“The Great Stay” Economy with Guy Berger

Mike Simonson, thanks for joining me today. Welcome to the Top of Mind podcast. If you follow along with Altos Research, you're familiar with our weekly real estate market data video series with the top of Mind podcast, we seek to add context to the discussion about what's happening in the market from leaders in the industry each week. Of course, Altos research tracks every home for sale in the country, all the pricing, all the supply and demand, all the changes in that data. And we make the insights available to you before you see it in the traditional channels. The people desperately need to know what's happening in the housing market right now. And if you need to understand the housing market or communicate about the market to others, go to altos research.com and just book a free consult with our team. Let's review your local market and teach you how to use market data in your business.

(00:47)
Okay, let's get to the show Today. We're talking jobs, employment, the labor market, and the tight relationship between employment and housing. My guest is Guy Berger. Guy is the director of economic research at the Burning Glass Institute. Guy's a macro economist with expert in US labor markets. He was previously a principal economist at LinkedIn and has also worked as an economist at Bank America, Royal Bank of Scotland. He's, his commentary is frequently featured in the media, all the big guys. He's a doctorate in economics from Yale. Guy is one of my favorite social media followers for follows for understanding in real time what's happening in the labor market. And we actually had some jobs data today which we might touch on. So I find guys so cogent and useful and so this is the first time though that we actually get to meet each other face to face. So Guy, welcome and thanks so much for joining me.

Thank you for having me. And I just want to say it's funny that you mentioned this today is a topic of thing because the jobs report also also topical and the opposite direction, which is we just closed up the house a few weeks ago in the That's

Great. It's San Francisco.

It's a funny thing that housing is on my mind. The linkage between the labor market interest rates and housing is very much been on my mind in a very practical day-to-day kind of way.

Yeah. Okay. Well we're going to dive into all of those things today. First though, Mike, let's talk about you and Burning Glass Institute. I didn't know much about the institute until you joined, so tell me about that and your role there and your work there.

Yeah, it's a really cool, I guess we call it a Think and Do tank because we operate very much in the space of labor markets, workforce development, education. And so a lot of the idea of how we can use really labor market expertise and really granular data from a variety of sources to help businesses state, local governments, educational institutions improve their ability to generate good labor outcomes for ordinary people is what is really top of mind for us. So we look at a lot of things. I mean AI designing curricula appropriately, skill-based hiring. I mean I could wax non-degree credentials, which is very top of mind for me these days. I can talk about a lot of these things. I dunno if we're going to get to 'em, but I certainly can.

So it is really about improving the situation, the employment and the work situation in the country and therefore we have to study it to make

It. Yep, exactly. Exactly. Cool.

And you were with LinkedIn before?

Yeah, I was at LinkedIn for a good eight plus years, a little more than eight. So it's a long time, long as I've been anywhere.

Okay. Alright. So let's talk data. Let's talk about, let's get some baseline about the state of the labor market, unemployment employment as we roll into the end of 2024. Are there surprising things about the job market? What should we know about employment right now?

So really good question. So I think that it's, the first thing I'll say is where we're sitting is I think things are good, not great. I mean we have unemployment, it's low by historical standards, it's gone up somewhat, it's a low level but it's going up very slowly. And so my feeling is if you think about the late market from that perspective, moving from great to good, it's a long way to go before we get to something that starts approximating bat at the current pace. There's no real indication in my opinion that pace. I know that there was worries earlier this year about are we tipping to recession? There's no real indicators that this is accelerating. It's just very slow, gradual cooling the labor market. And so from that perspective things are good and maybe trending toward less. I mean I guess the sort of thing about this gradation of good decent and we're sort of in the stage where if it keeps going on good might not apply and decent will apply and then if it keeps going on, but there's a long way to go before we get into anything from that perspective.

(05:12)
That's the bad lay market at twenties. Now there's subtleties to this because this late market is different than comparable ones. And say the mid 20 teens when Unemploy was in low fours, there's way fewer layoffs. So people that had jobs aside from a few industries that have been particularly sensitive to layoffs are actually at fairly low risk of losing their jobs. I think that that's something that's unusual. It is different than say the mid when was around this level and whenever I was 2017 or 2018 layoffs were somewhat higher even though spiel thought it was a pretty good job market back then. The other thing that has changed, so is we've talked about people that have jobs and then not being worried about losing them is it's hard to find a job. Hiring is way lower than it was in the late 20 teens. It's actually comparable maybe to 2012, 2013, which people didn't think were good labor markets, people thought were bad labor markets. And I think it's a weird thing, I think people that are looking for jobs are really bearing the brunt of a lot of the cooling of the labor market. People that have jobs, they may find it annoying if they want to leave their job for something else. Not a lot of stuff out there, but they have that security right now that is kind of reassuring. It's a weird labor market where relatively few people are moving whether voluntarily or involuntarily.

So I think that's your work and what you've published on that is where we started. I don't know if you started using this term or if I started using this term, calling it the great stay, I was noticing parallels in your work specifically showing parallels between employment and housing where if you've got a house, you're holding onto it and if you've got a job, you're holding onto it. If you're an employer, you're holding on and we're all kind of looking around the room going, well things got really good during the pandemic and I don't want to let go of that. And as a result we're staying. And so tell me, is it a useful, do you see the housing and employment parallel and tell me more about how you think about the great stay.

I mean they're similar. I guess what I haven't really thought about is whether the dynamics that are, whether they're caused by the same thing, how closely, deeply, what's causing, I think I'm open to your perspectives on this too, I just haven't thought about it very deeply. But in the labor market, what's causing it is, I think at root employers headcount strategy seems to have changed. I mean a lot of people talk about the people still have PTSD from the Great recession where not recession and covid where they laid off a lot of people and had to rehire them. They had plenty of time to do it after they a recession. But after Covid, when the land market switched back on, there was some of this intense musical chairs type phenomenon where blurs were trying to fill jobs, but the people they just hired quickly left and they had to rehire it in this giant chain of vacancies.

(08:29)
I don't think there's been a reason for most employers to become extremely pessimistic about the labor market. And so the thought was like, I just got to ride this out and so I don't want to let go of my existing workers. What I'm going to do is just turn off the top of hires. And I think what's unusual is just this period has been so protracted and employers have still been able to get away with it. I mean, you don't hear from employers, you don't hear, I'm massively overstaffed and you also don't hear, I'm massively understaffed. And so we will see how that evolves or that's a durable thing. But I think it's interesting because it hasn't seemed to B or who are still employers, I may actually interested could hiring fall to a certain point that employers do feel like they have to crank up layoffs, but there's no sign of that.

Yeah, there's no sign in the data of that actually happening yet. No. Yeah,

I don't think obviously we're even close to it I guess is the other aspect, I mean I guess feeling is could hiring keep falling a little while longer before layoffs go up? Yeah, I think so. I mean I'm not sure, but I think it's very possible the great state could become stay here I guess so to speak.

And I think that's a parallel with housing too. It could be that people have to sell their homes and we get some inventory and we get a supply and demand imbalance, but there's no sign of it.

(09:52)
And so I'm wondering about, you were talking about the cause. So employers are in a world where their headcount strategy has changed and it's really, in my view, it's first quarter of 22 cost of money starts going up and therefore it's the expansion, the cost to expand is much more dear and therefore it's like, okay, slow down hiring. And oh by the way, we've hired a ton. So even as we grow, we can still grow into the hiring the headcount that we already have. And so the parallel with housing is, well we got a super cheap mortgage even as our family grows, we're still in this super cheap mortgage. And occasionally there are people like you who wow, it's it, it's expensive time to buy now, but it's time to buy a new house.

I think that's basically what happened to us, I think. And I think the only thing is there was brief hopefulness on our side that rates would be going down soon given the fed cutting. And I've become much more pessimistic about that. A little more pess, not much more but a little more. I'm less confident in that than I was.

Than you were when you started shopping for the house

A few months ago. Yeah, a few

Months ago. So I think that's something that expectation of where mortgage rates are going to go for 2025 is a big deal for both home buyers. I think in 23 we saw surprising home buyer demand. It slowed way down at the end of 22 and we saw surprising resilience in 23 and I think it was people going, well, rates are going to go back down and I'll just refinance. So they were kind of just keeping the momentum going and we've lost that momentum this year because rates stayed higher longer than anybody expected. So when we think about hiring and so unemployment is low and shows no signs of really taking off, although it seems like it's going up a little bit, but it is hard to find a new job. Are there signs of it getting any easier?

So I think about this a lot because I think there are a couple of forces in here that are going to be, that are potentially going to push it higher. The first thing I think is sort of an important thing to realize is one of the reasons hiring has sort of been relatively and unique, even though we've had, okay, job growth is the supply side has mattered. I think a lot of hiring, we sort of think about it as somebody getting a new job, but some of it's just during the great resignation there was very much a chain of vacancies effect that has sort of stopped this idea that you left, you started a new job in that creative vacancy, so your employer had to hire one another person and then once they hired that person, they were probably already employed. And so there's this whole cascade of hires that happen from one.

(13:07)
Now what's happened, we have this big increase in employment coming out of immigration. And I think some of it is also that it's made it possible for employers again to hire out of the non-employed, it doesn't trigger a chain of vacancies. And so I think to some extent that shift has been one of things that's lowering hiring. And I think that brings me back to the next point, which is imagine a world where suddenly the pool of available labor is much smaller, some that may be already entrained because we are seeing stricter enforcement at the border. It might even be that fewer people are generally coming in. There was a sort of pent up. We used to talking about the, I listened to Connor San talking a lot about the bull effect and labor might be very much part of it. It was very hard to come into developed countries during the pandemic, then you had a bunch of people that wanted to immigrate that suddenly all piled in.

(13:55)
And it's not really curable as a secular force. It doesn't seem like it would be because demographics don't favor immigration in most parts of immigration, especi of the world almost the entire world's aging. And so there are fewer, this pool of young people that can work isn't as big as it was in the past. But regardless, there's a new administration coming in when I think the policies they're planning to do want 'em to be more restrictive on labor supply, whether mass deportations happen or not, I'm just going to be less eagerness to let people in the country and that may already be slung in the first place. So that's one thing that sort of reduces the amount which labor market can loosen on top of that maybe a fiscal stimulus and tax cuts that itself cause labor market to reheat. There's other things I'm less clear about their impact like tariffs, which probably more shuffle stuff in because some industries suffer and maybe construction suffers more because raw materials are there and then people shift to whatever industries are actually supported by tariffs.

(15:00)
So I dunno if that's a impact our overall hiring, but it shuffles things around make costs and dislocations. And then actually people have been asking and they haven't spent as much time thinking about it largely, I don't know how much I believe it's going to happen, but what happens if the government lays off a lot of people as part of this governmental efficiency push? I personally think that's a hard, I mean again, I'm non politics expert, but what I learned about high school government suggests that it's actually could be hard, particularly the narrow house majority, the past big spending cuts, which would obviously be in the direction of less hiring. But I think a lot of things on average lean to me toward hiring at some point leveling out, not falling anymore. We do see, I've sort of been following this experimental really cool census bureau survey.

(15:44)
It's the business trends and Outlook survey. It only goes back to 23, but it's nice they survey a lot of us firms. You can break it up by industry. I think what's interesting is there, you have seen the hiring plans a little higher than they were a year ago. Plans going forward six months from now. So it's not imminent and it makes me, and it maybe it's a result of the election, maybe it's ephemeral thing, but I am, it could be that we're near at least a bottom in hiring if not a lot of upside.

Okay. There's a lot in there.

Sorry that was a long monologue, but I've been thinking about this a long time. So

I love this and I noticed your post on the business trends and outlook survey and you talked about the dispersion where it looks like the hiring plans are starting to be more optimistic. So that's an interesting take. There's a couple of things though that I want to follow up on. Yeah, please. You mentioned we're hiring, we've got labor supply potentially tightening. Have you noticed, and I'm going to try to tie this back to housing, have you noticed regional differences in the great stay where things are tightest? That's

A good question. I had not spent a lot of time thinking about it. It's a really good bit of thinking. But I will say that my colleague, God Nan, who's our chief economist, has done some really cool stuff on where for example, Hispanic populations, which is a big chunk and I should have grown the most. And I mean the thing that sort of just generally stands out is that areas that I think about in terms of which there's been a lot of analysis on which areas have grown the fastest and have rebounded the most in the pandemic and in all likelihood what the biggest underpinning of these places population growth. And so that's internal migration. That is the ongoing shift that people from colder northern parts of the country to warmer southern parts of the country both in the southeast and southwest and actually, I mean I think more recently from California, some of its neighboring states. But the key thing is a lot of it is very much driven by migration is it's not just people within the country around, but where the economic opportunity that tracks people to the Sunbelt from inside the country is also tracking it from outside the country. And so I think that's a lot of it is, again, I suspect that a lot of where people are showing up is if it's warm then labor supply is showing up and people buying houses or renting them shows up.

Well, and that's really the housing tie tie-in that I'm getting to, which is if we look at the available inventory of homes unsold, it's built dramatically across the Sunbelt and it's very tight in the Midwest and northeast, barely more than the pandemic lows of homes for sale in Chicago or New York. The strongest market this year is probably Boston for housing all the cold market. Arizona right now has 60% more homes unsold than a year ago. So I'm wondering about that migration patterns. And I've described as I've seen some demographic data that shows that we've sort of slowed that migration pattern. We're not quitting our jobs in Chicago, we're not creating that chain of vacancies and we're not going for the, we're waiting whether we're waiting because the jobs aren't there yet or whether we're waiting because the houses are too expensive. I don't know which is the cause.

And by the way, I'll say, and I think again I'm going to mention God since he was way ahead of this, he follows app apprehensions the southern border very closely and he's been, I think the key thing is I think I wonder if the immigration story or thinking about it is a little outdated. I was thinking about the population, good population data is unfortunately the lags things we have and I just wonder whether our thinking about this thing, oh yeah, there's been this big boom in immigration, there was a very huge boom in immigration and it's petering out and some things, and maybe it's also by the way, internal migration is also slow. It was affiliated with a great resignation maybe and it's faded and all of a sudden your story about people leaving the rust be, it's slowing back down maybe to a more trend like level to degrees happening. And maybe if I'm speculating you're the housing guy now on me, but essentially it was this huge building wave that got triggered in some sunbelt areas that can still build on coastal California. And it was built on anticipation of ongoing migration forever and in some sense was caught short when that moderated a little bit or a lot.

Yeah, interesting. The other thing you mentioned in there was the potential of government hiring or drinking the employment. And I hadn't considered that when I'm thinking about the housing market for 25, but government has been a big driver of employment in the last bunch of years. Is that true?

And I think it's one of things I've been wondering because there's really two things here and I think it is worth thinking about. One is we're using a government when it dominates the news. People are like federal workers, but government is very much a state and local affair. And the big thing that is not the dog that hasn't barked and I don't follow very closely is one of the reasons state law government has expanded is because they got a big slug of stimulus funds. Some it's just the expansion itself. But there was also the post pandemic stimulus included money for state low governments. Not all of them, but some of 'em are still sitting on a fair amount of money and can keep doing this. And the question becomes is delay market turns? Do some of these state low governments have to retrench? That's the first thing that's top of mind for me on that.

(21:58)
And it's actually more significant as a story than whatever comes out of the federal government because the federal government workforces are smaller than state local governance and then beyond the federal government, are there going to be cuts here? I'm more skeptical than a lot of people because I think it's hard to do, it's not an easy thing to do with a narrow congressional majority, but there are things that could happen if part of it's attrition and just kind of saying we're not going to refill those people retire. Or there's certain targeted that seems plausible. Again, I'm a politics expert, you're going to have to have something else do that. But I just think about what my loose understanding of what's easy and hard to do. And what does seem hard to do is do it by fiat or executive action.

(22:42)
So I actually think that setting aside the DC area, which could be affected here, the way I would think about it is once the money runs out, and I think it's worth, I guess the question is whether there are places that are centers of government at the state and local level that suddenly start turning down. And what we find out is you look at the state and local government employment and it started turning down as well. But it's my thing that's out of sync with the cycle so to speak, because especially if there's money left over that these metro areas or state governments have been managing well, I don't know, they could keep going for a little while or alternatively they could run out even as the economy picks up.

That's interesting. So I think it's an important point to know that we think about federal government when we talk about government, but it's really state and local. It's way

Bigger.

And that was actually a big, I think in whatever the jobs numbers today, the state and local is actually still pretty strong part of the hiring. Yeah,

Yeah. And that's sort of it. And again it surprised me largely, I don't vaguely aware. It's one of those things where you're like I know enough to know that I don't know. What I know enough is there was a big slug of spending it. K clear has not run out to the point of these with some exception. I think for example, California because of idiosyncrasies and also California has been a weaker labor market in general and is more dependent on things like taxation of tech and stuff has sort of had to do I think a little more retrenchment, but it hasn't happened. I mean other states are not really, we talk about the lay market loosening, it varies so much. Again, there are people that are used thinking about California's leading edge to what is this going to filter everywhere? I don't know if it'll ever filter. California is truly idiosyncratic. Whereas in other places in the southeast it might be like they're not even noticing this or barely noticing it.

So as we look at the great stay, whether it's in employment and these trends where we're not hiring, but we're also not laying off where we're not moving, we're not migrating, we're not buying homes. If we look at this as an era that started say first quarter of 2022 or second quarter of 22, when does it end?

It's a good question, man. I think that the thing is, it's funny because when I was talking to people during the peak of the great resignation, there were all these thought things about this is the new thing, people are going to switch much more than they did. And obviously it's been thoroughly debunked what we've experienced it. And so I don't want to bad that this is a forever thing. There's some demographic forces by the way, both in housing and in the late market that are caused people to switch less. People just move. For me, it's a long time ago when I was in my twenties, but I moved, switched where I lived every few years and now that I'm in my, I guess I bought a new house, but I am going to lean on my wife never to change homes again. Even this house that we're currently in, I'm like I didn't want to move out of it.

(25:43)
And we're only doing it out of various life decisions. But the point is that people do slow and same thing with the jaw. You see it, that job switching has come down as the population's aged. And so I think just in general an older population is less dynamic across a lot of ways. I'm 46, I'm not as fast as I used to move. And I think that's thinking about, I do think it's possible rebounds though. It's not obvious to me that at some point employers are like, you know what? Maybe it is time to move to a strategy that has both more hiring and more layoffs. I guess I would say this labor hoarding thing, it is very possible is a several year fad that eventually goes away. Just all sorts of other management fads. And so you'll see it pick up. I think that my hunch is that the upside near term is limited until the feds convinced the cooked inflation because their constant thing is, I mean Powell's routinely said the lay market's in a good place, we don't want it to get any worse.

(26:53)
But one thing we haven't heard from it at all is I want to get the lay market to get better. It's in a good place. And granted if it deteriorates then there's going to be some element of reheating they want to do. But no again, they just want to put a floor under this thing. And if all of a sudden next year a bunch of policies come in that start for example reheating the labor market, I think the feds going to want to lean against that, especially if it's anything more than very minor. And so I just don't, and I think what this means is from our perspective and I guess is sort of if we're talking about the late market housing analogy, if I have a home, I'm better off than somebody who wants to buy one and doesn't have one. But at some point if I want to move, I'm going to get increased on the grumpy about mortgage rates and saying I want to move, I want to move.

(27:41)
I think that somebody that has a job but is not happy, they want to move. And one perspective is eventually people bite the bullet and just leave. And that may be true once things get bad enough. But the other thing, it is an easy thing to say and a much harder thing to do. I mean do you really want to in not good hiring market, do you want to quit your job and take a chance? Probably not. The thing is a house I'm just going to buy, I don't care how high s I'm going to buy, I think you do care. And that's an ongoing force. So it doesn't just mean that it won't be any quitting or any people switching houses, but it's pretty restrictive. And I don't see that radically changing because again, I think policy makers, until they're really convinced that inflation's licked, they're going to be very hesitant maybe. I think the late 2018 was a very different run. Inflation was low. So Powell was like, good, I want to lay market rip and until I see any reason to worry about inflation, I'm going to let it go. Which sort of led to some awkwardness in 20 21, 22, 23 when you had reverse course. But I think that's sort of it until they put themselves, that's going to take a long time to regain that

Confidence. Okay.

Long time years. I mean years is in a few years, not years and decades.

Right, right, right. Yeah. So we have this great stay dynamic, you called it labor market hoarding. I use the same though hoarding term for houses too. We're house hoarding, we own these, we don't want to get any house. Hoarding is even worse in California because our property taxes stay low forever. And so you get better turnover, you get less hoarding in Texas where taxes are high and you get a more healthy housing market. So using that term. And so it feels like that we're going to be hoarding for a couple more years, at least in before we see a dramatic turnaround.

(29:32)
You mentioned though, so let's transition to the Fed. So we're in a world where the Fed is still really mostly focused on inflation, but they haven't yet decided that we need to goose the housing market, right? Goose the employment, we haven't really decided, they haven't pivoted to being accommodated or growth oriented for employment. And it sounded like you said, so lemme make sure I got this right. It sounded like you said the trend for 25 is actually probably the opposite of that. The fed's probably more likely to be more restrictive than more accommodative in your view for 25.

Yeah. The way I see is there's a few things. The first one is I don't think they're necessarily against some improvement, but they don't want to see a lot of it. They just don't want to see further deterioration. So if they end up with unemploy roughly where it is or a tiny bit lower than, I mean I think roughly where it is right now and if hiring doesn't fall further, they're fine with that. They just don't want things to get worse from here. But again, that's what they keep saying what they don't want. You start thinking about what if hiring starts picking up and unemploy starts falling and they might start getting a little worried. It depends a lot on inflation again. And I think we haven't really talked about it and I'm not an inflation guy, but I do think about it a lot because I'm constantly about the outlook for the labor market and the fact there's sort of this feedback loop.

(31:05)
The inflation data the last few months has not been good. I mean it's not been terrible. It was so bad a few years ago that I think it's easy to forget but it's not been good. I think it's been pretty disappointing. It doesn't seem like there's additional progress on ongoing. Maybe it's just noise, but it's the kind of thing where I kind of look at it, landmark has been still softening a little bit. It's marginally better than the Fed expected inflation has been somewhat worse. And to me again, we could be surprised, maybe six months you and I are chatting, were like wow, we were worried about unemployment but it's fine and inflation suddenly started improving and affect can keep easing but there are forces in play and particularly once you consider future policy that don't seem necessarily super conducive to lower interest rates. And I guess that's sort of it again so far, just two or three months of it. And so I don't want to put mean in the end it matters a lot more what these numbers look like a year from now than what they look like right now. But I guess I'm just extrapolating, what if inflation kind of gets stuck a little bit below 3%? What if labor markets just stops cooling without the Fed doing much of anything at all and starts heating up And that is again not conducive to interest rate cuts.

Fascinating. So if you would help me sum up your view for 25, your macro view and what are we looking at?

I mean I guess what I'm assuming is the first thing is I think the hiring picture is going to improve, definitely stable and definitely nothing certain but I it's going to stabilize at some point in the first half of the year. And what that means is unemployed no longer goes up, maybe it starts going down a little bit, hiring and quits, start going up a little bit, definitely stop falling. And then beyond that, I guess I'm non inflation guy, so most of my inflation thinking is mostly based I joke but is I'm must say facetiously based on wishful thinking. I listen to inflation experts. I don't think there's been particularly high confidence. I don't pose a high confidence in forecast. My assumption is inflation will still come down. But I guess I'm in the realm of possibility that relative few months ago the odds were closer than to two at the end of 2025 has gone up and in t that both of these things mean that right now relative to a few months ago, there's expect less, fewer interest rate cuts. What we had, and I guess that sort of means for the perspective of the long-term starts probably a little higher at the end of next year than I would've thought a few months ago.

And as you pointed out at the beginning, you bought your house and as you were shopping for your house, you're hoping that rates come down and we get cheaper money coming, but it doesn't look like that's necessarily coming very quickly.

I mean it'd be glorious if I'm surprised

(33:57)
In some sense I'm somebody who's always willing to say I hope when I'm a little, and again, it's not super pessimist, it depends on where you are, whether it's a pessimistic or upbeat forecast. But I think my feeling is like I hope I'm wrong. We got this Goldilocks thing. I mean certainly the post 2020 job market has surprised people in so many ways that I think it's extremely conceivable that we're surprised the benign way here and inflation sort of hit a bump in the road but then all of a sudden it keeps going down the fed canes the retro cycle. But I also think that the point is we also have to consider this possibility of much more overheated economy and labor market with higher interest rates and essentially high rates continue to crowd out certain kinds of activity, home buying activity, job switching activity maybe even. Yeah, I think it's possible. And so it would not be a bad outcome in the sense of things falling to the ground, but just things being stuck the way they are.

Yeah, well and it would certainly be frustrating for the people in the real estate market who make their living on transaction volume and if an overheated economy leads to rates staying higher for yet another year, that'd be really a fascinating outcome. Let me look a little bit beyond 2025 just real quick. So are there big themes that we should be paying attention to? One of the things I'm interested in is remote work and what that means both for employment and for measuring employment and for the housing market. Tell me about what you think about the remote work and where we are there.

Well, I think there's been a big pendulum swing. I think the way I saw remote work is perceived by workers as this tremendous, extremely valuable benefit. Employers are much more willing to offer it and labor market is super tight and they're more reluctant to offer it. Labor market has loosened. I'm not sure for what it's worth whether how much of that shift it is really some employers didn't seem to think it's a genuine cost. And it may be, I mean I think it's debatable, but some lawyers think it's a genuine cost and some employers I think to some extent are using it as a lever.

(36:25)
It's a question to me how much this is prevalent, but it's kind of like pay cuts. The point is that you're going to use, you have to balance things instead of laying people off. You're just going to sort of squeeze them in certain ways whether you cut pay or cut availability remote work and some people leave and you sort of alter your headcount that way. But I don't think it's going away. I think employers are better at managing it that they were employees love it more. It may play out in the sense that employees compensation packages come more in the form of this non-monetary benefit of remote work and less in terms of salaries over their comp. But I mean the point is that it's going to be a higher share of employment than it ever was. And I think that the thing I always thought about it when it was happening was that a lot of it was going to be redistribution within metro areas of fewer people essentially.

(37:21)
It's beneficial. My feeling is the one very specific thing I always think about here since you and I both live in San Francisco is whenever I read any sort of news coverage on San Francisco's difficulty, it's extremely weirdly centric to San Francisco, which is a non-trivial but a minority fraction of the Bay Area. There's this huge boom in suburban employment and probably I suspect housing prices on the, let's call it barrier excerpts, were probably some of the biggest beneficiaries of remote work and hybrid work because Stockton, I'm going to pick on this within drive distance, commuting to the COR Bay area from Stockton five days a week sounds horrendous. Commuting to the COR Bay area from Stockton or from Fairfield two days a week is a manageable proposition. And I suspect those kind of dynamics of essentially the outer suburbs and excerpts being desirable places to live is going to be a persistent thing because I think again, hybrid work has not totally gone away and is an easier proposition for employers to tolerate.

(38:29)
So that's the one thing I do wonder. I'm somebody who's madly bullish on AI by I same mildly bullish as I'm not one of the people that's like this thing is going to, it is going to be bigger than fire or antibiotics, but it's a pretty significant thing that changes how work happens. I think it's going to matter. I do think it's going to have a persistent moderate boost of productivity growth over the next few decades and I think jobs in a few decades are going to look meaningfully differently than do now because of it. Again, I think some of the extreme scenarios are age, I mean I don't know, I'm skeptical of that, but it's a big business oriented technology that is going to change things. It may also change our society in various ways. And then the last thing that I think ties into these as demographics.

(39:15)
This is an aging population. Maybe we're going to spend a few decades like immigration sentiment wiggles around, but also there are few people that are going to come in because almost the entire world's aging. And so again, a population where people are older, homeowners and employees are both older probably looks different and is constructed and maybe that's sort of it. The part of technology is a lot of technology will just be to make up for a smaller older workforce or how you can compliment that. We sort of talk about this, we don't really think about how that technology interfaces with what if you median worker is like 50 years old instead of 35 years old. I mean I'm making up numbers here for that's a pretty radical shift but that's what we're headed for in the United States a few decades down the line.

So let dive in a little bit with there. So when you say you're mildly bullish on ai, meaning that means it adds to the economic growth and in a labor sense, do we end up with jobs created because

Of ai? I there's going to be jobs created. I guess I'm deeply skeptical that this is going to be the kind of thing that suddenly nobody's working. I think there's always going to be useful stuff. It may be different, it may be by the way that it's not, the new jobs are not terribly, I mean I don't know are not desirable and maybe people that have jobs are affected have trouble transitioning. So it's sort of a disruptive technology and the people that benefit from it are younger than you and me and then the people that are our age are kind like, it's not obvious to me that affects people uniformly. But on that I think there are going to be jobs. I think there are going to be jobs and things that I think the technology is not yet good at doing and that people are particularly good at doing.

(41:07)
I also think there is an underrated element. People talk about technology which is sort of just like there's this feeling sometimes that people have that all economic activity that occurs in our world is just basically about doing things as cheaply as possible, but that's not actually true. Why do people go to fancy restaurants or to do things that involve regular people waiting on them hand and foot? I think that there's some sort of element of people, like a huge chunk of human interaction isn't doing something with another human. No, which weather is particularly benign. I mean people like butler's is a butler the most efficient way to do some things? Probably not, but this is why I don't think it's necessarily a pause something people get excited about. But I think the more it gets cheap to do things with technology, the more people want to pay extra money for something to be done inefficiently with a human when they have disposable income. And so I think that's sort of the transformation that I think we can think about with the lay market and technology is again, when more stuff gets mass produced, what are people like to spend their income premium

On? Okay, that's like a view, a jevons paradox. Say things get cheaper, we don't use less of it, we use more of it, we get more efficient at energy, we use more energy, we get more efficient with our employees, we want more of 'em rather than fewer.

I mean what is it that currently constrained by some of these bottlenecks where suddenly you'd hire a lot more people? I mean that to me is an interesting question in itself. But actually what I'm saying is purely a taste thing, which is paradoxically people, again, you can get cheap cars that are mass produced. A Honda Civic is very reliable and yet there are people that are buying Ferraris. I mean there's a performance thing, but some it just literally I get to drive Ferrari and show it off

To everybody.

Nobody gets a that when I'm driving Honda

Civic

And people are willing to pay a premium for that. And I think that applies to the more you mass produce things, the more fancy status goods become valuable and what labors needed to supply those I think is a good question asked. But there of

Automation, so humans grow in value and fanciness in an ai.

Yeah, because you want to say I paid for a humans inefficiently produced this, anybody can get a cheaply produced AI driven service, but online is made by a human.

I like it. I like it. I think that's a really great, really clever take on it. And then so in an AI world that's basically it makes this more efficient way it adds to jobs in a remote work world. You kind of phrased it as a cost center, like a cost that businesses have. Do you think that that is ultimately, and maybe you have data on this, are we more or less productive in remote or hybrid worlds like Elon thinks we are less Elon thinks or Mark Andreessen's talking about mouse wiggles for the remote workers that are pretending they're unlike,

I think it's massively, I think that part, I mean there's mixed data to start.

(44:20)
My personal opinion is that there's been sanas productivities more, some less. I think it's also relative, the way I always think about it is let's say that in your working hours you are 5% less productive but you get an hour and a half extra work every day because you're not commuting. Is that a productivity? I mean in a productivity stat aspect, if you're only measuring your working hours, your productivity has gone down but you're working more hours because you're not spending time commuting. That's like an inefficiency. So I just want to start with that because it's a measurement thing that is non-trivial here. An hour and a half extra every day is that's a big boost to laboring hours. I think about myself and what I would do if I was commuting every day. And that'd be a big, I mean to someone in the peninsula and when I was still working, it eases up a lot of time.

(45:09)
And so the other thing is I think there's a political economy thing going on here at these firms where it might very well be that there's the firm, what the firm values than what the manager's value and managers might have putting more value in people on butts and seats than the actual front than shareholders do. It's just the nature of it. You might have preferences maybe because some of us are older and that form of work better and so we just want that whereas other people don't. Again, this is all low confidence health views, but I definitely don't buy this argument. The evidence that this is catastrophic for firm productivity is low. I mean the only question is are there some long-term impacts that are hard to measure? My general feeling though is in the end I think this is going to win out because if we are in a world of scarce labor secularly because of demographics, you're going to want to hire where people are. And if you're not going remote, maybe in the showroom, labor's very plentiful. You're like, oh, I can just hire locally otherwise there's a reason why this great resignation and that was because you're like, I can't find the people I need here but I can't hire great engineers in the Bay Area. But there's this lady in New Hampshire, a guy in New Hampshire, and I think that is still going to eventually dictate firms that can adopt this will find it very valuable.

For me, we were always at Altos Research had to be hybrid because I was competing with big tech hiring engineers against big tech is a small company in Silicon Valley and things like commutes are killers. And so okay, I think you're onto something there and the long-term impact is really a curious question of are there strategic things that don't quite happen even if the tactical things happen better. Maybe there's something like that that goes on. Alright, great. When we look at the longer term future, we've talked about a few of these things. Tell me about your, I always like to ask my guest this is tell me about your vision of the longer term future, the big trends. We should be paying attention to what's happening and watch this number or watch this trend over time because I think that's going to be impactful. Do you have a view like that? Anything we should be focused on for the next long

Term or

Term? Say long term?

Long term

Multiple second half of the decade?

I'd say that if I were to ask anything, it's like I spend some time looking at this, but I probably check it more regularly is like, what is the median age of the American worker or homeowner that's, that comes down to it. I think it's going to go up, especially if immigration, I think immigration has been a force that's sort of weighed on it even as the population ages and it might start going up faster. We're essentially the same. It's happening everywhere with falling birth rates. And so to me as labor econ guys, I already talked briefly over the decades, the aging population has led to turnover falling and is it going to actually cause it to go down further? So yeah, I'd say I don't think about as much as I should because I'm probably too short-term focused. But I think that's the big one.

That's an interesting take. And I think it gets back to our initial part of our conversation with the great stay as we're aging, we're less likely to want to change jobs, we're less likely to want to change houses, we're less likely to want to move across the country. And so as a factor that the aging American worker is a number for us to keep an eye on. That's a great insight. I appreciate that. Are there anything right now that the headlines are getting wrong?

Anything? The headlines are getting wrong. My only thing is, I think this is sort of as we talk so much about the vibe obsession, is there so much, I mean on the one hand the people are saying, oh, the economy's already in recession or the economy's on the verge are falling in recession that have been consistently too pessimistic and I think they're still wrong. And then periodically, and I think this sort of popped off, it really hit home. People are like, well this is the best jaw market had a decade. I don't think so. I think in general people are, I feel like there's sort of a tendency to think in these extreme of dynamics. And I think in reality this is, at least from the perspective of a lot of people in the economy, this is kind of a ho-hum type situation. It's hard to buy a house, it's hard to find a new job. You're not at risk of losing it. Employment's pretty high and employment's low. GDP growth is fast. A lot of that's coming from the supply side, not from the demand side. Again, I don't think, it's not a terrible thing, but we're sort of used to these hum states as being transitions between good and bad and maybe it's like we're for protracted whole ness.

Yeah, yeah, yeah, yeah. Protracted whole ness. When you talked about the, I know I'm not a macro economist, so I was right along. I've been assuming that we were heading for recession for late 21 where four years ago, three years ago, we were sitting there going, it seems like it's right around the corner. It seems like it's right around the corner. Where were you on that view along that path?

I basically was worried about recession until probably early 23. In early 23 started becoming more pessimistic because inflation data really started moving in the right direction. To me, the inflation story is still, and again, I'm always call myself inflation built on. I'm not an expert on, there are people like the employee America guys and er Sharif at Inflation insights or really get it and I'm not that person, but I think about it all the time. I'm forced to think about it all the time because to me it matters for interest rates, which then matters for labor market activity. And I think that's sort of it. And I think when that started changing was like, okay, I'm less worried the fed's going to try to squish the economy. And now as I'm looking at it, I'm kind of like, at what point does this thing start reducing my optimism about the Fed acting to boost the labor market? Again, if we're talking about things that are going to boost your world, in my world, they're so conditioned on inflation being lower. That's it. We're hanging on every, neither you or I are like inflation. Maybe you are, but I'm certainly not, but we have to pay attention to it.

Right, right, right. That's a terrific insight to land the plane on further conversation. I really appreciate your time today. Guy, guy Berger, burning Glass Institute on socials. Do you publish a lot on LinkedIn, on Twitter and now Blue Sky Econ Burger?

Yeah, and I'm on Substack too. I have a macro, mostly tech Substack that I don't, probably not as active on as I should be, but I'd publish stuff periodically if you like to read stuff that's a little longer.

Great. And I love following you each month, multiple times during the month when the various jobs numbers come out and your take on is very helpful to me to understand what we're looking at and why I started recognizing these jobs and housing parallels that we can talk about. So I'm sure we're going to call this episode Diving into the Great Stay. And so I really appreciate your time today, guy.

Thanks Mike. Have a wonderful afternoon.