AYESHA RASCOE, HOST:
A weak jobs report is raising alarms about the strength of the U.S. economy. The Labor Department said Friday that employers unexpectedly lost 23,000 jobs in July, and the department revised the numbers down from May and June by a total of 100,000 jobs. Jed Kolko is a senior fellow at the Peterson Institute for International Economics. He served as undersecretary for economic affairs in the Commerce Department during the Biden administration, and he joins us now. Welcome.
JED KOLKO: Thanks very much, Ayesha.
RASCOE: We used the word alarms. Is that a fair assessment of what these numbers are signaling?
KOLKO: I don't think Friday's jobs report is cause for alarm. Let's unpack what we actually learned on Friday. The economy lost jobs. At the same time, the unemployment rate actually went down. Now, it seems like that shouldn't happen at the same time, but it sometimes does. The unemployment rate fell in part 'cause people are dropping out of the labor force, which is not good news. But the real reason why we have seen slower job growth even though the unemployment rate has more or less held steady is the labor force is growing more slowly than it used to. Baby boomers are retiring. Immigration has dropped. So it means that we don't need as much job growth to keep the unemployment rate steady as we used to.
RASCOE: So then what you're seeing as the main drivers of this data and the U.S. economy in general - it's just kind of generational trends. Is that the main driver of this data, or are there other forces at play here?
KOLKO: So I think to understand where the labor market is today, we need to look not just at what happened in Friday's jobs report, but what we've seen over the past several months. I think the main facts, first of all, is that the unemployment rate in the U.S. is still quite low by historical standards. So for the most part, people who want to work are working, and that is good news for the U.S. economy.
I think one of the challenges is that we are in a relatively low-hire, low-fire economy. So the rate at which people are finding jobs is unusually low. Typically, when unemployment is this low, it's a lot easier to find a new job. And this kind of low-hire, low-fire labor market does a few things. First of all, it feeds bad vibes about the economy 'cause it's really challenging if you need a job and can't find one. And it hurts young people. Young people who are trying to find their first job and to get their first foothold in the labor market are having a hard time right now 'cause there aren't as many jobs available.
Low-hire, low-fire also means that wages probably aren't growing as fast as they otherwise would be. People tend to get bigger jumps in wages when they switch jobs than when they stay put waiting for a raise. So low-hire, low-fire is not great for wage growth. But low-fire, low-hire is not about AI. It's not about current administration policy. We've actually been in a low-hire, low-fire labor market for at least a couple of years.
RASCOE: Turning to immigration, how does that affect the economy at this moment, especially when we're in a low-hire, low-fire environment?
KOLKO: We have seen clear effects of immigration policy on the labor market. One effect has been that overall workforce growth has slowed. What we've seen, though, is job growth has been essentially flat in sectors that rely more on immigrants, but job growth has been stronger in the rest of the labor market. So clearly, firms that traditionally rely more on immigrants have had a harder time trying to find workers.
Now, you might have thought that a crackdown in immigration might free up jobs for native-born workers to take. But in fact, the unemployment rate for native-born workers has stayed roughly the same over the past 12 to 18 months. What's behind that is that it's not as simple as native-born workers coming in and taking jobs that foreign-born workers used to have. Native-born and foreign-born workers often work in different sectors. And so it means that lots of firms who traditionally employ foreign-born workers are still looking to find other-foreign born workers, and that has caused the labor market for foreign-born workers to tighten and the unemployment rate for foreign-born workers to fall.
RASCOE: Quickly, going back to when you were talking about the bad vibes around the economy, what do you say to this idea that people feel like they're either underemployed or just underpaid, even if they have a job?
KOLKO: Yeah, we're at a moment where many people feel that their job or their position in the labor market is precarious. In a labor market where it's hard to find a new job, the cost of losing your job is much higher. And because we've seen spikes in energy prices, we're at a moment where wages haven't been growing quite as fast as inflation. I expect that will change as energy prices grow more slowly, and we'll get back to positive wage growth, but there's still a sense in which many people feel that their job and their place in the labor market is precarious.
There's also a lot of anxiety around AI. Again, we have not seen widespread effects of AI on the labor market. But there will be disruption, and there is a lot of concern about what AI means not only for, will I have a job in the future, but also what will I be doing in that job? What will that job look like, and what skills might I need to learn in order to be successful in the labor market in the future?
RASCOE: That's Jed Kolko, senior fellow at the Peterson Institute for International Economics. Thanks so much for being with us.
KOLKO: Thank you, Ayesha. Transcript provided by NPR, Copyright NPR.
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