A MARTÍNEZ, HOST:
All right. Let's talk about some of the latest economic indicators with Diane Swonk. She's chief economist at the accounting firm KPMG U.S. Diane, all right, so I'm going to go over the numbers from last week again. The U.S. lost 23,000 jobs in July, a quarter of a million people stopped looking for work, but the unemployment rate is still 4.1%. It's historically quite low. How do those numbers fit together? What do you make of those numbers?
DIANE SWONK: I know, it's very confusing. Well, first of all, the payroll survey, that included some over 50,000 educational workers that were either let go more aggressively at the end of the year or didn't show up. Or it could be a statistical fluke. We often get some weird numbers in July on that because of what's called seasonal adjustment. This is the time of year when teachers in June are let off and it shows up in the month of July, and then they're hired back up again in August and September.
MARTÍNEZ: OK.
SWONK: So we'll see how those numbers flush out. But the larger issue is what's happening onto the participation rate. And those number of workers, the supply of workers is falling. At the same time, demand seems to be waning as well, and that's what's holding the unemployment rate steady.
But why are workers not showing up is important. The first reason is aging demographics. Of course, we have the baby boom aging into retirement, so that's few older workers that are in the labor force and participating. That holds down the unemployment rate. We also have young workers, entry-level workers, in this low-hire, low-fire sort of regime we falled (ph) into, which, frankly, I've never seen anything like. It is not very conducive to those wanting to get their foot in the door. And entry-level workers are having a very hard time - new college grads. The unemployment rate is quite elevated relative to the overall unemployment rate, and that says something in and of itself that those workers are getting discouraged and not lurking. But they are, you know, able-bodied people who want to work and they're not being counted in the overall unemployment rate. But more importantly, on immigration, we're also starting to see...
MARTÍNEZ: Right.
SWONK: ...The effects of people leaving the workforce, and they can't count as employed, particularly if they're temporary protected status workers, like the Haitian workers who lost their jobs at the end of July. Some of those layoffs may have come early 'cause there was a lot of uncertainty about when they were going to have to be fired, otherwise employers would be penalized. Those workers aren't eligible for unemployment insurance or counted in the overall unemployment rate.
MARTÍNEZ: Diane, really quick - for the people that stopped looking for work, by having the unemployment rate still be low, is it fair to say that if they wanted to find work, they probably could?
SWONK: You know, it's still very difficult to find work. We know the duration of unemployment went down a little bit in the month of July, which is encouraging, but we need a lot more of that. There's about 1.8 million people that have been unemployed more than 27 weeks in any given month, in the month of July in particular. That's come down a little bit, but that's very elevated. It's much higher than it was pre-pandemic. And this is when we get looking into under the hood of the overall unemployment rate because the picture looks a lot more turbulent underneath.
MARTÍNEZ: OK. Now, with temporary protected status - you mentioned that - the Supreme Court cleared the way for the Trump administration to end that for 350,000 Haitians, maybe 260,000 Venezuelans. What impact do you think that could have on future jobs numbers?
SWONK: Well, those are numbers that are important because we end up hitting these cliffs where they end up having to be fired all at once. And that one - that might have shown up a little bit in the July numbers in leisure and hospitality and the weakness we saw in healthcare and social assistance. A lot of those workers are very heavily represented in everything from leisure and hospitality, food preparation to the care economy, caring for elderly people. We're going to see more of those effects in the month of August, and we'll see them again after the next round of temporary protected status workers hits a cliff in early October.
What's important about that is it creates these pockets of labor shortages in the service sector where inflation has been so acute, but at the same time, it also means rationing - not as much care for elderly people in nursing homes and things like that. But it also causes a blow to regional economies - places like Florida, which have a disproportionate number of those workers no longer have those workers buying and creating demand. And some of them are going to be in duress on their homes and things like that as well.
MARTÍNEZ: Diane, I want to get one more thing, and really quick - only a few seconds left. You mentioned inflation. The Fed usually raises interest rates when inflation is too high. So how should the Fed go about this, you think?
SWONK: This is really hard. I think the most important thing to remember is that we still expect interest rates to go up, and that's because we're over five years into this inflation and the shocks keep coming. We don't know exactly what's going to happen with the Strait of Hormuz. And even though there was some discounting over the summer on food costs in many big-box discounters to bring low-income households in...
MARTÍNEZ: OK.
SWONK: That's not enough on its own to keep inflation down. Price level is too high.
MARTÍNEZ: Diane Swonk is chief economist for KPMG. Thank you very much.
SWONK: Thank you. Transcript provided by NPR, Copyright NPR.
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