Is the Job Boom Over? | Top of Mind Series

Welcome back to the Invest Like a Billionaire podcast. I am your host, Ben Fraser, joined by fellow host Bob Fraser. Today we've got another top of mind episode for you. These are shorter episodes focused on kind of a one-two punch of what's going on in the economy. Some kind of interesting headline that sparked our interest that we think is relevant for investors in navigating the ever-changing economic landscape, but wanting to tie things back to the broader themes that we're following. And so one of those themes, and this is something we talked about, Bob, probably what, a year and a half 2 years ago, kind of coming out of the initial kind of COVID restrictions. And we had this massive spike in unemployment. And then, you know, it dropped. And now we've been at like record low unemployment again for really the past 12 to 18 months. And it was really confusing because it's like, wait, wait, where are all these workers go? All these people, you know, that needed jobs before go and now kind of post the pandemic, they're out there. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires millionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, we do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. So we kind of did a whole analysis there. Basically, a lot of elderly in the workforce, you know, kind of baby boomers that are kind of close to retirement decided just to leave early. Right. And they decided just to, hey, I'll take a little severance and, you know, I got enough in my retirement and I'm going to, you know, call it quits and be done. And they're not coming back. And then there's another kind of group or group that were kind of dual income families. And because of the rise in wages that was happening, they decided, hey, we can pull back to a single income. One of us stays home with the kids. We don't have to put them into daycare, which is very expensive, and it kind of consolidates. So that was a trend that's been going on for a while. We've seen wages really, really increase. We saw some massive increases in wages. And one, why is that important? Well, wages are very— wage increases are very inflationary. Right. Because as we've said before, GDP and GDP growth is driven predominantly by consumer spending. And so if consumers are making more money, they're putting more in their pockets, they're going to be spending more, which continues to put this pressure on, on inflation. And meanwhile, as companies are trying to expand, there's a shortage of labor and they're trying to hire more people. They're having a challenging time finding right workers. So this article that we saw in The Wall Street Journal posted in the links here talking about the job market boom is over and here's what it means. And so a little bit of a clickbait title, not really clickbait. It's a good article, but we agree with some of the points. But then we also wanted to push on some of the points because we think it might be a little bit too far to the one side of the spectrum on calling the job market crazy boom over. So, Bob, share, share some of your thoughts and let's walk through some of the points of this article.

Yeah. And they're making the point that the nonfarm payrolls are— the growth of payrolls is kind of really where it was pre-pandemic. And, and that's, that's accurate. And so what we've seen is people massively coming into the job market. So it's called the participation rate. It's the percentage of the population or the percentage of people in certain age groups that are considered part of the workforce. And so retirees are not considered part of the workforce, teenagers, etc., or people who voluntarily remove themselves from the workforce say, no, I'm not, I'm not interested in having a job. And so what's happened is a lot of people have reentered the workforce and a lot of immigrants and a lot of women and a lot of, you know, disabled and others are coming into the workforce. Really, uh, probably pushed by the higher wages, you know, that they're— that they've been seeing. And so what's happened is, is they've begun to fill some of these jobs and take some of the pressure off. Um, but, but what it's missing is the bigger story that wage growth is still tracking above 4% range. Um, and so there's a, there's a lot of imbalances in the market. So, so the, the Fed Beige Book was pointing out that while job growth was subdued, or you kind of normalized across inflation imbalances are still persisting because there's a shortage of skilled workers and, and, and the number of applicants. There's just not enough applicants to fill a lot of these jobs. Um, and they're also, they're also saying that, you know, cost pressures— they, while they see, you know, wage growth slowing, it's still, it's still going to continue to, to grow. And, and inflation— so, so it's not, it's not a, it's not all it's not all hunky-dory as everybody, everybody thinks. I am.

And for those who don't know what the Beige Book is, can you just share what that is?

Well, that's the Fed's kind of assemblage of data that they, that they look at with their analysis. So they, they, you know, their economists put together these massive reports. It's called the Beige Book that they look and they review, and that's what they make their kind of, uh, you know, calls on interest rates. Um, so So yeah, so it's not, it's not just, it's not over. There's still a lot of imbalances and there's still a lot of wage pressure because of that.

Yeah, absolutely agree. There's a great chart that they have that's kind of a dynamic chart on the article here. So definitely look at it if you have a minute. And one of the charts here, you know, graphs and charts, job openings relative to unemployment. And so we kind of, you know, have seen, you know, job openings higher than, you know, that employment rate. Even before COVID we saw a massive spike up in unemployment. You know, there wasn't many jobs. And then we saw this massive resurgence of a lot of job openings, right? Companies were hiring and there wasn't enough people to, to hire. And now we've seen the gap kind of compress. And, you know, there is, you know, less job openings relative to those that are looking for work, but it's still pretty elevated gap. There's still a pretty large gap. And what I think is interesting, it would be they had the chart to kind of bifurcate between, you know, skilled labor versus unskilled labor. And you're making the point that, you know, while some of these jobs for like unskilled labor, I say like restaurants or, you know, some of these like harder to fill type roles in like nursing homes, hospitals, some of those kind of unskilled labor jobs, you know, those are being filled. They're kind of being filled by some other parts of the workforce that maybe weren't as high participation rate. But the skilled labor, you know, those are still more difficult to find because a lot of the people that exited the workforce were the skilled labor. And that's the bigger gap that is going to be harder to solve. It's not going to be as simple. I put my application into McDonald's and I don't really need a whole very strong resume, right, to go get a job there versus go be an IT engineer at X company or something.

Yeah, yeah. So, so it's still lots of imbalances and still lots of inflationary pressures in spite of the, uh, the new people entering the workforce, you know. And we still have, you know, the demographic pressure of the boomers are retiring, and, and as you said, you know, they're, they're the holders of a lot of skilled positions. So there's a lot of aging out of a lot of industries, you know. Where the, the highly skilled people are leaving the industries and there's not, not really the replacements.

I mean, it's so interesting too to kind of compare and contrast what we shared about a few weeks ago with China facing deflation because they actually have the inverse problem, right? They have much higher, uh, unemployment and they have more skilled workers than there are skilled jobs, right? Because they're predominantly in manufacturing kind of labor force. But as they've kind of, you know, continued to become more of a developed country, they're more educated. People are going to college, getting advanced degrees. They're not coming out. They don't have jobs. So it's, it's this really unique dynamic, right? That, right, we have a very different problem that they have and it's creating different dynamics.

Yeah, they focused on sending all their young people to university and those university graduates don't want to work in manufacturing. Of course they don't. And so they have a, they have a very interesting problem that they just, they don't have this, they don't have the skilled jobs. It's kind of, kind of strange. And, you know, we continue to see, you know, there's a huge problem. There's made a lot of headlines is the, the youth unemployment rate in China officially is running 25%. And of course, as soon as people, you know, the Western press picks on the Chinese, discontinue the data and they, they stop reporting on it because they don't want any bad news. And then I've seen other reports that the unofficial unemployment rate of the younger set is actually closer to 50%. And people who are simply— they're saying that they call them, I think, the lay flats, right? They're just— they're saying, no, we're opting out of the system. We don't like the system and we're just opting out. And for a lot of reasons, they don't like a lot of things that are happening there. So China, China is in— is in, I mean, a world of horror in everything that's happening over there right now. I mean, their future is just nuked. I even saw the latest demographic trends there, you know, if possible, the, the birth rate is dropping, um, per the, the— it was—

they reported it's already one of the lowest birth rates and always one of the lowest, and it's dropping even more.

1.15 children per, per woman, and now it's dropping to 1.09, you know, births per woman. Um, so it's just there's, there's really a hopelessness, you know, in the, in the younger people who just say, yeah, I don't, don't want to have children. And, and that's on top of the fact that simply aren't enough young women because of the one-child policy favored men, and so they aborted more women. There's just, there's simply no young women over there, you know, very, very few. And so not enough to sustain a population. So China is just continuing to make whiff after whiff and goof after goof. You know, the centrally planned economy, you know, is, is kind of an oxymoron. Yeah.

Yeah. So bringing it back here to the US, do you think— would you agree with the article that the, the job market boom and the labor shortage is over?

No, I think it's going to continue. As you know, I mean, like I said, it's probably people driving back into the workforce because of the higher wages and probably inflation. Hey, get a job. You know, but if as those things ease, there's people are going to, are going to opt out again out of the workforce there, you know, the— there's people who marginally want a job and marginally don't. Um, so I don't, I don't think so. And you, and then you continue to see the older generations, the boomer generation retire. Um, you know, so I, I don't think it's— I don't think we're going to see any lasting changes here. I think we're going to see continued job shortages and continued wage growth. Both.

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