531K jobs added in October

Robert Rosener, Morgan Stanley Senior Economist joins the Yahoo Finance Live panel to discuss the jobs report.

Video transcript

- And Robert, obviously a lot of interesting threads to pull from that data that we got this morning, but just hoping to glean kind of the big picture here. We heard the president say just a few minutes ago that there's a lot more to be done. And Jessica laid out the numbers there, 4.2 million remains the shortfall compared to pre-pandemic non-farm payrolls. So what did you see in the October jobs report with regards to the progress in closing that gap?

ROBERT ROSENER: Yeah, well, thanks, Brian, and thanks for having me. I mean, it was certainly a robust report, upside in the total rate of job growth, very broad-based across sectors. Again, we saw the COVID-sensitive leisure and hospitality sector re-accelerating after two soft months following the spread of the Delta variant. There was definitely a lot to like in the report in terms of just robust topline job growth, but also the breadth of gains that we saw across sectors. And you mentioned, you know, we're roughly 4, 4.2 million jobs short of pre-COVID peaks. But if you look at the rate of job growth that we've been seeing over the past three months, on average, if this kind of pace of job growth does continue, we could see that gap get closed within the next 9 to 10 months.

- Now the question is, does each jobs report gain get marginally more difficult to achieve? When you talk about whether or not there was structural damage to this labor market, right, a lot of questions out there about whether or not you can get the labor market to pre-pandemic form, if it is indeed the case that some people have decided to permanently leave the labor market. Obviously, the number of permanent job losers remained the same between September and October, at 2.1 million. Are you seeing anything in the October jobs report that would tell you one way or another about whether or not there is structural damage to the labor market?

ROBERT ROSENER: Yeah, that's a very interesting point. And one of the key things in the details of this report is we saw labor force participation remain unchanged. And the labor force participation rate unchanged at 61.6%, that's definitely been defying expectations for a larger pickup. We've seen it stay pretty flat in recent months, despite the fact that we had expected to see some evidence of an upturn in labor supply.

And if you dig through the details, there's quite a mixed picture because there was still an elevated rate of individuals dropping out of the workforce in October, but it appears that those workers who are leaving their jobs and dropping out of the workforce are doing so-- they're older. And so they may be doing so for more structural reasons. We've talked a lot about the effect of retirements reducing the labor force participation rate. So that may have been further behind some of the softness in labor supply that we saw in October because, on the other side, we actually saw a really nice tick up in prime age employment.

Prime age labor force participation ticked up. The prime age employment to population ratio moved up 30 basis points. So if you're thinking about the labor market adjusted for what might be changing demographics, there was a lot of help there under the surface. And I would come back to that original point, you know, to the extent that these retirements remain persistent and that we are not going to see a chunk of this labor supply come back, then we may not need to return to pre-COVID employment levels in order to get to conditions that might be consistent with maximum employment.

- Yeah, and another interesting kind of thread there was that actually the employment to population ratio, specifically for those that have less than a college degree or high school degree, actually increased between September and October. So that's a green shoot. But I'm wondering if-- when you talk about demographics, one of the hardest hit-- actually, some of the most hardest hit groups were women, who arguably have had to stay home to take care of the kids through the pandemic when schools were closed, although some of that dynamic is changing, in addition to African-American and Hispanic communities. Even though it's notable that the unemployment rate on a headline basis ticked down, actually the Black unemployment rate remained the same, at 7.9%. Seeing anything about the unevenness of this recovery?

ROBERT ROSENER: Yeah, there's a lot of unevenness. And you mentioned a lot of factors. I mean, there's unevenness across sectors, there's unevenness across wage cohorts. You know, if you look at where we are on the jobs front, it's notable that, among higher paying industries within the labor market, we're pretty close back to pre-COVID peak levels of jobs. So the recovery looks much fuller there, but then you have these bigger, yawning shortfalls in lower paying segments of the economy, particularly those service sectors that were hardest hit by COVID. So you do continue to have that unevenness. You see that across demographics.

And certainly, there are other issues that are at play, too. I think you mentioned childcare, which is really important in understanding the labor market right now because it creates sort of a feedback loop. You know, to the extent that labor supply remains tight, the availability of childcare workers remains tight. And then the availability of childcare for people who want to return to work also remains tight, and increasingly expensive. That's one area where we've seen average pay rates increasing, as well. And so those childcare issues certainly enter in for mothers or families with young children, who may be prevented from going back to work. That's one of those factors that we think can recede over time, but certainly is still in place, operating as a wedge preventing people from returning back to work.