How economists are reacting to January’s jobs report

Dana Peterson — The Conference Board’s chief economist — and Joe Brusuelas — RSM Chief Economist — join Yahoo Finance Live to weigh in on January’s jobs report, which missed expectations.

Video Transcript

JULIE HYMAN: But now, let's talk with a couple of economists. Joe Brusuelas is RSM chief economist, and Dana Peterson is the Conference Board chief economist. I'm struck here by this decline in the unemployment rate. And does this mean that, once again, we've got people dropping out of the labor force? Dana, let's take it to you first.

DANA PETERSON: Well, I mean, the number of people in the labor force seemed to tick up a little bit. However, the participation rate fell. So I think some of the decline in the unemployment rate is a reflection of people leaving.

We've known that people who-- older workers who have been retiring, women have been dropping out given the strains of work life as well as home life, all it at home, and trying to care for children who we're schooling from home. And so we're still very concerned about the fact that people are leaving the labor force. And there could be some permanent scarring here, where these folks are unable to come back.

BRIAN SOZZI: Joe, is the labor market perhaps weaker than investors expect? Buried at the bottom of this report, we had downward revisions for November, December. I mean, November was revised down 72,000 jobs, December down-- revised down 87,000 jobs. Those are pretty big numbers.

JOE BRUSUELAS: OK, so when you look at this 400,000 people exited the labor force, that's why that unemployment rate declined. You know what? We need to step back here and take a look at what's happened over the past four years. The Trump-era US jobs market ended with a whimper, not a bang. We are short roughly 3 million jobs where we were compared to January 2017. Outside of business and professional services, which Julie and I talked about this week, this is a uniformly weak jobs report.

It really does illustrate the long shadow of the pandemic. There's certainly going to be economic scarring. And I think the major takeaway on this is the policy takeaway. We need to go big, we need to go bold. This is no time to hold back. They have to overwhelm this problem and be willing to sustain that fiscal aid and stimulus for much longer than I think conventional wisdom would suggest. I'm telling you guys right now, the Congress and the administration need to flood the zone with liquidity. These people in this portion of the economy are in real trouble.

MYLES UDLAND: Well, and on that point, Dana, you heard us discussing at the beginning of the program that 9 million job gap between where we left things in February 2020 and where we find things today. These kinds of headline numbers are not really bridging that gap. I mean, do you agree with Joe's assessment of the need for additional fiscal aid here, given that continued hole that has not really been filled? And we're now looking at month four of kind of stasis during what you would hope would be a more robust and continued recovery in overall employment.

DANA PETERSON: Well, as long as the virus is still raging throughout the US, indeed the numbers are down slightly, but still are at very elevated levels, and governments are keeping things shuttered, businesses closed and mobility low for households, then you're probably going to need fiscal supports to offset the negatives from that. So you know, it's not up to me to determine how big the government should go, but certainly there is scope for additional stimulus here, especially for folks in the bottom portion of that K-shaped recovery, people who are still unemployed, people who have left the labor market, people who have seen interruptions in income, and people who are still struggling, as well as potentially businesses that are still grappling with not seeing customers, and also potentially state and local governments who have seen their revenues decline and also have been bearing a lot of the burden in terms of paying for caring for people and vaccinations and for treatments, and for testing, as well.

JULIE HYMAN: So let's dig into that a little bit more, Joe. And I want to talk to you about the various groups that, as you referred to, we talked about earlier in the week, with professional and business services coming back. Leisure and hospitality is really the area where we are still seeing the deepest hole here.

You know, air transportation workers are still-- are in that, as well, with American Airlines talking about potentially 13,000 people being furloughed. They talked about that this week. How can stimulus be targeted to help those people, or do you just-- do you send those people checks? How do you figure out where the need is most acute?

JOE BRUSUELAS: OK, well let me just sort of approach this as an economist. You have to identify what the fiscal multiplier is. It's very low right now, I'm thinking about 0.3. So you've got to go big. Second, this idea of a targeted stimulus, I get the optics around that and the politics of it, but when it comes to the economics of this, there's no evidence that implies you can have an optimal fiscal aid and stimulus plan by attempting to target or fine tune this policy. You need to flood the zone with liquidity and overwhelm it. Right?

And again, as I look at this, the average duration of unemployment is over 26 weeks. The median is at 15 weeks. If you're in a household with less than 50,000 in income, the unemployment rate in this country is over 20%. You know, Dana nailed it when she mentioned that K-shaped recovery. I'm fortunate. I'm a remote worker. I don't need to be in a single place. I don't work with my hands.

Life has gone on, with a little bit of disruption. More of an inconvenience, right? But if you're in that bottom half of that K, it's not a recession on the cusp of recovery. It's a depression. I'm telling you guys, as you look at this data, you see the back revisions and you think about the lower three quintile of income earners, they need help, and they need it quickly. And it's got to be big, and it's got to be sustained.

BRIAN SOZZI: Dana, the number of unemployed persons fell 10.1 million in the month. Do you think the recovery is creating high-quality jobs? Do these folks have better jobs now than when they did pre-pandemic?

DANA PETERSON: Well, I really think it depends upon your skill set. We've seen that folks with high skills are actually very attractive, and they're not having a difficult time finding jobs. In fact, they're in high demand. Indeed, anything that involves technology or financial services or business services, those folks are definitely going to have an easier time finding jobs. What we're concerned about is the folks who, as my colleague said, have to work with their hands or have to physically be present and have to engage in in-person services. So those people are the ones that we're very, very concerned about at this point.

JULIE HYMAN: All right, thanks to you both very much for your perspective this morning. Joe Brusuelas is RSM chief economist, and Dana Peterson is the Conference Board chief economist.