Diane Swonk Talks Economic Data
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Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made.
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Your leadership at the National Association for Business Economics is noted with KPMG. Diane Swonk joins us right now. Diane, just a 60,000-foot question for our listeners, those with a job, those with Google stock options and the Google 100-year piece, and those flat on their back across America. How K-shaped are we this morning?
Well, we are as much as we've been since the data started on corporate profit share versus wage share in the economy going back to the 1970s. What we're seeing is a record break between the share of profits going to the to wealth holders versus the amount of going to wages. And I think that's where the bulk of this is. You're seeing the productivity gains accrue to the owners of capital as opposed to workers, and that's why workers are not very happy about where things are. Also, when you think about wages, I think it's very important to understand that we are seeing this labor market looks like it's now healing after getting cratered last year. That's important, but it's healing at a pace, as Claudia and Eric pointed out, where we just don't need to generate many jobs to be able to
bring the unemployment rate down, which could push wages higher. That's great if it does not also be accompanied by inflation. And we know that much like stock returns compound, also inflation compounded over the last five years, leaving too many prices out of reach for too many.
Paul, I was just going to say for your weekend reading, it's not Friday, it's Wednesday.
I know, I know. We've got a ways to go. Tom, a red headline crossing the Bloomberg terminal. Traders fully price in Fed rate cut by July versus June previously. So the warp function kind of, we're seeing it right there here on this strong labor print. Diane, we know the Fed likes to look at this unemployment rate, and boy, it ticked down from 4.4% to 4.3%. That's full time. fully-employed America, isn't it?
Actually, it was even better under the hood. What we saw was the U6 rate, which is that sort of underemployment rate where you get discouraged workers and those having to cut part-time for economic reasons. That fell to 8% from 8.4% in December. That's an important move. It's still well above the 6.2% we saw back in 2019, but it is a move down and an important move down for those who are really struggling to get a job. What we're starting to see is some of the ice melt in the labor market now and things beginning to shift a bit. We need to keep up that momentum for workers. On the flip side of it, it keeps the Fed on the sidelines longer.
We're not seeing what this economy, this labor economy has been described as a kind of a low hire, low fire type of environment. How about some of the industries that rely historically upon immigration, such as housing, agriculture? Are we seeing any problems there?
Well, we are seeing a major shift in things like leisure and hospitality in terms of quit rates. Quit rates in that sector have soared even as they've cooled and sort of come to a near standstill across the economy.
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