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Your leadership of the National Association for Business Economics is noted with KPMG. Diane Swank joins us right now. Diane, just a sixty thousand foot question for our listeners, those with the job, those with Google stock options and the Google one hundred year piece, and those flat on their back across America. How case shaped are we this morning?
Well, we are as much as we've been since the data started on corporate profit share versus wade share in the economy going back to the nineteen seventies. What we're seeing is a record break between the share of profits going to wealthholders versus the amount of going to wages. And I think that's where the bulk of this is.
You're seeing the productivity gains a crew to the owners of capital as opposed to workers, and that's why workers are not very happy about where are Also when you think about wages, I think it's very important to understand that we are seeing this labor market looks like it's
now healing after getting cratered last year. That's important, but it's healing at a pace as Claudia and Eric pointed out, where we just don't need to generate many jobs be able to bring the unemployment rate down, which could push wages higher. That's great if it does not also be accompanied by information, and we know that much like stock returns compound, also inflation compounded over the last five years, leaving too many prices out of reach for too many.
Paul, I was just going to say for your weekend reading, it's not Friday, it's.
When I know we got a waste to go tom or red headline crossing the Bloomberg terminal traders fully price in FED rate cut by July versus June previously. So the WORP function kind of we're seeing it right there here on this strong labor print, Diane. We know that FED likes to look at this unemployment right and boy, you tick down from four point four percent to four point three percent. That's full, full, fully employed America, isn't it.
Actually it is. It is even better under the hood. What we saw was the U six rate, which is that sort of underemployment rate where you get discouraged workers and those having just cut part time for economic reasons, that fell to eight percent from eight point four percent in December. That's an important move It's still well above the six point two percent we saw back in twenty nineteen, but it is a move down and an important move down for those who were really struggling to get a job.
What we're starting to see is some of the ice melt in the labor market now and things beginning to shift a bit, and we need to keep up that momentum for workers on the flip side of it, it keeps the fed on the sidelines longer.
We're not seeing you know, what does economy This labor economy has been described as a kind of a low higher, low fire type of environment. How about some of the industries that rely historically upon immigrations, such as housing, agriculture. Are we seeing any problems there?
Well, we are seeing a major shift in things like leisure and hospitality in terms of quit rates. Quit rates in that sector have soared, even as they've cooled and sort of come to a near standstill across the economy and the job openings and labor turnover survey, we saw those quit rates really soar. That has not been accompanied by a lot of wage pressures in the economy that was very weak last year, and in fact, vacations actually went down a bit. Over the course of the year.
We saw only the affluent households continuing to spend heavily on vacations, and that showed up in the breakdown in terms of people paying to go to the front of the bus, in terms of the planes and luxury hotels continue to do extremely well, but the rest of the economy side of vacations did not. In twenty twenty five, the.
Binging you here, folks, I believe is doctor Swark. That's that's Kevin Worsh. Yes, seeing Diane Swark right now, Like Kevin Warsh is saying to Dan, we need to talk right now, Diane. One of the things here, and you know, I'll pick on you know a city that I know is really having trouble. Alexander County, Illinois. Six percent unemployment right, this is kro It's you know, southern Southern Illinois has
really struggled. How do you synthesize, Diane with all your decades of work the easy gloom path versus observing the vibrancy of the American economy. I mean, the media and Tom Keen are really really good at going out and finding a six percent unemployment rate and saying, OMG, the world's going to end, but there's an America that's vital out there. How do you balance that after this report?
Well, I think the important issue is is that we know that fewer firms and fewer households are counting for more of the ECONO gains in the US economy. And that's where you get to the K shaped economy. We've talked about it a lot, but it's showing up and just about everywhere and every strata, even with higher income households now trading down and going to big box discounters trying to get more value because they're feeling strained as
well unless they have a large stock portfolio. So there really is this delineating thread that goes through the US economy in terms of wealth versus non wealth, and it's not just housing market wealth. Equity in your home cannot be as easily tapped, but wealth in the stock market has moved up dramatically, and that is important because it's not filtering down to workers and the dichotomy of those
two things happening at the same time. The hard part is that it keeps inflation void as well, and I think that's something that the Fed is going to be watching for and we know that, as you heard earlier. I think Eric pointed it out. If these losses that we saw on jobs last year were more structural than
cyclical in nature, then rate cuts don't help them. If they are more demand driven, and the rate cuts actually helped to reignite employment, that's great, although they don't usually work quite this quickly, so I have my doubts about that. I think you are working through some big uncertainty issues that finally abated a bit, but measures of uncertainty move back up again in the month of January.
Dayne Swack, thank you for your work. Dayne Swack is KPMG here