Welcome to the Letter from the Chief Economist.
A few weeks ago, I shared that I was participating in a webinar on automation and the labor market with The Block Center at Carnegie Mellon University, alongside Nicole Nestoriak from the Bureau of Labor Statistics and Erik Brynjolfsson from Stanford. Thank you to everyone who was able to join us, and for everyone else, a full video of the session is available on YouTube.
While the focus of the talk was on automation, we also spoke quite a bit about how real-time labor market data complemented traditional data, and how researchers can apply these techniques to their insights.
Katharine Abraham, former BLS commissioner, was moderating the session, and she raised an interesting point about how much the government needs to be involved in upskilling workers. I’d like to expand on that further: while I believe that there a significant role for government to play, I think there are three other things we need to do before creating more upskilling programs:
Better labor-market literacy. I think this is just as important for young people to understand as general financial literacy. We know from the literature that students often lack knowledge of the career opportunities available to them, as well as important background information, like how much each job pays. This is an area that needs more investment so that students can align their choices with labor market opportunities.
Better skills-matching programs. One of the biggest hurdles to an efficient and effective labor market is the disconnect between workers, employers, and training providers. An automated platform that matches individuals and their skills with open positions, as well as showing training programs that lead to other jobs, can supply everyone’s needs: workers find jobs, businesses find employees, and training providers find students. Lightcast’s SkillFit is our answer to this problem, and like all our products, we’re always working to improve it.
Better research into what works—and what doesn’t. Research with data from across the entire labor market has shown that most training programs aren’t actually effective in preparing workers for jobs. But research also shows programs that are more specific (focusing on a specific sector or industry) are often much more effective, and so is training that teaches transferable and certifiable skills. The better we can understand the programs currently available, the more effective those programs can be.
It’s been a turbulent summer and early fall for the economy, as inflation rose and the Federal Reserve raised interest rates to fight it. But even as we keep a wary eye on a potential recession, there are signs that individuals and businesses are still optimistic.
Our friends at The Conference Board reported this week that consumer confidence is starting to tick up again: its baseline index rose to 108 from a revised 103.6 in August, the highest it has been since April. Even a few weeks ago, the University of Michigan consumer sentiment index was near its all-time low, so this change of heart from consumers is welcome news.
New orders for US-manufactured capital goods also rose more than expected in August, and while some of that increased total is because of higher prices, it still indicates that businesses are willing to spend money instead of hoarding their reserves. That’s not the type of pattern we would expect to see leading up to recession, so I’ll take it as a good sign.
But why is this rebound happening? I think it’s because the economy at large has come to terms with our ongoing inflation. The Fed’s aggressive stance is likely helping calm fears that prices will keep rising—people feel like something is being done, and that prices won’t keep rising this sharply forever. Here’s hoping.
In The Papers
The International Monetary Fund released new research earlier this month on the impact of “dominant employers” in the US, those who can attract a large pool of job applicants without having to offer higher wages. Simply because these businesses are so large and have so many employees, they have greater impact on local labor markets—especially in rural areas, where a large employer has even greater influence.
The IMF researchers—Anastasia Burya, Rui C. Mano, Yannick Timmer, and Anke Weber—used Lightcast job posting data to calculate the share of job vacancies in an area that are offered by a single dominant employer. I’m glad we were able to help with this valuable insight.
The prevalence of dominant employers also ties back to research I published with co-authors José Azar, Ioana Marinescu, and Marshall Steinbaum in Labour Economics, where we found that labor market concentration is negatively correlated with wages, suggesting that employer concentration is a meaningful measure of employer power in certain areas.
The IMF’s research is especially timely because, as the researchers note, larger employers are more sensitive to rising interest rates than smaller ones. They’re also more likely to lay their workforce off, because they can more easily hire the same amount of workers back. As the Fed sets up to maintain its aggressive stance, this is a trend to watch for in the rural US.
The Latest from Lightcast
Lastly, Lightcast and has two other pieces of research that just came out and are worth highlighting today, each with a different partner.
With Business Roundtable and The Burning Glass Institute, we’ve issued a new “playbook” to guide employers in reforming their hiring and advancement practices to emphasize skills-based hiring, in order to improve equity and diversity and also expand economic opportunity in the US. This is part of their Multiple Pathways Initiative, and the resources include company best practices, success stories and a “how-to” guide. Get the report at the Business Roundtable website.
And with the Government Finance Officers Association, we’ve released a new report titled Meeting Demand for State and Local Public Finance Jobs. Our research there shows that that demand for state and local public finance workers is far outstripping the current workforce and straining familiar talent pipelines. While the report is specific to government financial officers, the problems facing the industry aren’t: like countless other fields, those looking to hire will need to re-evaluate their systems for attracting and retaining workers, and a strong data strategy is one of the best ways to succeed in doing so.
Until next week,
Lightcast Chief Economist