Inside the 2025 Economy - Lab 118

into that? Because the jobs numbers are swinging And I don't know about you, but when I submit a report, it's supposed to be done no revisions, but they're coming back with revisions months later, and that.

record job growth. Can you help us understand what drives those shifts and what the job numbers really tells us about the health of our economy.

of people in the population have different unemployment levels. People look at the overall participation in the job market. Technically, the unemployment rate just measures of the percentage of those people who are looking for jobs. How many people are unemployed, So the employment aspect can mask different things that are going on, like if the economy is really bad. People

get discouraged from looking, and so they quit looking. Technically, they no longer are part of the unemployment rate at that point, because the unemployment rate just focuses on those who are looking who are not able to find a job.

and they quit looking. Therefore they drop out of the unemployment rate. They are still there, they still do not have a job. So sometimes the economy is worse than the economic numbers would actually suggest, and I think that is likely to be the case right now. There are probably people who would like to have a job. They perhaps have gotten discouraged because they've been looking and not

able to find anything. A lot of the big companies have announced layoffs in a recent months, so I think it's one of the reasons why you can have a relatively low unemployment rate, but yet the economy still is not doing very well and people feel poorly about the national economy.

you know, ask a series of questions. Now, of course, the problem right now is with the government shutdown, those surveys actually are not taking place, and so many of the economic indicators that we typically follow are at least a month out of date because the people who would collect that information have been furloughed. They're not working, they're

not collecting the survey information. So we're actually flying a bit blind as a result of the government shutdown, And obviously the longer that shutdown continues, the more of a problem that creates because you know, business leaders have to make decisions. They want the best and most up to date information. We're not getting that right now, So the government shutdown creates a lot of problems in terms of collecting economic data.

In plane talk? And then what's going into determining that.

out the unemployment rate. But then a lot of times, since the data are based on surveys of businesses, the preliminary number can be revised in the following month because more businesses have responded with any survey that you're sending, Like there are a bunch of people who respond right away, and then there are other people who respond two weeks later,

three weeks later, or four weeks later. So the beer of labor statistics will revise the numbers, and in recent months sometimes the revisions have actually been really big in either direction. Either they can make the economy look better or worse based on that revision. This is upsetting to people like Trump used that as an argument that the numbers are unreliable, that the people who work there are biased, they're trying to make him look bad by reporting bad

numbers for the economy. That actually is not the case. You know, these are professional economists who are compiling the data. But when you have big revisions each month, it does make people wonder, like, why are there so many revisions, Why aren't the numbers more consistent and more reliable?

up fluctuating that number as well. Like Takia was saying at the very beginning, I look a lot at the research funding and things like that, and means a key have a lot of conversations about this because you know, we both have doctorates, we both benefited from research funding.

And when the federal government cut back on research funding, can you talk about the ripple effects that that has on the broader economy, Because some people when they hear these things, they're like, Okay, who cares, so you won't be able to test that frog or whatever, But we know it's bigger than that.

had to lay off people. You know, this would be devastating for a young person starting out in the field of science, engineering, math, or otherwise. Like they were counting on a certain level of support for their graduate studies and the money basically got yanked. So that would be devastating for those individuals. But you're also right, there's a broader issue, like beyond those individuals, you know, the impact on the academics who were assuming that funding was going

to come through. The economic impact for entire communities can actually be quite substantial. In many cities across the United States, two of the big drivers are what we call eds and mets, educational institutions and all the medical and health related institutions. The whole hospital establishment, the healthcare community, the

doctors like that generates a lot of jobs. And what the administration has done has disrupted both the educational communities and the healthcare establishment, and so devastating for many cities. They have counted on the economic growth and the jobs generated by these types of institutions, and in the last six months they can no longer count on that money.

Even when there are being court rulings demanding that the federal government resume the funding, it's not clear that the administration has followed up to the degree that judges have required.

I've spent over seven years working in the farharmaceutical industry, but after being laid off from a major biotech company, I've found it incredibly difficult to secure a new role. I've seen many others share similar struggles in online communities like Reddit, and it's discouraging to realize how widespread this has become. So many of us have dedicated our careers and lives to advancing science, yet with the way things are now, it can feel like this work is no

longer appreciated or valued. Covering this topic could remind people why it is worth staying the course in their studies or in careers in science and give them hope to keep moving forward. And I won't share their name, but I'm curious your response to this, and I don't know if you can give that type of recommendation, but if you have any kind of forecasting. Should people be following these careers, Should they pursue this with the way things look now?

the research area. AI can do things that gradu students and faculty used to do on their own. So the combination of all these things has been very destabilizing, and I do worry what it's going to mean for the future in the United States, because you know, what actually has made America great has been the innovation economy, our

scientific establishment. Like this is the reason so many foreign students want to come to the United States because they know America has the best universities in the world, and a lot of these people come here they'd like to stay. Some of them end up starting their own companies. So they're a vital part of what is propelled American prosperity the creation of jobs and the fact that the United States has been very innovative in a lot of different areas.

So to the extent that the we're cutting back in that area, either through research funding or if big pharmaceutical companies are laying off people, or if immigration policies are making it very difficult for foreign students who get educated here and would like to stay but they're no longer able to do that, all of that is going to have a very detrimental effect on our future economy. Like people seem to think we can do all these things and everything else is going to stay the same, and

that is just simply not the case. Without all of the ingredients that drive the innovation economy, we're not going to have the same level of economic prosperity in the future that we have had over the last couple of decades.

hot demand for a number of years. It turns out AI can actually do that stuff pretty well, and so some of these companies have said, you know, these are tech companies, forty percent of their layoffs have been due to AI being able to do the jobs that these humans used to do. So I think it is creating a problem in the entire STEM field, and it's not just in the computer area. Like a lot of what happens in the knowledge sector is basic research, and basic

research consists of a variety of different things. It's like doing a literature review to find out what's going on in the field, collecting data, analyzing, data, interpreting the data, writing reports, having summaries of what comes out of various studies.

It turns out AI can actually do many of those things, and so the implications of the rise of AI for the entire knowledge sector, I think are actually quite serious, and so we need to think about how we build the next generation of scientific talent in a world that increasingly is being driven by AI. You don't want robots and AI to be doing all the jobs and humans having no role in it. Like, that's not a good rest of for creative solutions coming out of the future.

In the data area, people who have really good data analysis skills are still in hot demand, particularly those who are skilled at working with very large data sets, data sets that may number in the hundreds of thousands or even millions of records associated with them, So that's an important skill, and the digital economy is just creating so much data. Anybody who has data skills like cleaning data sets, analyzing information, interpreting information, I think still be an important thing.

There are other types of new jobs where companies and organizations are trying to integrate AI into their operations and improve their administrative processing, their financial management. Like there's a wide variety of things, but it actually is not such a simple matter just to add AI to your organization and expect people to be able to figure it out.

So they're going to mean new jobs that I would describe as something like management, innovation, organizational dynamics, kind of figuring out how AI works in the ways that organizations particularly need, Like to really automate functions, you have to break down every administrative task into its component parts, and even the simple thing like paying a bill, there may be like five six or seven steps involved with that, and so the process of automation means taking a look

at each of those those five six or seven steps, figuring out how to automate that, how to link that sequence of activities, and then how to integrate all that so you actually get the right answer. At the end of that, there are going to be jobs for people

who actually know how to do that. So that will involve scientists who understand AI, people who understand organizations, and then people who are used to dealing with human beings that can actually sit down with you or I and explain you know, this is how we're integrating AI into our operations. So there are going to be a bunch

of new types of jobs that are being created. If you look at the types of job ads that organizations are starting to put out now, there are job listings that have the strangest titles like jobs I've never heard of. But yet these organizations are understanding that as technology gets integrated into their operations, they need new types of people who have different types of skills. So there will be

lots of new opportunities. But the key thing is making sure people have the training that will qualify them for those new types of jobs.

no one had to think about anything. But now we've learned how to use it in better ways, even though some people's Google searches are very different from the rest

of the population. We've talked about a lot of the tough things going on with the economy, but I am interested from your perspective at Brookings, how you would describe the overall state of the US economy right now, but then also what you would do or how you would fix our economy, Like, because you know, people are we just had an election, the exit pole, they're saying that the economy was the most important thing for folks. What are the steps that were needed in order to course correct.

They may assemble an item in the United States. They may rely on a service here, but somewhere along the way, there's something happening abroad that needs to come here to

help them do what they need to do. With Trump's tariffs problems, it seems like every other week he changes the tariff rate on China or India or Brazil or Argentina, and so these countries like their heads are spinning, and then the business people who are having to make decisions when they don't know what their supply chain looks like is just completely problematic. The same thing is true in terms of immigration, Like the United States economy depends on immigrants.

Immigrants are doing a large percentage of the job in agriculture, the hotel industry, restaurants, construction. I mean, you can kind of go down a very long list of sectors. Immigrants are doing a lot of work in those areas. We've all seen the raids that are taking place in a number of major cities across the country that's completely disrupted the immigrant portion of the market. That creates enormous problems for the business communities. So if you ask me, how

do we make the American economy better? It's like our policy has to become more consistent. Our leaders have to adopt policies that actually make sense given the way our economy operates. Like, you know, you can kind of have in your head this mythical notion that only native born Americans are going to get the jobs in America, and that's a complete fantasy. Like, our economy doesn't operate that way.

Businesses don't operate that way. So the administration is trying to force a model of the economy on the country that is just completely unrealistic. So fixing the economy involves kind of removing all of the things that are actually disrupting the market, creating uncertainty, paralyzing business leaders, leading them not to invest, and they end up not hiring people because they don't know what the environment is going to be. That's completely problematic. We need to fix that.

Before we start tinkering and I would love for you to kind of talk about, especially because we started out in the STEM area, if you were able to talk to us about like how immigrant populations contribute to our STEM economy and workforce so people have an understand of that, and then broader how we can see immigrant labor in our market.

three quarters actually coming from abroad. Immigrants have been a very important part of the STEM field because the data suggests data born Americans have not gone into these fields, or they've gone in, or they've gotten discouraged and they've dropped out. I mean, there are lots of different things that are going on there, and so it's hard to know how our technology innovation is going to continue in the future without some involvement from immigrants. They have a

lot of technical expertise. There's tremendous talent all around the world, and companies have relied on that for several decades right now, so clearly we need immigration reform. We need kind of a more standardized way for people who want to come to America to actually do that. Right now, it's kind of a free for all because the last major immigration reform was in the nineteen eighties, So I mean we're talking about like almost forty years ago, and the world

has just changed so much in that time. Our policies have not kept up with the changes that are taking place.

that are going on. People have complicated feelings about immigrants and what it means to be an American, so it's hard for our political system to deal with that, and typically only once a generation or once every other generation there's an opportunity that comes along, people are able to pass some reform, but most of the time we're in the same situation we are now, which is the system

is completely screwed up. Everybody recognizes it's screwed up. But yet we can't muster the political will to actually fix it.

much younger. You're going to face a world where you're going to have to upgrade your job skills at ages thirty, forty, fifty, and sixty literally throughout your adult lifetimes. Everybody else is going to have to do the same thing because the job market is changing. Old jobs are disappearing, new jobs are being created. People are going to have to adapt to an era of change. You may be trained in one field, you may end up having to develop skills

that put you in a different area. And so people regularly are going to have to take adult education classes avail themselves of professional development opportunities. Like everybody is just going to have to learn new skills throughout the rest of their life. Now, at one level, that's actually not bad. As an educator, I like the fact people have to constantly educate themselves, But there is a societal question of who pays for this, Like you know, for elementary school,

for high school, and for college. We as a society have always said this is important, we will help finance education. We've never actually made that commitment for adult education or professional development. So right now, when people have to upgrade their job skills, generally they have to pay for it themselves. We as a society need to understand that's actually an important part of our economy now. We need to provide

that kind of assistance. The worst case scenario is people just being up behind, not having the skills not qualifying for any of the new jobs that are being created, and we end up with a permitted underclass. Ah.

the orchestrator of this, what goes first? What has the biggest ripple effect in your mind?

to start talking about this. We need to understand things are changing fast that we need to help people deal with the changes that are taking place, and that will involve public policy changes. Like one hundred years ago, when the United States moved from an agrarian to an industrial economy, we actually made a number of policy changes designed to help people with that transition. Today, we're moving from an industrial to a digital economy that is equally fundamental to

what we experienced with industrialization. We need a bunch of new policies to address different aspects of it, like who pays for adult education, how do we get people the skills that they're going to need for these new jobs. There's like a variety of different questions that we need to be exploring. The thing I worry the most about is most of the time we're not even talking about it, and so we can't even get to a solution if it's not on the agenda for conversation.

they don't become obsolete job wise. So that would be an important development kind of figuring out how you provide healthcare and retirement benefits to people who are undergoing economic transitions, because one of the things that's unusual about the United States is most of our benefits come through the job. Like European countries have national health insurance, so if you move from one company to another company, you're not losing

your health insurance. In the United States, if you move from one company to another, you may lose health insurance. You may end up with a different healthcare provider. Like there are all sorts of changes that flow from that job change. So it's not just a question of addressing employment related things. It's understanding that our health benefits and retirement benefits are linked to jobs, and so anything that destabilizes the job market also destabilizes healthcare.

look like when it comes to healthcare. I'm nervous for a lot of folks, and it feels like there's a lot of things swirling around like right now that are creating like a perfect storm for a lot of turmoil. Is there a glimmer of hope that people can cling to. We just had the like I said, we had the midterms,

and we see that there are some shifts happening. But is there something that we don't see that you feel like, is Okay, we have this thing, this one thing that's going right, and this is what can help us begin to start talking about things and then putting things into practice.

going to go up very dramatically. People now are understanding this is not a blue state, red state issue. There are a lot of rural, conservative areas where people's healthcare costs are rising dramatically. It's not just liberal states, it's conservative states that are going to experience the same thing. The Medicaid cutbacks that were part of the last congressional budget bill. That's going to have a lot of impact

on rural, southern and conservative estates. So I think there's a basis for a coalition to emerge from people whose constituents are going to be affected by this. I think they're starting to figure that out. They're understanding they need to address these issues. The healthcare issue was actually a big issue in this week's elections. I'm sure it's going to be a big issue in next year's midterm elections. So to me, this is a positive sign. People now

are paying attention to this. They understand it's a problem, and people are trying to figure out how can we address it.

these economic issues worse. In the short run, technology is increasing inequality, but people are now starting to understand that, they're starting to pinpoint that as a problem, they're starting to think about the policy measures that we need to adopt in order to deal with that. So it actually makes me optimisty that even though there's going to be short term pain, they're definitely going to people who lose

jobs are not able to find them. People who are losing healthcare benefits, and I don't want to minimize the reality of that, but I think these issues are now on the agenda. Political leaders are starting to talk about them, so there actually is hope in the not too distant future.