Valuetainment - February 08, 2023


The Next Big Economic Crisis - UNEMPLOYMENT


Episode Stats


Length

10 minutes

Words per minute

204.47807

Word count

2,207

Sentence count

214

Harmful content

Misogyny

3

sentences flagged

Hate speech

3

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Unemployment is at an all-time low of 3.5% and it's not going to get any better. Why is the economy so bad? Are we in a recession? Or is it an economic anomaly? In this video, we will explain why the unemployment rate is so low and why it will never go back up.

Transcript

Transcript generated with Whisper (turbo).
Misogyny classifications generated with MilaNLProc/bert-base-uncased-ear-misogyny .
Hate speech classifications generated with facebook/roberta-hate-speech-dynabench-r4-target .
00:00:00.000 So the last couple of years, if you read the Wall Street Journal, you watch the news,
00:00:03.200 you're going to hear about inflation, interest rates.
00:00:05.600 Everybody's scared about these two numbers.
00:00:07.120 Inflation is so high.
00:00:08.080 Jerome Powell has to keep increasing interest rates.
00:00:09.900 What is the next big thing they're going to talk about in 2023?
00:00:12.680 You ready?
00:00:13.220 It's unemployment.
00:00:14.140 Here's what we're going to do in this video today.
00:00:15.560 There's multiple formulas they have to come up with unemployment. 0.97
00:00:18.640 I'll share those formulas with you.
00:00:20.060 There are six key factors that is causing this economy to be an anomaly that even economists
00:00:25.840 cannot predict what's really going to happen to the economy.
00:00:28.560 You'll see what those six things are.
00:00:29.660 And another thing we'll talk about is called Phillips Curve.
00:00:32.080 It's something you need to know about that has to do with unemployment.
00:00:43.520 All right, so let's get right into it.
00:00:44.840 A couple of things.
00:00:45.420 You'll hear people say, today's unemployment rate is 3.5%, but that's the U3. 0.65
00:00:49.580 But our U6 unemployment rate is 7.4%.
00:00:52.280 And people will say, what the hell is U3 and U6?
00:00:54.740 We'll talk about that today.
00:00:55.800 But let's just look at the U3, right?
00:00:57.620 The unemployment rate.
00:00:58.380 Historically, U.S. government started tracking unemployment rate in the 50s.
00:01:03.220 But based on data, they can kind of track what happened in the 20s and the 30s.
00:01:07.120 The data they get is the worst unemployment rate we've ever had in the history of America
00:01:10.660 was in the 30s.
00:01:11.740 And the lowest we ever had was 1.2% during World War II in 1944.
00:01:16.320 But it's 1.2% because everybody was kind of forced to go to war.
00:01:19.760 So you didn't have a choice.
00:01:21.100 You got a job.
00:01:22.160 Go to war. 0.80
00:01:22.680 And if we want to talk about post-World War, what happened to the lowest unemployment rate,
00:01:26.520 it's 2.9% in 1953.
00:01:28.660 And we're at 3.5% today.
00:01:30.080 It's not a big difference.
00:01:31.040 Which means kind of, it's not going to get any better than it is today.
00:01:34.000 Maybe a small little point, 1.2%, but not dramatically.
00:01:37.600 Which means the only direction it can go right now is what?
00:01:39.700 Go up.
00:01:40.120 Now, here's the thing to keep in mind.
00:01:41.180 Since then, we've had 11 different recessions and the U.S. government has tried to control
00:01:45.920 markers to not allow unemployment to go too high.
00:01:49.300 And we'll talk about that, but a couple things we need to know.
00:01:51.600 Six key factors throws everything that we've used out the window on why today's economy
00:01:57.820 is an anomaly.
00:01:58.820 Number one, we've never had 128-month economic expansion and that was caused because money
00:02:03.820 was so cheap.
00:02:04.600 Zero to 1% interest rates.
00:02:06.300 We've never done that in the history of the economy before.
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00:02:56.100 Number two, COVID.
00:02:57.240 When's the last time we experienced a pandemic the way we did?
00:02:59.500 It threw everything off.
00:03:00.920 Number three, trillions of dollars pumped into the economy, nearly 50% off.
00:03:06.000 Everything we have in the economy, currency-wise, was fed into it in two and a half years.
00:03:09.840 We've never experienced that before.
00:03:11.860 Number four, in 2022, the Fed increased the interest rates seven times.
00:03:16.460 That's seven times in one year.
00:03:17.980 You know when's the last time we increased it seven times?
00:03:19.560 When do you think?
00:03:20.500 2008.
00:03:21.120 By the way, the record is eight times in 05.
00:03:23.400 And a fun fact here, do you know what year we lowered the rates the most times?
00:03:27.600 2001.
00:03:28.000 You know how many times we lowered the rates in 2001?
00:03:30.740 You ready?
00:03:31.680 Not five times.
00:03:33.040 Not eight times.
00:03:34.200 Not ten times.
00:03:35.480 Eleven times we lowered the rates in 2001.
00:03:38.160 Again, it's a very unpredictable climate today.
00:03:40.980 Number five, great resignation, increased wages.
00:03:43.120 People were normally getting a job for $40,000 a year.
00:03:45.480 You had to pay them $65,000.
00:03:46.520 They were getting a job for $100,000.
00:03:48.020 You had to pay them $150,000.
00:03:49.700 It was a strange time when it came down to making job offers the last year and a half, two years.
00:03:53.620 Point number six is population actually moved.
00:03:56.260 Like physically they moved.
00:03:57.220 A lot of people moved out of California.
00:03:58.980 First time since 1851, California's population went down.
00:04:02.040 330,000 people left New York to other places.
00:04:05.040 Chicago, Illinois, moving to Texas or Florida.
00:04:08.000 So whether it was politics or it was working remote, why am I living in New York and paying
00:04:12.840 so much cost?
00:04:13.660 I can work remote out of Nashville and get paid a salary in New York.
00:04:18.320 I'm just going to move.
00:04:18.940 So again, we've not experienced that before.
00:04:21.140 So again, the six key factors happening at the same time during a 20 and a half, three
00:04:25.340 year period is what's causing an anomaly where nobody can predict the future.
00:04:29.000 But there's four different types of unemployment.
00:04:31.760 Let's talk about it.
00:04:32.700 Number one, frictional unemployment.
00:04:34.080 This has nothing to do with the economy.
00:04:35.900 This is people are moving from one job to another job, transitioning out from one state 0.61
00:04:39.660 to another state.
00:04:40.320 So there's a 30, 60, 90 day window of them not having a job.
00:04:43.600 That's called frictional unemployment.
00:04:45.320 The second type of unemployment is structural unemployment.
00:04:47.820 So for example, let's just say we're hiring a bunch of IT here, you know, engineers here,
00:04:51.360 cost is going up.
00:04:52.020 You're like, listen, I'm not going to do this.
00:04:53.220 Moving forward, we're going to hire a thousand employees out of India, you know, 500 engineers
00:04:56.400 from Armenia.
00:04:57.040 I'm going to go offshore.
00:04:58.020 I'm not going to do it here.
00:04:58.900 That's structural where those jobs are lost here, right?
00:05:01.280 Or, you know, newspaper industries, a big industry.
00:05:04.500 Boom, online comes in.
00:05:05.540 Why do we need newspapers?
00:05:06.620 We don't.
00:05:07.120 Boom, 25% unemployment in a year.
00:05:09.360 They're going into different industries.
00:05:10.700 There's a little bit of a structural unemployment.
00:05:12.840 Chad GBT.
00:05:13.640 Restaurants now don't have fast food.
00:05:15.500 They have automation.
00:05:16.580 This is the kind of stuff that causes unemployment to go up, but it's purely structural.
00:05:21.180 Number three is the title will explain itself.
00:05:23.260 It's called seasonal unemployment, which means Christmas is here.
00:05:26.540 Black Friday is here.
00:05:27.820 Let's hire a bunch of different people to work retail. 0.95
00:05:29.760 But then January 15, we don't need you anymore.
00:05:31.420 Summertime, New York, hotels, super busy.
00:05:34.020 We need to hire a bunch of people to work at the hotel. 0.92
00:05:35.780 Boom, season's gone.
00:05:36.460 Everyone's going back to school.
00:05:37.580 It's not here anymore.
00:05:38.740 Farmers.
00:05:39.160 Oh, this is our season.
00:05:40.760 Hiring.
00:05:41.320 Boom.
00:05:41.740 Two months from now, we don't need them anymore.
00:05:43.100 Seasonal unemployment just happens every year.
00:05:45.460 And last but not least, it's the cyclical unemployment.
00:05:47.380 This is a part of capitalism.
00:05:49.100 Boom and bust.
00:05:50.040 Recession.
00:05:50.520 Kind of like what we're going through right now.
00:05:51.780 When people are making money, they spend money.
00:05:53.500 They go entertain.
00:05:54.220 They do all this stuff.
00:05:55.000 When the market goes through its bust, they're not spending money.
00:05:58.160 The economy kind of contracts a little bit.
00:06:00.260 That's the cyclical unemployment.
00:06:01.820 So those were the four different things that cause unemployment.
00:06:03.900 But here's a kicker.
00:06:04.700 So every month, the Bureau of Labor Statistics puts out stats.
00:06:08.720 And in the government level and a lot of corporations, companies, there's the one statistics
00:06:13.260 everybody looks forward to seeing.
00:06:15.280 Some are concerned.
00:06:16.600 Some are enthusiastic about it.
00:06:17.960 It's the unemployment rate.
00:06:18.960 When it comes out, like, oh my God, rates are good.
00:06:20.860 We're good.
00:06:21.420 Why?
00:06:21.780 Many reasons.
00:06:22.820 If people are having a job, they're paying the bills.
00:06:24.920 Crime is lower.
00:06:25.880 Re-election for politicians.
00:06:27.380 If it's high, you're not getting re-elected.
00:06:29.440 Crime is up.
00:06:30.380 A lot of uncertainty.
00:06:31.720 People are not spending money.
00:06:32.860 They're not investing into different communities.
00:06:34.720 It's a very, very important indicator.
00:06:37.840 But the question becomes, well, Pat, how do they figure out the formula for unemployment?
00:06:41.920 Let me share with you their formula on how they come up with the unemployment rate.
00:06:45.020 Here's what it is.
00:06:45.920 Okay, so the U.S. employment report is based on two surveys that they do.
00:06:49.320 The first one is the establishment report, which asks a random sample of employers how many
00:06:54.480 people are on the payroll.
00:06:55.660 The second one is the current population survey, also called the CPS, in which approximately
00:06:59.940 60,000 households, whether their family members are working or looking for work.
00:07:04.700 Okay, so don't ask me why it's 60,000 and why they do it the way they do it, but that's
00:07:08.440 how they get the numbers.
00:07:09.440 Now, here's a formula.
00:07:10.300 They take the number of unemployed divided by the total labor force times a hundred.
00:07:15.820 Okay, I'm sure you're having so much fun right now getting all these statistics, but
00:07:18.780 as if it's not already complicated, there's six different ways they measure unemployment.
00:07:23.340 You ready?
00:07:23.760 Let's have some fun together.
00:07:24.920 It's U1, U2, all the way down to U6.
00:07:27.520 Here's what it is.
00:07:28.660 U1, these are people that are unemployed 15 weeks or longer.
00:07:32.060 U2, they have completed temporary work or recently lost their jobs.
00:07:36.180 U3, which is the one we typically hear about, is the official unemployment rate, total unemployed
00:07:41.120 as a percentage of the civilian labor force.
00:07:44.000 U4, ready?
00:07:45.300 The total unemployed plus the total of discouraged workers, those who have given up looking for
00:07:50.520 work because they don't think there are jobs available.
00:07:52.760 U5, the total of unemployed, U3s, plus discouraged workers, U4s, plus all those marginally attached
00:08:00.720 to the labor force, those unemployed who would like to work but have not looked for work
00:08:05.200 recently.
00:08:06.320 And last but not least, U6.
00:08:08.280 The total unemployed, U3s, plus discouraged workers, U4, plus marginally attached workers,
00:08:14.200 U5, plus part-time or underemployed workers who want to work full-time but can't because
00:08:18.720 of economic reasons.
00:08:19.640 So now that you know what the U1, U2, U3, U6 is, you'll see why U3 is 3.5% unemployment
00:08:25.080 and U6 is 7.4%, right?
00:08:27.240 But here's the point.
00:08:28.120 Why do these things matter?
00:08:29.540 Historically, there's this thing called Phillips curve.
00:08:32.040 Phillips curve means when inflation is high, unemployment is low.
00:08:36.580 They're inverse, like directly complete opposite, okay?
00:08:39.460 When inflation is low, unemployment sometimes can be high.
00:08:43.020 So today, what has Jerome Powell been doing?
00:08:45.360 They increased interest rates seven times, okay?
00:08:50.260 Back to back to back to cause inflation to go down.
00:08:54.420 If they cause inflation to go down, unemployment should go up, okay?
00:08:59.940 So let me give you a little bit of context here in history.
00:09:02.640 In the 70s, both interest rates were high, inflation was high, and unemployment was high.
00:09:09.440 That's what you call stagflation.
00:09:11.080 Jimmy Carter era.
00:09:12.100 In the 90s, both inflation was down, and both unemployment was down.
00:09:18.680 That's the last time we were in a budget surplus during Clinton era when you hear about that.
00:09:22.940 That's because the economy was great in the 90s.
00:09:25.540 We were managing our finances properly as a nation.
00:09:29.180 Today, it's a little weird.
00:09:30.960 Again, those six key factors we talked about.
00:09:33.300 But if everything goes the way it is, the next data you're going to hear about, them talking about unemployment going to 5%, 6%, possibly 7%, 8%, is going to be happening by Q3, Q4, maybe Q1 of 2024.
00:09:47.300 Again, if history repeats itself, that's the direction we're going.
00:09:51.860 So what does this mean to you?
00:09:52.880 You may say, Pat, okay, I got the data.
00:09:54.920 Now what do I think about?
00:09:55.780 Well, if you're an employee yourself, and you're sitting here saying, what if I get laid off, the market always loves great employees with great attitudes that go above and beyond, that are experts, that are constantly getting better, because it's very, very hard to find people like that.
00:10:09.080 If that's you, you're going to be all right.
00:10:10.400 Number two, if you're an employer or an entrepreneur or business owner, this is going to be a very good season to recruit talent, period.
00:10:16.360 Because as the layoffs take place, somebody getting laid off doesn't mean that it's bad talent.
00:10:22.400 It could simply mean that the company at the time didn't have the money to keep them.
00:10:27.280 All this means is you can pick up some great people right now, the next 3, 6, 12 months, in case unemployment does go up.
00:10:33.440 Having said that, I want you to watch this video I shot, I think 2018, 2019, 8 Ways to Prepare for a Market Crash.
00:10:38.980 This is pre-COVID.
00:10:39.980 Very interesting video.
00:10:41.100 If you've never seen it, click here to watch the video.
00:10:43.300 And if you got value from today's video, give it a thumbs up and subscribe to the channel.
00:10:46.480 Take care, everybody.
00:10:47.260 Bye-bye.