Nela Richardson, the chief economist at ADP, joined Cheddar News to discuss the current labor market.

ADP says that payrolls have risen by 239,000 in October. Nela Richardson, the chief economist at ADP, joined Cheddar News to discuss the current labor market. "It's still robust. It's still strong that companies are no longer hiring to recoup jobs that were lost during the pandemic. They're actually hiring for very normal reasons to replace headcount and to grow their businesses," she said.

ADP on the 'Robust' State of the Labor Market

So here and dive into the numbers with us. Is Neela Richardson, chief economist over at a. D. P. Neil. Good to see you. So what do the numbers tell us about the overall state of the labor market right now. Good morning baker. Well it's still robust. It's still strong companies are no longer hiring to recoup jobs that were lost during the pandemic. They're actually hiring for very normal reasons to replace headcount and to grow their businesses. And you're seeing that play out, especially in the service sector 247 1000 jobs produced in services alone. The bulk of those coming from leisure and hospitality. That was the sector hardest hit by the pandemic. It's still adding headcount companies are still hiring. So we're seeing that even though we're in the mature stages of the economic recovery of the economic cycle, we're still seeing some Really strong hiring in that service sector. Yeah, you mentioned leisure and hospitality really interesting. Their goods producing industries reported a loss of about 8000 positions. Manufacturing lost about 20,000 rolls there. Would you say supply chain woes were sort of still contributing to these industries seeing a decline. And do you also see them making a rebound here? Yeah, they're still struggling with some inventory and supply chain shortages. Those bottlenecks are not going to disappear quickly. But also this is the sector of the economy that's the most interest rate sensitive. So here is where we may be seeing some of the effects of the Fed's data. Uh Not data. Excuse me. The Fed policy driving some of this demand destruction. So hiring is Is robust, but it is not broad based as you point out, banker, there are still parts of the economy that are struggling under supply chain and higher interest rates and the goods producers, one of those pockets of the labor market where you see that happening now during the pandemic, we saw more than 20 million jobs lost. We've recovered a vast majority of those jobs. But what unique dynamic is the labor-market facing at this juncture? I think the the unique part about the labor market is that the service sector is such a big part of the economic growth story that we're seeing right now in the labor market. Um This was a sector that was hit. So service sector recession is actually pretty rare. It's usually starting out in manufacturing services are still going strong, but that's also mirrored by the fact that consumer spending has shifted from more goods oriented during the pandemic period to services people want experiences. And that's playing out and all this data is reinforcing itself, right? We saw very low jobless claims were seeing adults report yesterday where companies are still posting jobs in an accommodation and food services. So there's still a sense even though there's this overhang or shadow that the economy is following services are still holding steady and holding their own in this economy. Yeah, you bring up the myriad of factors that are so interesting here. Besides just the fact of high un inflation, low unemployment, we're also seeing consumer spending still incredibly high people still paying money for all of this stuff right now. So obviously with the Fed decision coming today, what are you gonna be sort of looking out for in terms of the economy data that's out today on the jobs front that maybe the Fed will be looking at today. It's all about pay, it's all about wages, right? Because that's what the Feds like. We just had, Halloween. That's the nightmare on Elm Street. The nightmare in terms of the Fed policy is that wages contribute to this wage price spiral that keeps inflation elevated for longer. And so what we're seeing in the wage data, if we look at those 10 million workers that we can match over 12 year period, we're seeing, yes, high wage growth seven point 7% in october but it has stabilized. It's been bounded by about 7.627 point eight for several months now. It's not going up higher than that, it's stabilized, but it's vastly higher than it was this time or even in the spring of last year. So the Feds gonna be looking at wages, we're looking at wages really closely when we look at job changes, we're still seeing double digit gains, but they're not recouping, they're not gaining as much from changing jobs, these workers as they did in earlier periods, that's a sign a small one, I'll admit that wages are not going to be such a big contributor to inflation going. Really interesting. And look if if most economists are right within the next year, we do have a small, you know, recession, albeit small but still a recession. What do you sort of looking forward in the next year in terms of these numbers? What are you looking at here? Yeah, I think the biggest question for the labor market is not whether or not we go into recession, but whether or not we get inflation under control because inflation is what is eroding those wage gains, those pay gains and for the vast majority of workers, their pay is not keeping up with recession. So the question for the Fed is, can they get inflation down without going through the labor market without hampering? What we're seeing is solid, robust hiring. Can they go around the labor market through a different channel? Maybe it's housing, for example, maybe it's more investment. I don't know what channel the Fed has access to other than the labor market to get inflation down, but that's what I think I'm looking for to see if they can preserve the good news in the economy while still taking control of inflation Neela One last question I got for you, have we seen enough lower wage workers upscaling to be hired at these higher paying, higher skilled jobs. Have we been seeing enough of that here? I don't think so. I mean we're still kind of hiring for the old issue, right? Which was the fact that a lot of customer facing roles were decimated during the pandemic like food services, accommodations, hotels, all of that. And so companies are still struggling to hire in those areas. But the next phase of hiring will be for the skilled jobs of tomorrow. Those jobs that rely increasingly on a digitized economy. Um And there's still some work to be done here, not just laying the groundwork for whether or not we go into recession this year or next, but the future of the U. S. Economy is going to rely on the ability to scale workers for the jobs that are coming. Not just the jobs that are here Neela. Great insight. Thank you so much for joining us. Nela Richardson, chief economist over at A. D. P. A.