

Wasserman said that LA28 had already contracted with sponsors for half the revenue it needed to stage the games, and that, if needed, it could put on the games with just that money, although he expected more to come.

Councilmember Paul Krekorian, who chairs the city’s budget committee, described the contract as having “belt and suspenders” redundant safeguards against the city going into debt, and said he was satisfied that the contract bore little risk for taxpayers.

Contracts For Whom?

Councilmember Curren Price wanted to know more about the specific ways in which Black and Latino business owners and workers would be included.

Councilmember Gil Cedillo went further, calling on LA28 to ensure that the city’s Mexican, Mexican American and Latino populations receive at least half the contracts and jobs the games produce, an amount in line with their portion of the city’s population. He also named a few Latino labor leaders he wanted included on the workforce development committee of LA28.

Wasserman said it would be a mistake to offer specific numbers of underrepresented companies or workers who would receive contracts or employment from the games. He said the working group to be formed on business and workforce development would include people from underrepresented and labor groups to help guide decisions.

Alyssa Peterson, a staff attorney with the hospitality workers union UNITE Here Local 11, said the agreement should be delayed for 30 days while it is amended to make sure labor and community organizations are included on the working groups.

WASHINGTON, Nov 18 (Reuters) – The number of Americans filing new claims for unemployment benefits fell close to pre-pandemic levels last week as the labor market recovery continues, though a shortage of workers remains an obstacle to faster job growth.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy's health, also showed jobless benefits rolls declining to a 20-month low in early November. The economy is regaining momentum following a lull over the summer as a wave of COVID-19 infections driven by the Delta variant battered the nation.

"Demand for labor is very strong and workers are in short supply, so layoffs are very low right now," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

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Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 268,000 for the week ended Nov. 13. That was the lowest level since the start of the coronavirus pandemic in the United States more than 20 months ago.

Economists polled by Reuters had forecast 260,000 applications in the latest week. The smaller decline was because the model that the government uses to strip out seasonal fluctuations from the data was less generous last week.

Unadjusted claims dropped 18,183 to 238,850. The decrease was led by Kentucky, likely due to automobile workers returning to factories after temporary layoffs as motor vehicle manufacturers deal with a global semiconductor shortage. There were also big declines in Michigan, Tennessee and Ohio, states that also have a strong presence of auto manufacturers.

The decreases offset a surge in filings in California.

The seventh straight weekly decline left claims just above the 256,000 level in mid-March 2020, and in a range that is associated with a healthy labor market. Claims have declined from a record high of 6.149 million in early April 2020.

The improving economic tone was matched by other data from the Philadelphia Federal Reserve on Thursday showing an acceleration in manufacturing activity in the mid-Atlantic region this month.

Factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware, reported strong order growth. They were upbeat about business conditions over the next six months and anticipated maintaining a strong pace of capital expenditures in 2022. But labor and raw material shortages persisted, leading to a rapid piling up of unfinished work, even as manufacturers increased hours for workers.

Factories continued to face higher prices for inputs, which they passed on to consumers.

"We look for voracious goods demand and a plethora of unfilled orders to keep factories pumping out goods at a very healthy pace," said Oren Klachkin, lead U.S. economist at Oxford Economics in New York. "We also expect that businesses will continue to face major supply-chain problems next year, though headwinds should start to ease in the second half of 2022."

Stocks on Wall Street were lower. The dollar slipped against a basket of currencies. U.S. Treasury yields dipped.

TIGHT LABOR MARKET

The reports added to a surge in retail sales in October and a sharp rebound in production at factories in suggesting that economic activity accelerated early in the fourth quarter after gross domestic product increased at its slowest pace in more than a year in the July-September period.

Stronger growth could spill over into 2022, with a third report from the Conference Board showing its index of Leading Economic Indicators jumped 0.9% in October after gaining 0.1% in September.

The labor market is getting tighter. The number of people continuing to receive benefits after an initial week of aid dropped 129,000 to 2.080 million in the week ended Nov. 6, the claims report showed. That was also the lowest level since the mid-March in 2020.

A total 3.185 million people were collecting unemployment checks under all programs during the week ended Oct. 30. Shrinking unemployment rolls raise hopes that more people will return to the labor force soon.

Millions of unemployed Americans remain at home even after the expiration of generous federal government-funded benefits, the reopening of schools for in-person learning and companies raising wages.

The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of November's employment report.

Claims have dropped since mid-October, which would suggest stronger employment growth this month. But workers are scarce, with 10.4 million job openings as of the end of September.

"There is some uncertainty as a key to monthly job growth is labor supply and the Delta variant," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "The good news is that the Delta variant's impact on the labor market in November will be less than that seen during the teeth of the recent wave."

The economy created 531,000 jobs in October. Employment growth has averaged 582,000 jobs per month this year and the labor force is down 3 million from its pre-pandemic level.

Jerome Powell and his colleagues at the Fed are getting advice from a new generation of college students; maybe that’s a group they’ll listen to.

They’re telling them to speed up the tapering, enhance communications with the public and finish their study on digital currency.

For a few minutes every semester or two, the students act as Fed officials and compete to pitch staffers the best direction for the economy.

Never mind the Wall Streeters. Here’s a fresh look from the next generation policymakers.

Guest Writer | December 4, 2021

By Dave Allen for Discount Gold & Silver

Jerome Powell and his colleagues at the Fed are getting advice from a new generation of college students; maybe that’s a group they’ll listen to.

They’re telling them to speed up the tapering, enhance communications with the public and finish their study on digital currency.

For a few minutes every semester or two, the students act as Fed officials and compete to pitch staffers the best direction for the economy.

Never mind the Wall Streeters. Here’s a fresh look from the next generation policymakers.

Liza Brover, a senior at Penn who competed in the College Fed Challenge this year, explained:

“This competition is a window for the Fed to see how young people look at the economy. To that extent, people should care what we have to say about inflation and employment.”

Earlier this fall, college Fed clubs around the country took a look at the economy. Covid was finally starting to level off, when the Delta variant reared its ugly head.

Inflation was getting hotter and hotter, but it appeared to be transitory. And job gains, after a summer surge, looked to have slowed.

The Fed students debuted a policy decision based on those conditions — much like the real one we get from the actual FOMC roughly every six weeks.

The best presentation wins Round One and then moves on to Q&A with Fed economists and other staff.

The latest winners were students from Pace University. That team recommended that the Fed issue a new document that’s more explicit about the path of the economy.

They also presented other recommendations, such as keeping the current pace of its asset purchases.

Pace senior and team co-captain Fiona Waterman “It’d be around two pages, just letting market participants into the mind of the Fed and the specific indicators that help guide their outlook…”

That advice still holds true as the Fed made a recent hard right turn. Bowing to the possibility that surging prices might stick around, Powell announced the Fed will likely speed up the tapering of its bond purchases.

Plus, it added, an interest rate hike might not be as far off as it had been saying.

Another Pace captain Winnie Liu said, “The Fed should be more specific about what kind of [specific] conditions would trigger liftoff.

“If the economy continues to grow and inflation stays elevated, how long can the Fed afford to wait to raise rates?”

Other students say the Fed should have better prepared the public for that switch dynamic.

Penn sophomore (and co-captain of the club that won 2nd place this year) Brian Lee, noted:

“What we would have hoped to see was the [specific] conditions which would have led the Fed to reconsider whether inflation is transitory laid out way ahead of time, maybe in September or August.”

The Pace students also said the Fed should clarify where they stand on Fed-issued digital coins.

Issaac Tham, a Penn senior, reminded us that over the summer, “Powell did promise to release a white paper about what the Fed thinks about CBDCs. It’s really cold now and we haven’t seen the white paper.”

Powell told the Senate Banking Committee earlier this week that the paper is expected to be released in the next few weeks.

The bottom line, Fed Challenge alumni tend to land at Wall Street’s big banks, think tanks and sometimes the Fed itself.

Let’s hope this new generation of policymakers is more successful at effectively managing the economy than their predecessors have been.

Speaking of Jobs…

Whatever you’re thinking about the economy, you’ll find something in today’s conflicting jobs report to reinforce your views:

America’s job market is hot and the labor market is anemic. The conflict comes from the two separate surveys the government uses to compile the report.

The emerging consensus among economists and market participants is that the Fed’s survey of households is more on-point than the survey of employers, which shows much more weakness.

The most recent households survey showed a booming employment situation, with over 1.1 million new jobs last month.

If we’re at or near full employment (generally thought to be around 4%), then the Fed should take its foot off the gas pedal and maybe even start thinking about tapping the brakes.

If, however, there’s still a long way to go before we get back to whatever full employment actually is, then the Fed certainly shouldn’t leave the most vulnerable Americans behind.

According to the Department of Labor, the economy added 210,000 jobs in November. That’s just one third of the roughly 575,000 new jobs that economists expected.

In the household survey, however, the headline unemployment rate plunged to a pandemic-low of 4.2%, down from 4.6%.

Plus, the jobs report showed that labor force participation increased to a pandemic-high of 61.8%.

“My sense is the household estimate is closer to the truth around what is happening in the jobs market,” so says RSM economist Joe Brusuelas.

Another Fed watcher, the New York Times’ Neil Irwin, added: “Normally the establishment survey is the better indicator of how things are going month to month,

“But right now, the household survey better aligns with what the rest of the data and anecdotes are telling us.”

Again, however you see the economy as a whole — where it is today and where it’s going in the next 3-6 months — inflation’s trajectory should be at the top of what you pay attention to…when it comes to gold and silver.

How to speed up labor

Approximately 13 percent of low-wage jobs in Germany would not be viable if workers understood just how good their outside options truly are. That is the conclusion of a recent paper by Benjamin Schoefer, my colleague here at the University of California, Berkeley, and his co-authors, Simon Jager, Christopher Roth and Nina Roussille.

“When comparing workers’ subjective outside options against objective measures of pay premia from matched employer-employee data,” they note, “many workers mistakenly believe their current wage is representative of the external labor market — objectively low-paid (high-paid) workers are overpessimistic (overoptimistic) about their outside options.”

In plain English, the implication is that if something were to shake up low-wage workers’ false beliefs about how poor their outside options are, occupational and labor-market conditions would fundamentally change. The same basic insight surely also applies to the US, only more so, because the US federal minimum wage is much lower, relative to average productivity, than Germany’s.

If ever there was such a shake-up, the COVID-19 pandemic and its widespread economic fallout are it. Recent data shows that 3 percent of US workers, or 4.4 million people, quit their jobs in September. That monthly quit rate is not only remarkably high; it is unheard of, especially given that the US employment-to-population ratio is still only 59.2 percent, almost two points below its February 2020 peak.

What is going on in the US labor market? In normal times, the current figures would suggest that America is dealing with a great shortage of jobs. And yet, workers’ outsized willingness to quit their jobs and look for something better indicates that these are not normal times.

There is a standard list of explanations for this so-called Great Resignation. One obvious factor is fear of COVID-19, especially among those who live with elderly or immunocompromised relatives. Low-wage workers do not want to log long hours in service-industry settings that require them to come into close contact with other people, not least the sizable share of the population that remains unvaccinated.

A related issue is disrupted child care, which often forces at least one parent to remain at home. Many observers also argue that workers feel empowered because they are still flush with cash from the pandemic-relief programs. And others contend that the past two years have prompted more people to stop and smell the roses, rather than work too hard at an unpleasant, low-paying job. (The problem with that explanation, Paul Krugman of the New York Times observes, is that Western Europe, which had a similar pandemic experience overall, is not experiencing a Great Resignation or depression in the share of adults who are employed.)

One notable effect of the pandemic is that it has fueled a transformation of work and the workplace that either would have taken decades in the absence of the virus, or would never have happened at all. Consider, for example, the widespread shift to remote white-collar work; the rapid automation of substantial components of service work; or the transformation of retail — requiring many more delivery drivers and many fewer in-store sales workers.

These changes have brought a great deal of convenience to many consumers and employees. Suddenly, online tools are good enough that one need not shop in person to get a sense of a product’s quality. (And if a delivery isn’t what was expected, one can always return it.) The sectors affected by these changes will not be returning to the pre-pandemic status quo.

Unless workers are explicitly furloughed, re-knitting the division of labor to restore employment after a massive disruption is always a long and painful process. In the 2010s, the return to full employment seemed to be bound by a speed limit of 1 percentage point per year, not least because demand remained relatively slack as fiscal and monetary policymakers focused on fighting the phantom dragons of debt and inflation.

It would not be good policy for the current recovery to be bound by this low speed limit. A rapid recovery requires that US employers provide low-wage workers with the better bargains that, by quitting en masse, they obviously are demanding. It requires a rapid removal of the main supply-side barriers to labor participation: a lack of child care and the virus itself. And it requires a high-pressure economy, so that it is obvious to workers on the sidelines that there are good opportunities out there.

President Joe Biden’s administration and the Democratic congressional majority must recognize that both workers and entrepreneurs need a great deal more support right now than American business as usual can provide. Europe provides a promising example. The US needs more of them.

By J. Bradford DeLong
J. Bradford DeLong, a former deputy assistant US Treasury secretary, is professor of economics at the University of California, Berkeley, and a research associate at the National Bureau of Economic Research. — Ed.

How to speed up labor

Jerome Powell and his colleagues at the Fed are getting advice from a new generation of college students; maybe that’s a group they’ll listen to.

They’re telling them to speed up the tapering, enhance communications with the public and finish their study on digital currency.

For a few minutes every semester or two, the students act as Fed officials and compete to pitch staffers the best direction for the economy.

Never mind the Wall Streeters. Here’s a fresh look from the next generation policymakers.

Liza Brover, a senior at Penn who competed in the College Fed Challenge this year, explained:

“This competition is a window for the Fed to see how young people look at the economy. To that extent, people should care what we have to say about inflation and employment.”

Earlier this fall, college Fed clubs around the country took a look at the economy. Covid was finally starting to level off, when the Delta variant reared its ugly head.

Inflation was getting hotter and hotter, but it appeared to be transitory. And job gains, after a summer surge, looked to have slowed.

The Fed students debuted a policy decision based on those conditions — much like the real one we get from the actual FOMC roughly every six weeks.

The best presentation wins Round One and then moves on to Q&A with Fed economists and other staff.

The latest winners were students from Pace University. That team recommended that the Fed issue a new document that’s more explicit about the path of the economy.

They also presented other recommendations, such as keeping the current pace of its asset purchases.

Pace senior and team co-captain Fiona Waterman “It’d be around two pages, just letting market participants into the mind of the Fed and the specific indicators that help guide their outlook…”

That advice still holds true as the Fed made a recent hard right turn. Bowing to the possibility that surging prices might stick around, Powell announced the Fed will likely speed up the tapering of its bond purchases.

Plus, it added, an interest rate hike might not be as far off as it had been saying.

Another Pace captain Winnie Liu said, “The Fed should be more specific about what kind of [specific] conditions would trigger liftoff.

“If the economy continues to grow and inflation stays elevated, how long can the Fed afford to wait to raise rates?”

Other students say the Fed should have better prepared the public for that switch dynamic.

Penn sophomore (and co-captain of the club that won 2nd place this year) Brian Lee, noted:

“What we would have hoped to see was the [specific] conditions which would have led the Fed to reconsider whether inflation is transitory laid out way ahead of time, maybe in September or August.”

The Pace students also said the Fed should clarify where they stand on Fed-issued digital coins.

Issaac Tham, a Penn senior, reminded us that over the summer, “Powell did promise to release a white paper about what the Fed thinks about CBDCs. It’s really cold now and we haven’t seen the white paper.”

Powell told the Senate Banking Committee earlier this week that the paper is expected to be released in the next few weeks.

The bottom line, Fed Challenge alumni tend to land at Wall Street’s big banks, think tanks and sometimes the Fed itself.

Let’s hope this new generation of policymakers is more successful at effectively managing the economy than their predecessors have been.

Speaking of Jobs…

Whatever you’re thinking about the economy, you’ll find something in today’s conflicting jobs report to reinforce your views:

America’s job market is hot and the labor market is anemic. The conflict comes from the two separate surveys the government uses to compile the report.

The emerging consensus among economists and market participants is that the Fed’s survey of households is more on-point than the survey of employers, which shows much more weakness.

The most recent households survey showed a booming employment situation, with over 1.1 million new jobs last month.

If we’re at or near full employment (generally thought to be around 4%), then the Fed should take its foot off the gas pedal and maybe even start thinking about tapping the brakes.

If, however, there’s still a long way to go before we get back to whatever full employment actually is, then the Fed certainly shouldn’t leave the most vulnerable Americans behind.

According to the Department of Labor, the economy added 210,000 jobs in November. That’s just one third of the roughly 575,000 new jobs that economists expected.

In the household survey, however, the headline unemployment rate plunged to a pandemic-low of 4.2%, down from 4.6%.

Plus, the jobs report showed that labor force participation increased to a pandemic-high of 61.8%.

“My sense is the household estimate is closer to the truth around what is happening in the jobs market,” so says RSM economist Joe Brusuelas.

The New South Wales Liberal executive will be pushed on Friday to speed up preselections in the state that could determine the outcome of the next federal election.

A number of Liberals are frustrated about the backroom tactics of a key ally of the prime minister – the immigration minister, Alex Hawke. Party sources say Hawke has been deliberately delaying preselections in Morrison’s home state in order to circumvent grassroots plebiscites to install candidates.

Guardian Australia understands a motion will go to the state executive on Friday calling for outstanding preselections to be expedited. With a federal election now only months away, the motion is said to have the support of both the hard right and moderate factions.

Liberals are worried the backroom brinkmanship is jeopardising the government’s election preparations.

Only a handful of preselections have been completed. Exasperated Liberals point out the party currently has no candidate preselected for the electorate of Parramatta – a targeted seat after the departure of the long-serving Labor MP Julie Owens.

Some sources say the Warringah conference is particularly agitated about the prolonged delays because there is no Liberal candidate preselected to take on Zali Steggall – the independent who unseated Tony Abbott at the 2019 election.

Factional politics in the NSW Liberal party is notoriously brutal. This preselection season is the first time candidates will be selected through a controversial plebiscite model successfully pushed by Abbott.

Some of Hawke’s colleagues contend he is using his position as Scott Morrison’s organisational proxy to generate a crisis that can only be solved through central intervention – a tactic that would maximise the position of his own “soft right” faction. The moderate and the hard-right conservative factions have formed a loose alliance in the state to counter the power of Hawke’s centre-right faction.

The Liberal party performed strongly in NSW during the 2019 federal election, but the government is under pressure from climate-focused independents rallying in heartland seats, and from political insurgencies on the right, with micro-parties emboldened by government restrictions imposed during the coronavirus pandemic.

The latest quarterly polling data from Guardian Essential suggests that Clive Palmer’s United Australia party has picked up steam since August. On primary votes, the UAP is currently a nose in front of Pauline Hanson’s One Nation, led in NSW by the high-profile former Labor politician Mark Latham.

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The UAP has gone from nothing to grabbing 5% of the primary vote since August. Voter interest is concentrated in regional parts of the country – although the strongest support at the moment seems to be in NSW rather than Queensland.

Ahead of the final two parliamentary sitting weeks of the year, Morrison and the Labor leader, Anthony Albanese, have moved into faux campaign mode, with an election due in the first half of 2022.

Dana Peterson, The Conference Board Chief Economist, and Jeanette Garretty, Robertson Stephens Wealth Management Chief Economist, join Yahoo Finance Live to assess the Fed’s decision to accelerate its tapering schedule and the ways in which the market is responding to this news.

Video Transcript

KARINA MITCHELL: We’d like to bring in a panel of guests, Dana Peterson, the Conference Board chief economist, and Jeanette Garretty, Robertson Stephens Wealth Management chief economist. Thank you, ladies, both for being here today. I want to start with you, Dana, and just get your perspective on what you think of the decision that came down. It was fairly hawkish, but markets sort of liking what they see. So how much of this has already been baked in, do you think?

DANA PETERSON: I think a lot of this has already been baked in, certainly when you look at [INAUDIBLE] Fed fund futures, markets were already anticipating three rate hikes for next year. And the Fed really delivered in terms of the dot plot moving higher. And certainly, I think what’s maybe keeping markets a little bit calm is that the Fed isn’t looking for 10 or 12 rate hikes over the course of the next few years. It’s still eight. And still, even if we have three hikes next year, we’re going to have interest rates that are well below the averages that we saw decades ago. And even with eight hikes, we’d still only be about 2%.

So I think with all that, markets are probably taking into account the fact that inflation has been very high. Meanwhile, the labor market has been healing. And the Fed really does need to act. And this ripping the Band-Aid off, so to speak, was very important to do today.

ADAM SHAPIRO: Hey, Dana. It’s good to see you. Good to see you, too, Jeanette. Let me throw this question to Jeanette. As investors, as consumers, what’s going to change in our lives over the next six months? Is it going to be mortgage rates? Is it going to be credit card rates? Where are we going to feel whatever’s about to happen?

JEANETTE GARRETTY: Well, it’s interesting you said rates, right? Because that’s going to– I think that’s going to hang on when the Fed decides to start actually raising short-term rates. And then one would expect over time that all those rates would move up together. But I don’t think much is really going to change in six months, which is why Fed policy mavens always know it takes 9 to 12 months for any policy action to feed its way into the economy. So not much in six months. I think this is very much a story about the second half of 2022, actually.

And I agree with the comments beforehand that this– the good news about this press release is that this is what everybody was thinking. And we sort of baked in, but you notice that the market is now coming off where it was in kind of a relief. I got to wonder if the first reaction being way up was, yeah, we knew this, but now it’s done. Good, we can go do the holiday parties. And now, half an hour later, people are thinking about exactly what three rate hikes mean. It is a very hawkish press release. Absolutely think it needed to be done. Absolutely, but it’s hawkish.

JARED BLIKRE: And Dana, I just– we were talking with Michael Gapen of Barclays just a few minutes ago, and he said his belief was that the market is reacting positive to this. We have stocks up right now off of the announcement because maybe the terminal rate, the total number of rate hikes looks like it’s only going to be eight. That’s what the FOMC members are expecting now. I’m just wondering, do you agree with this, or how are you viewing the summary of economic projections data that we got today?

DANA PETERSON: Sure, I think certainly, again, markets are looking at the number of hikes and seeing that it’s not different relative to the prior SEP, even though they’re accelerated. And I think the big concern is if we continue to have elevated inflation, what’s it going to do to economic growth? And we notice that the Fed did raise its expectations for growth next year and then lowered them a little bit for 2023. So they’re anticipating that their actions are going to dampen growth certainly in 2023.

But still in all, that’s pretty much the average where we were before the pandemic. We were growing around 2 and 1/4%. So the Fed, the Fed’s action still suggests that we’re going to have very robust growth. The labor market is probably going to continue to tighten. We’re probably going to continue to have labor shortages that are going to feed into wages, and consequently, consumer spending– I’m sorry, consumer inflation. So it makes sense that the Fed is doing this. And I think markets are starting to absorb the benefits of the Fed deploying less accommodation in terms of monetary policy.

KARINA MITCHELL: And Jeanette, I want to ask you the wild card for all of this would be if we get any insight into the balance sheet. It’s currently at $8.7 trillion. It was $4 trillion before the pandemic. When does that likely get reduced? Do you think we hear anything from that because, obviously, he’s going to be asked that question.

JEANETTE GARRETTY: I think he’s going to be asked that question, but I would be surprised if he really talks so much about it. I think the big storyline, and he’s going to stick to it, is, the taper and the interest rate movement. Remember, in previous press conferences, he hasn’t even touched the issue of interest rates. He’s avoided it like a plague. So now he’s going to talk about it. That’s going to suck all the air out of the room.

And by the way, I want to call attention to in the summary of economic projections, the most interesting number to me is the long-term outlook. For 2024 and beyond, the signal is 1.8% to 2% GDP growth. That tells me that the Fed is thinking in terms of a very different labor force population growth and labor force growth than they were anticipating two years ago or three.

ADAM SHAPIRO: This one’s for Dana because so much of what your employers do is based on consumer sentiment. How are the average men and women, hearing what we’re talking about, going to feel going forward? It’s not really going to impact any of that, is it?

DANA PETERSON: Well, it depends on who you are. If you’re looking to buy a home, you’re probably shaking in your boots right now because you know that mortgage rates are going to rise. And the mortgage rates are going to rise much more quickly than inflation’s going to fall off. And certainly, I think that the average person will probably feel internally that it’s great that someone’s listening to us, that they understand our plight, that we are seeing an erosion of our purchasing power. The rising prices for everything from food to shelter to energy and even discretionary items, it’s really harming us. And so, I think the signaling will be positive. However, they probably won’t feel it for some time.

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