Dialogue with the Fed—A Look Ahead: Economic Briefing and Labor Market Update

Nishesh Chalise: Good morning, everyone. Welcome to the Federal Reserve Bank of St. Louis. I’m Nishesh Chalise. I’m a senior manager with the Institute for Economic Equity here at the St. Louis Fed. The Institute for Economic Equity is part of the Community Development Department within the St. Louis Fed. And we focus on lower income economic conditions in lower income households and communities, with a special look on barriers facing these households and communities as they try to participate and derive benefits from the economy. We’re so glad that you joined here this morning, braving the cold. I think it's supposed to get a little bit warmer today, but it was still pretty cold. And I believe we have quite a good turnout virtually.

In today’s presentation, we’ll be examining regional and national labor market conditions. And we have great panelists to provide a good discussion. I feel like we’ll learn a lot today. After this brief welcome and introduction, I’ll turn things over to Charles Gascon, who will give this morning’s presentation. Following his presentation, we'll be back here with our panel with Dr. Ness Sandoval from Saint Louis University and Megan Soto, director of business operations at TEKsystems. A few things, and I’m going to make sure I say all of these housekeeping items.

First of all, you’ll receive an email after this event that has a survey. We love our surveys. We love data. So please do complete the evaluation. We take it very seriously, and it helps us continuously improve for the future. For those of you who are in person, if you require a hearing assistance, they are available at the front of the auditorium. And if you're not-- if you have not found restrooms yet, I always wanted to do this, it reminds me of being in an airplane. The exits are back there behind you. And so, the restrooms are right there. So, if you just take that exit back there, you should be able to see it.

During the Q&A, if you have a question, please do raise your hand and then I’ll come to you. And you’ll see that in front of you. There’s a microphone. If you touch that gray area, the light should go from red to green, and then you’ll be able to ask the question. We do ask you to use the microphone so that our virtual participants can hear you properly. Finally, for those of you joining virtually, please put your questions in the chat and one of our team members will let me know that you have a question and that’s the way your questions will be asked with the panelists.

Now, I’d like to introduce Charles Gascon. Chuck, as we lovingly call him, is an economist and research officer in the research division of the Federal Reserve Bank of St. Louis. He joined in June of 2006. He analyzes economic conditions nationally and in the eighth Federal Reserve District. He reports on the regional economic conditions to the bank and the staff economists prior to the Federal Open Market Committee meetings. He is responsible for writing the Bank’s Beige Book report on economic conditions and contributes to other bank publications. If you follow the Beige Book. I believe it comes out today. Chuck has a master’s degree in economics from State University of New York at Albany, and an MBA from Washington University in St. Louis. His work has been cited in the Wall Street Journal, the New York Times, in local media. He’s a member of the American Economic Association and the National Association for Business Economics.

All of this to say, we are in great hands. Chuck, please join me in, and please join me in welcoming Chuck.

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Charles Gascon: Thanks, Nishesh. Is this off, I think? You guys can all hear me OK, and online we’re good. OK. Here’s the plan for today. I’m going to go over-- really focus on the labor market. I know we’ll have a lot of questions on various aspects of the economy. I really want to take a deep dive in the labor market and in the St. Louis Metropolitan Area, and put together, ultimately, an outlook for the year ahead as we think about what some of the longer-term trends are, as well as some of the short-term factors that are influencing job growth in the region today.

Here’s the outline of how I’m going to go through things. I think it’s really important that we start with the foundation of where’s the economy today with respect to the labor market. And then from there, I’ll go into the supply side of the labor market and an outlook for labor supply, move into labor demand, and then merge these things together and look at outlook for the unemployment rate, and then wrap up with some of the risks and conclusions to this overall outlook.

Before I get going. These are my own views. They’re not necessarily the views of the Federal Reserve Bank of St. Louis or the Fed System. So, everything I say, it’s ultimately on me here. So, you can’t blame anybody else for what I have to say. And Nishesh is very familiar with this disclaimer. OK, so FOMC meeting. There’s another meeting here coming up in a couple of weeks. But when the FOMC met on November 7, this is how they described the labor market in their statement. They said since earlier in the year the labor market conditions have generally eased, and the unemployment rate has moved up but remains low.

So, I want to start just putting some data behind this as to what exactly is trying to be described here. So, the first chart with these bars on your left shows the monthly change in nonfarm payroll employment, which is, broadly speaking, the headline job growth number that we think about that gets reported in the news every first Friday of the month. So, the next one, the data will come out this coming Friday. Over the last two years, the economy has added on average 219,000 jobs a month.

If you look at the golden line here, that’s the average job growth from 2010 to 2019. So, over the past expansion. So, really strong job growth over the last two years. Over the last 12 months, basically right in line with this longer-term average. And then if we look over the last six months, we’ve seen job growth continue to slow 132,000 jobs. And then over the last three months, 104,000 jobs. Now, the last three months does have the October number in here, which was about 20,000 jobs, which was impacted by the Boeing strike, as well as the storm disruptions that we saw in North Carolina and throughout Florida.

So, the numbers for November are expected to show a rebound in job growth in that number. So, we’ll take a pause there on that number and we’ll see what comes out on Friday. As a result of that slowing in job growth, we’ve seen just a little bit of an uptick in the unemployment rate. But when you look at it from a historical standpoint, it’s still at a low level. And that’s what the statement was trying to outline, slowing job growth, a little bit of an improvement or increase in the unemployment rate. But still conditions in the labor market, as measured by the unemployment rate remain pretty healthy.

So, what’s going on behind these numbers. Well, first of all, like I mentioned, weaker job growth in October. Only 12,000 jobs were added. Forecasters expect a strong reversal in the November data. Looking at the tracking forecast I’ve seen over the last couple of days, close to 200,000 jobs are expected in the November jobs report, so definitely a rebound from what happened in October. We’ll also get revisions to the October data. So, that may also change the employment outlook for the October numbers. So, there’s definitely disruptions in the data recently that I think make it difficult to interpret some of those signals.

Underlying these headline numbers, a lot of what’s going on is just less churn in the labor market, so fewer people voluntarily quitting their jobs. So, the quit rates are down. Layoff rates remain low, so not a lot of businesses having mass layoffs. Although there have been some headlines made recently about firms laying off workers. And the other thing that we’ve seen is job openings. So, the number of positions that firms have posted have dropped down pretty sharply. So, if you can combine those things together, you still have steady job gains, just not as many people moving around in the background resulting in those job gains.

The other thing that’s happening is the supply of labor in the economy has increased pretty sharply over the last couple of years. Workforce participation rates, particularly of those workers 25 to 54, are higher now than they were before the pandemic. Immigration has also increased the labor supply, so a lot of what’s caused some of the easing in the labor market has been supply has improved and met that strong demand that we saw coming out of the pandemic. As a result of improvements in the labor supply and cooling and demand, wage growth is starting to return to normal. It’s still elevated relative to 2019 levels, but it is starting to stabilize.

And when you look at the wage gains for people switching their jobs versus those that are staying at their employer, that gap has narrowed quite significantly. So, it’s not like you see as many people dropping from one employer to the next looking for an extra couple of dollars an hour for those pay raises. That kind of dynamic has worked its way out over the last couple of months or a couple of years. And then in the background of all this, labor productivity growth has been strong. And this has eased the demand for additional labor. And it’s also supporting strong wage gains.

What’s happening when we look at the data, this isn’t just investments in new technology, but also stable workforces allow employers to not have to spend as much time training new workers, but actually focusing on getting their work done. And also, just stabilizing like, where do we need workers to grow our businesses with labor costs increasing, making some of those investments in new technology are also playing out. But from our surveys, it does suggest that it’s probably still a few years out before you’ll see some of those real gains coming from the productivity growth at businesses, but the numbers so far look pretty strong.

At the Fed, across the system, we run surveys of businesses, and one of the questions that we ask our business contacts-- and this latest data point was from our recent survey, which just concluded about a week and a half ago, ran from middle of November until just before Thanksgiving. And one of the questions we ask businesses, are you increasing your employment and/or are you decreasing your employment? And the way I’m putting this chart together is I’m taking the net percentage. So, the share of businesses saying they’re increasing employment minus the share that are saying they’re decreasing employment.

And as you can see from the chart, we’ve seen the share of businesses that have increased their employment has slowed pretty substantially from 2021 and 2022 to now, where it’s relatively in balance. We have a lot of firms that are telling us that their employment is unchanged. And then those sectors where we’re seeing increasing employment are primarily in hospitality and construction. Employment is generally flat in manufacturing. And then the sectors where we’re hearing businesses reporting declines in employment, it’s primarily in the retail space.

Again, there’s seasonality that’s going to come in. So, probably not happening right at this time of the year. But generally speaking, over the course of the year, declines in retail employment, and then in other professional services areas. So, again, the survey data is broadly consistent with what I showed you with the job growth data, which is a cooling labor market and fewer firms hiring.

When I look at the aggregate data for the St. Louis Metropolitan Area, there’s a lot of mixed signals that are coming from the various sources. And I want to take a minute here to walk through what’s going on because this is really important when we think about how to interpret the outlook. To start with the dark blue line on here is nonfarm payroll employment. That’s the headline series that’s often cited in the press.

So, that’s the data for the national economy that will come out on Friday. We’ll get the regional data here in a couple of weeks. That’s a survey of business establishments. About 600,000 establishments across the nation. Probably maps down to about 5,000 businesses in the St. Louis Metropolitan Area. There’s also a survey of households. That’s where the unemployment rate comes from, and that’s a survey of about 60,000 households nationally. So, the primary number that we think about from the household survey is the unemployment rate, but we also get-- from that number, you get a job as a number. So, the number of people who are active. They actually have a job in the economy. That’s the light blue line.

And then the last line on here, which is the golden line, and I made it golden for a reason, which is this is a census data. It’s not a survey-based data. So, businesses are required every quarter to file an unemployment insurance form that tells you how many people that they have on their payrolls that are eligible for unemployment insurance. And it covers all 100,000 establishments in the St. Louis Metropolitan area. The data comes out with a lag, so we only have data through the second quarter. I have estimates pushing this all the way through here to the October data, which is comparable to other series.

And so, what you see in the picture-- and I made some adjustments here to get the trends in line. But what you see in the picture is that the quarterly census of employment and wages data shows significantly slower job growth coming out of the pandemic than the other two series show. The household survey data will not be revised, but the nonfarm payroll employment data will be revised. And the source of that revisions is that gold line.

And so when I’m moving forward through the talk, one of the first things that’s going to be important to note is that when the Labor Department goes back and does their benchmark revision in March, so in just a couple of months, we’re probably going to see the data for the St. Louis Metropolitan area revised downward by a decent amount, not necessarily all the way down to this line because there are some differences in methodology.

But I do expect to see some downward revisions in the data. And I’m going to make that adjustment before I go forward with the rest of my economic outlook talk because it changes the narrative. The ending point for my forecast is going to be the same, but if we start at this high level, you’re going to expect to see job employment declines going forward versus if you get that level to the right place, it shows steady improvement in employment.

So, here’s what-- when I go through and I look at where the revisions are coming from, this is ultimately what I’m expecting to see. So, the data right now, over the last two years shows about 50,000 jobs added in the St. Louis Metropolitan area. I expect that to get revised down closer to about 35,000 jobs. A lot of the downward-- the downward revisions are pretty widespread. I think the only sector where we see an upward revision is in professional and business services by about 3,000 workers. Most of the downward revisions are coming from leisure and hospitality and health and education.

And again, this is just sampling error. We have about 1.6 million workers in the St. Louis Metropolitan area. So, when we think about a revision of 30,000, it’s not huge over a two-year period. But when we look at job growth numbers, it definitely can be interpreted as being quite significant. so that’s why I think it’s important to keep this in mind. Leisure and hospitality, education sectors. The other place is trade, transportation, and utilities is the other area that I expect to see some downward revisions in job growth. And these will come out at the end of March, and they’ll go back the next couple of years.

OK, so taking that as the foundation, let me move into what I see going on with the supply of labor. So, I think the first point I want to know is if we go back from 2010 to the present, the overall labor force in the U.S. economy has increased by about 10%. In the St. Louis metro area, it’s increased by about 2%. So, definitely seeing sluggish labor force growth overall in the St. Louis metro area. In the State of Illinois, the labor force is actually 2% smaller than it was in 2010.

So, that’s the underlying trend in the background that we have to think about before we-- then I want to move into what we’re seeing coming out of the pandemic. And I’m going to zoom in now on the 2020 to the present data. And what you’re going to see is the labor market-- labor force recovery has been pretty strong here in the St. Louis area, and more consistent with the national average. And what’s happening here is we’ve seen a really strong increase in the labor force participation rate, as well as inflows into the labor market from people who had been on the sidelines impacted by the pandemic.

The broader Midwest region saw a quicker and stronger rebound coming out of the pandemic than some of the other parts of the nation, and so that also helped up and boost this labor force growth. But now, again, we’re in this position where is this short-term recovery in the labor force. It seems like it’s coming to the end, and now we’re starting to get back into this situation where we have to deal with some of the longer-term and demographic trends because these employment to population ratios are getting back to historic highs relative to pre-pandemic.

And here’s what I’m talking about labor force participation. This is what the data is showing us today. I don’t have data for the St. Louis Metropolitan area, but you can see from Missouri and Illinois, generally speaking, the St. Louis numbers will fall pretty closely to those Missouri numbers as we make a big portion of the labor market. Again, longer-term trend is downward for the labor force participation. This is our aging of our population, lower birth rates generally leading to fewer workers participating in the labor market.

Now, we have seen that really strong recovery. And even in the National data, a stabilization in the labor force participation rate. And the reason that that’s happened is that these workers, 25 to 54, so prime age workers that you would expect to be participating in the labor force, those rates are higher than they were in 2019, and in many cases, they’ve hit all-time highs. So, if you look at women’s labor force participation rate, for example, it’s at 78%. It was at 76% prior to the pandemic. And that’s one of the highest levels on record going all the way back to the 1950s.

If you look for men, it’s hit 90% for this prime age working group. It was at 98% in 1950, but it’s really in the more recent period of time. This is also at an all-time high. So, what’s happening is that prime age workers are continuing to participate at higher and higher rates in the labor market, but at the same time, there’s fewer and fewer of these people. So, that is what’s creating this longer-term downward trend. But it’s also created a very positive environment over the last couple of years and has resulted in a pretty strong rebound in the participation rates.

But it’s hard to see an environment, in my mind, where these upward trends can continue because these prime age workers are now really getting to their max point in many cases. And so, when you move forward and you look at, well, how much labor force growth can we have in the region? There’s not a whole lot of room for more growth given the fact that population flows are outward. So, net migration of domestic workers is a negative outflow. Those overall labor force participation rates. The longer-term trend is for those to continue to decline.

And as a result of that, a basic expectation is that we’re going to probably have to see our labor force stabilized. These are the forecasts from S&P Global. So, you can take the numbers at face value. I think the bigger point here is that 27,000, 28,000 new workers entering the labor market a year is probably not sustainable in the long run without really significant changes in migration patterns in the region. And you can see that’s been basically the case. And those numbers are pretty consistent with what we’ve seen going back to 2011. So, that’s the labor market supply. So, really constrained supply in the labor market.

So, let me turn to demand now and talk about what we’re seeing on the demand side of things. I mentioned job openings are declining. This is data from Indeed-- it’s indexed to February 2020. So, you can think of that as basically normal tight labor market conditions right before the pandemic. So, the surge in job postings both nationally and within the region, index of 160 would mean 60% increase in job postings.

That’s now cooled pretty substantially. So, this is that less churn, fewer job openings out there for people to apply for, less workers quitting, but it’s still a little bit elevated relative to those 2020 numbers. So, this is the cooling and demand for labor at a really high level that we’re looking at.

In our surveys, what we see is that while demand for labor has cooled, it does still remain relatively strong and healthy. And this is the November survey. The light blue lines are from last November. We asked the same question. And then over the last, basically, 10 years we’ve been asking this question every November. And 55% of businesses expect their employment to be unchanged over the next 12 months. 34% of businesses expect to increase to their employment. That’s up quite noticeably from last year. And then the share of businesses that expect to decrease their employment has actually declined.

So, when you think about the fundamentals of the outlook today relative to if I were showing this chart a year ago, it does suggest continued healthy growth in employment because there’s still pretty strong demand for labor. So, digging into the weeds, why are businesses hiring? Well, some are just seeing strong sales growth, so they need to hire. They need to keep up their employment levels with the number of inquiries coming in for new job opportunities or new work.

Skill mismatch is another big area. So, there are job postings that are maybe out there or positions that they just know that they need to fill, but they don’t have the workers on staff right now to fill those positions. So, if Nishesh wasn’t here, we’d have to find somebody like him to come up here and do this. And that’s a hard spot to fill. And then current staff being overworked is another big one. So, businesses that are just finding themselves in an environment where they’ve tried to manage their costs, they haven’t overemployed, and now their staff are overworked.

The factors restraining hiring plans primarily skill mismatch. So, we can’t find workers, but at the same time in our current firm, when we go out into the labor market, we still can’t find those workers that were looking for. Weaker sales growth is another reason they’re not going to continue hiring at the same pace. And then desire to keep operating costs low is another top concern. Wage pressures have been very strong over the last couple of years, so a lot of businesses have seen that labor cost share of the overall cost structure get higher. And as a result of that, they don’t want to bring on more workers onto their payroll, and they want to try to keep their operating costs low to maintain profitability.

And then last but not least, of those firms that do plan on reducing their employment, they’re primarily expecting to do it through attrition. So, not replacing a worker who’s departed. So, this leads to a slow decline in employment in these firms, not mass layoffs or anything like that. So, I think that’s a really important thing to keep in mind for those businesses that are looking to reduce their employment. With respect to wages, as I mentioned, there’s fewer job openings out there, less people voluntarily quitting. And as a result of that, we’re not seeing the strong competition for increasing wages relative to what we’ve seen over the last few years.

So, there’s still a significant share of businesses that are raising wages for new hires. That’s actually the plurality in this case. But there are a greater share of businesses that are now saying, we’re not going to raise our wages in the coming year to bring in new workers. So, it’s definitely shifting in many ways from an environment where workers had a lot of ability to compete for higher wages, and now firms are starting to push back on that, again, because they want to keep their operating costs low, maybe they’re not seeing their sales numbers be as strong as they were before. And so, wage pressures have clearly moderated as over the last year. And that’s expected to continue as we move into 2025.

So, when you get to the jobs numbers, this is before the revisions. So, this is what S&P Global has for their forecast right now. So, 28,000 to 26,000 jobs were added over the last two years. And then the forecast is actually for really slow job growth next year, and then a decline in 2026. However, after I make my revisions that I expect to see, we end up at the same ending point, same number of total people employed, but the picture looks very different and it’s much more consistent with the national picture, which is still strong job gains over the last couple of years, but more of a slowing of job growth as we move into the next couple of years.

So, that’s why when I talk about this revision, it is very important to keep that in mind because the picture looks very different here than the one I just showed you a second ago. So, cooling job growth out this year, some downward revisions, but still healthy job gains in 2025, and then some cooling as we move into 2026, again, as that labor supply remains constrained.

So, if you put this all together, and I plot the demand for labor here, which is employment plus job openings and then the labor force, which gives us the supply of labor, continued tight labor market conditions, not as tight as they were in 2022, but closer to what we saw in 2019 or early 2020, which is the demand for labor still outpacing the supply of labor in the region, which presents a lot of challenges for employers because that suggests that you have to look outside of the broader region to sometimes fill some of the positions that you have open.

But this is the headline, the big picture to take away is continued tightness in the labor market, steady job gains, but really constraints on the supply of labor. And as a result of that constraint on the supply of labor, even with some of the cooling and job growth, the forecast for the unemployment rate are still continued low unemployment rate. There’s just not as many workers in the workforce. Demand for labor remains pretty strong, and as a result of that see an unemployment rate for the region that remains in the upper 3’s, which is really, in many cases probably as low as we’ve seen in the history of the Metropolitan area.

So, where are the risks to this outlook? And then looking forward to our panel discussion here. So, at the September FOMC meeting, when policymakers released their projections for the unemployment rate, the majority of members noted that there was a greater upside risk to their employment rate projections than a downside risk. Now, what I mean by that is, it’s more likely that the unemployment rate will be higher than what I showed you as a projected then lower. It’s bounded by zero, so in many cases, that may not be surprising.

I mentioned attrition is a key for downsizing workforce. We are hearing reports from some businesses that those rates of attrition and turnover are lower than what they expected. If they don’t see that internal turnover, it can result in an environment where there may be layoffs. And so that’s something we have to keep in mind. And that could reduce employment further. And it can have a chilling effect on the overall economy as people see those kind of headlines in the news.

The immigration rate has increased pretty substantially over the last couple of years. I know this has been in headlines over for the better part of the year. It has boosted the labor supply. And in the St. Louis area, it’s definitely helped offset some of that negative domestic migration of workers that currently are living here who have moved elsewhere and help offset some of those losses in labor supply.

Businesses’ ability to attract workers from outside of the region is really going to be necessary to meet some of that local demand for labor, so that businesses can continue to expand and have those opportunities. That presents a lot of challenges. Wages in the region are very competitive relative to the national market. So, that’s generally a benefit to the St. Louis area. You cannot say the same thing about all parts of Missouri, but generally in the St. Louis area, when you look at the wages that we pay, they are nationally competitive. So, that is a big benefit.

And then the last but not least, productivity growth. It shouldn’t be understated. We don’t necessarily need to add more workers to produce more stuff. If we can find ways to produce the same amount of stuff with the same number of workers, that means that there’s more profits to be had for businesses. There’s a greater incentive to compensate workers at a higher level because they’re doing more year in and year out. And so with higher labor costs, constraints on labor supply, productivity growth already being strong does present, I’d say, an upside risk to the outlook and that we’re already seeing it start to play out.

There’s a lot of reports that we’re getting from businesses that investments in new technologies and labor-saving areas will allow them to continue to expand their operations and present new opportunities going forward. So, I think that’s one of the real keys when we think about the upside risk is that you can see demand for labor remain relatively stable, but still see people in the region see healthy wage gains and businesses expand through productivity gains. And that ultimately can attract more workers into the region. I’ll get to you in a second.

Let me just wrap up with some of the key takeaways here. And then we’ll move to our panel discussion. And, Mike, I’ll get to your question too. Nationally, labor market conditions have eased, demand stabilized, and the supply of labor has increased. I think that’s really the background that we’ve seen. That’s led to some of these cooling of wage pressures, but still a low unemployment rate and healthy job gains. The St. Louis economy, and I didn’t really dive into the industry mix, but it’s really similar to the U.S. And so, it’s rare to see the U.S. economy expand and the St. Louis economy contract. When the U.S. economy is doing well, businesses in our region and employers in our region tend to add workers.

And so, when you think about the outlook over the next year, you can very confidently look at what we’re seeing in the national data and understand that has probably a pretty much a one-to-one mapping to the St. Louis region when it comes to the business cycle. Downward revisions to these payroll employment growth will put the region more in line with national trends. If you look at the data right now, it does show job gains in the St. Louis area significantly faster than the national average.

With these revisions, again, it gets to the first point. It’ll still show a healthy labor market, but it’ll show a labor market that’s more in line with national trends. Where the differences start to come into play is structurally what’s going on in the region, which is with our negative-- with our aging population and then the negative out-migration. The forecast is for constrained labor supply over the next few years, and that’s where you can start to see some weaker job numbers coming in because it’s just harder for businesses in the region to find workers. And it may take longer.

But at the same time, demand’s healthy. Businesses are still looking to employ to raise or increase their employment on net. And so, the forecast is for steady but slowing job growth over the next couple of years, consistent, again, with the national picture, where we saw really, really strong job gains over the last few years. And then absent any major shocks to the region with that constrained labor supply and healthy demand for labor, my expectation is that the unemployment rate in the region will remain low.

So, with that, I’ll pass it back over to you, Nishesh.

Nishesh Chalise: Thank you, Chuck. If you have questions for Chuck and then later for the panelists, please, please start jotting them down. And same goes for our 145 virtual attendees. If you have questions, keep them coming in the chat, and we’ll make sure we’ll get to them. We have a bunch of time saved.

So, first of all, let me introduce our panelists, and you can go further if you want to add something after I share. Dr. Sandoval is a professor of demography and sociology at Saint Louis University and is actively engaged in research that combines demography and spatial data science. Maybe you can even get into a little bit of what spatial data science means.

His primary focus is on utilizing big data to examine socioeconomic demographic patterns in American cities. He’s also one of the founding members of the Taylor Geospatial Institute. Through his research and outreach, he works to bridge the gap between data science and policy, helping communities better understand and navigate the demographic shifts impacting their lives.

Megan Soto is a dynamic leader with a proven track record in business operations and business development. Currently, she serves as the director of business operations at TEKsystems where she plays a pivotal role in leading a team of professionals, who provide strategic business process and technology support to over 200 clients across various industries and sectors in Missouri, with a focus on cloud, data, and digital solutions.

That was a lot. That sounds like you have a lot on your plate. Her mission is to help clients achieve their transformation and customer experience goals, while empowering her team to grow and excel. Thank you so much for joining us this morning.

I’ll start with Chuck. Thank you for that insightful presentation. Always learned something new. And you got into this a little bit. And I know Dr. Sandoval and Megan will also add their comment on this, but you mentioned that there is less movement of overall workers and especially compared to a few years ago. Could you say a little bit more about what that means for employers in the region-- what you have heard during roundtables What does it mean for maybe young folks who are trying to get their first jobs, or those who are somehow having to come back from retirement or some gap in workforce, and they’re trying to get back into the labor force? What does this tight labor market, less movement of workers mean for them.

Charles Gascon: So, I think we have to start by realizing what we saw in 2021 and 2022 was not a normal labor market by any stretch of the imagination. People had multiple job opportunities to choose from, and the turnover rates that we were hearing from employers were unprecedented in some cases. I would describe the labor market today as something that’s much more normal in recent times. And so, what that means is that there are fewer job opportunities, job openings that are posted, but they’re still plentiful.

It just maybe takes a little bit longer to find the right fit than you would have expected just a couple of years ago, where you had a lot of different opportunities that you could pick and choose from as a worker. Now, employers have a little bit more say and being more selective. We’re hearing from a lot of businesses that the number of applicants per position that they have is back to levels that they’d seen before.

I remember we had a staffing roundtable here at the bank just a couple of months ago, and one of the people mentioned that they had six people show up for interviews, and that was the first time that they’ve had six people show up in a row for interviews, when a year ago they had six no shows. So, that’s the difference in the market. Is that it’s just back to where it normally would.

Chalise: Thank you. That helps a lot. I don’t know if Dr. Sandoval-- Megan, you had any questions or clarifying-- or any comments on what Chuck presented today?

J.S. Onesimo Sandoval: I think it was a great presentation. I can speak directly to the labor supply topic for the region. I think the data comes from multiple places from the U.S. census, from Iowa. We have pretty good data from multiple sources. And so, we always try to triangulate our analysis. And so, the region-- as a demographer, I talk about demographic hurdles. And so, the region, historically, has been losing people. More people have been leaving the region than moving into the region.

And if you go back to 1970, the St. Louis Metropolitan region was a fairly large region relative to its peers, but it only grew by 12%, since 1970. And so that’s nothing compared to Charlotte, Orlando, Houston, Dallas. And so, what this-- if you go back and look at the data, we start counting births versus deaths, the region today should be about 4.2 million residents.

We should be 4.2 million residents based on where we were at in 1970. And the number of births that happened versus deaths were under 2.8 million today. And so, what this tells us is that we’ve been losing people for a long time. More people have been leaving the region and coming in, and now, we have pretty good data that shows us-- because we’re not experiencing population growth. It’s exposing that trend that’s been happening.

So, it’s not a new trend. It’s a trend that’s been happening for several decades. The reason we see it now is we have more people dying than are born. And so, this is something that’s relatively new to the region. And it has implications, if we don’t pay attention to the long-term implications of being a region that moves from what we call a COVID demographic winter -- more people dying in are born-- to a traditional demographic winter based on the age structure of the region, where you have more people dying in a born, but not because of COVID. Simply because of your age, structure of the region.

Chalise: Thank you.

Megan Soto: And I would add a few things on the demand perspective. I think, historically, our region was known for heavy manufacturing, and we’ve shifted in the direction of bioscience, neuroscience, and now geospatial, which I know Dr. Ness can talk about a little bit more in a while. But we’re still dealing with the after effects of the post-pandemic era, which most companies right now-- a lot of companies are still missing revenue goals.

They have forced product delays. There’s a plunge in customer satisfaction, product service issues, and overall just lost revenue. That still will push demand. There will still be a demand for people. So, that’s all I would say. Is demand is still outpacing supply, and we can talk a little bit more about that based off questions.

Chalise: Could you add a little bit on that? From your vantage point, do you have a sense of which businesses and industries are driving the growth versus which businesses or industries do you see are more steady or maybe slowing down in the region?

Soto: Yeah. I think, specifically in St. Louis, we see growth coming from the government sector, which your slide actually highlighted that as well. And not just, I would say, the base driving some of that from a programmatic standpoint, but the state of Missouri, the cities, the counties, the funding that they’re receiving right now for things like broadband.

I think, additionally, healthcare, especially with the new administration-- I’ll be curious to see the impact on how that changes the trajectory of health care growing in the future. As well as, I think, financial services, but specific segments. So, there’s obviously a large credit card company that exists in St. Louis that’s going to be growing. Wealth management is growing and booming right now versus traditional banking is not. So, I think it’s been interesting to see how that kind of impacts St. Louis specifically.

Gascon: Yeah. Thank you. I’ll add one other thing to this, which is the data that I showed is broken down by industry. When you look at occupations, the demand for IT occupations spans across many industries in the healthcare space, not just in your traditional-- in your banking space as well. So, that’s an area that we continue to see in the data continue to be really strong demand for IT type of positions. Not only entry level but definitely skilled it positions. And information security is another big area.

Chalise: Coming back to the supply side, I think everybody who lives in St. Louis or is from the region, probably, has heard about this decline in population for a number of years. Dr. Sandoval, you do a lot of research on this. You present this to different audiences. What is usually the reaction of the audience? Because this is-- I think we’ve known this. I agree there is more data that sheds even further light on this. What is the reaction? What are the conversations like?

Sandoval: I think the initial reaction is-- I think there’s a part of the population that wants the region to grow. I think they just think we’re going to grow. But then when you look at the components of growth-- and you have to start with births and deaths. And then you look at people, who are leaving a region and moving in. You start to see that’s only two ways you can grow. You have more babies born and people dying and more people moving in and moving out.

And so, it’s simply to say you want to grow is a nice thing. It’s a nice statement, but when you look at the empirical data, the region right now is not growing in either of those dimensions. And I’ll talk about the births and deaths for a little bit because this is the part that if we don’t really pay attention to it, it has big implications for the future of the region. So, right now-- and part of it is driven-- we’re seeing a significant decline in fertility for our region and for the state as well.

And so, we’re ranked among the top 50 Metropolitan regions. We have the 44th. We’re ranked 44th in terms of our birth rate. And in terms of our death rate, we’re ranked eighth. And so right now, the region has a rate of natural decline. We’re only there’s six regions in the United States. And St Louis is one of those regions. And so I always benchmark the Pittsburgh because Pittsburgh’s been there for well over a decade.

But St. Louis is a much larger region than Pittsburgh. And we have an age structure that can make us number one in the region, if we don’t pay attention to why birth rates are dropping so fast. Because we know there are many indicators, but the one I use is the agent index. The St. Louis Metropolitan region is around 11th oldest region in the country. We have fewer families with children today than we did in 2010.

Among all of our peers, they all have seen an increase in families with children. And so I go back to-- if you go back to the housing, we’re not building the housing at the level that our peers-- We’re, not even close. We’re not even in the ball game when we compare ourselves to San Antonio, Austin, Charlotte, in terms of the sheer amount of housing that’s being built. And so, when I talk to people-- you want to grow, but where’s the housing that’s being built that can absorb that growth.

Because if we were to turn the switch and get 20,000 new people a year, 30,000 new people a year, there’s simply not enough housing in the city or in the counties to absorb that growth. And so that’s the challenge for the region. Is if you don’t build housing, young people are going to move to other regions, where their jobs are at, and they can see the American dream and look for that housing. It can go bad for St. Louis in 20 years.

We call it a decline of about 10,000 a year in terms of deaths versus births. And so over 10 years, that’s 100,000 people that the region can decline, starting in 2042. We could be 2.7 million very easily if we don’t really pay attention and try to address our housing-- and bring a younger population into the region.

Gascon: Let me build on that. The housing part is challenging because I think a lot of people think, well, if the population is not growing, why would you build housing? And what you see in the data is that areas that have seen strong productivity shocks, where firms are looking to hire very quickly, if the housing supply has not matched that growth, the result is generally less population growth and faster increases in rents and overall cost of living.

So, if you look at places in California, for example, where it is very difficult to build housing, you’ve seen great productivity gains but not necessarily the inflow of people that you would expect to see, but then outsized price increases. So, that makes it so that for existing residents, particularly renters, it’s not necessarily a desirable place to remain because your costs are going up, and you’re not necessarily seeing that broader growth.

So, it’s not necessarily-- the building housing is making sure that you have the capacity to build housing in response to workers coming in. With respect to the labor force as it matches to the population. One of the things that we also see in the data are vast disparities based on geography, and race, and income on participation in the labor market.

So, I talked about prime age, workers-- participation has moved up sharply, and that’s been necessary to maintain labor force growth and employment growth. But there are still pockets of our labor market, and in certain areas and certain other ways you can look at it, where you can still see gains in participation.

And so, if we take what Ness is described as given, it often means that you have to look and say, well, where are the untapped labor markets in the region? What workforce development opportunities do we need to look into to take what may be a shrinking population and try to continue to at least sustain our labor force. And I know Nishesh you’re working in that space a lot.

Chalise: Yeah, absolutely, just to add to this, and we hear this a lot. We were at a roundtable in Mission St. Louis, which is a nonprofit organization. They do a lot of other work, but they do workforce development and provide wraparound services for communities for more, like, households in North St. Louis. And they do a wonderful job. And their idea has always been that yes, new folks can come to the region and get the jobs, but we do have, as you said, Chuck, a pool of untapped talent in here.

But what we need to do is upskill them. And I’m going to come to you, Megan, about that. The skill conversation is that we need to upskill them because this stays with me a lot. One of the person says, when we talk about upskilling in the IT sector, we always say, why don’t we send folks to coding boot camps? And she said, the people who walk in this door don’t know how to right click.

And so, I think we have to change our perception. When we think about upskilling and upskilling a certain sector of the community, we might also have to rethink what that upskilling looks like. Megan, I’m going to start with-- I asked Ness how do his audiences react as a person leading in the IT industry and as a person who has to hire. What is your reaction to that demographic conversation? And after that, maybe we can jump into some of the skills number that you shared earlier. I find that fascinating.

Soto: Yeah. I think what I would add is the education that can lack sometimes around what does that opportunity look like and how-- especially for entry level role. How are we educating not only students graduating but people just entering the workforce around what to look for, what to ask for? What kind of roles can you take now that are going to help you build general skills to become specialized later?

I think that narrative is one that is-- it comes up frequently. I’m also noticing more of a skill gap in things that maybe I take for granted now-- just general sitting down and communicating one on one with humans and not via technology, being able to sit in a room with people and interact in person. I’m starting to notice a shift, I would say, especially with entry level workers in a direction that previously we didn’t have to worry about. So, those are some things that I’ve definitely noticed.

Chalise: Megan shared this number here. I’m going to do-- or do you want to share the number, or do you want--

Soto: Go for it. I can--

Chalise: I’ll share it because I wrote it down. So, Megan shared about-- I think this is from the Gartner Report-- that the total number of skills required for a single job is increasing at 6.3% annually, and that 29% of the skills present in an average job posting in 2018 will not be needed by 2015. So, it’s quite a dynamic environment for us. Could you talk a little bit more about that skills gap and how you experience it, how your industry experiences that?

Soto: Yeah. I think what I’ll start with is there are several skills that are expected to be in high demand, and not just from an IT perspective. Generative AI is a hot topic. It’s not going away. Data analytics, software development, and design-- I think those are all going to continue to grow. Project management-- some of those more functional skills that I was just referencing come into play there.

Cybersecurity also not going anywhere. Cloud computing and then sustainability skills. So, going green-- what does your profile look like as a customer? Those are all going to be in high demand moving into 2025. And what he’s referencing is it’s a moving target. So, if you think about how anyone right now may go and look for a job, which, yes, companies are not seeing the attrition rates they expected, but people are more open to changing jobs than ever before, especially after the great resignation and the lingering effects of that.

So, it’s a moving target. So, what we were asking for a general project manager three years ago is completely different now, except there’s still verbiage and details and specific maybe technologies or tools that they want from three years ago-- and then the newer version of that, of whatever it is now. And all of those words are on a job posting.

So, I think that skills gap is only going to widen, unless I would say organizations start to look at how those scale. So, if someone can paint and paint in red, they can probably paint in blue. Can you teach it? Can you send them to a boot camp? Can you provide some sort of training? I think there’s a lot there that an organization can do to help tackle that gap.

Chalise: Yes, absolutely. I think about it as the accumulation of the skills you need, the new skills. But don’t forget the ones you already have. Yes. That sounds fun. As an educator, Dr. Ness, when you think about the skills and when you are teaching young people, how do you approach that? Or what is your reaction to this idea of skills and preparing—

Sandoval: We are in this interesting moment at the universities because of AI and technology, and then we’re working with students who were in high school when they were in Zoom classes. And so what generally speaking-- many of those students missed some very important moments in their life in terms of communication-- of personal communication.

And so, I can just share a couple stories because it’s incredible. So, in one of our classes, one of the assignments for our students is simply to go to lunch together and get to know-- have a lunch date. And 90% of the students said I’d rather get a 0 than actually go and have lunch with a classmate.

And this is like last semester. So, one of the challenges we have as professors is to resocialize students and interacting with each other face to face and not through social media, not through texting, because I think they lost a skill during COVID. And so, I see it now. My students prefer to meet by Zoom. They do email, and I have to be intentional and say, we have to have face to face interaction because you cannot-- you have to learn how to interact with people face to face if you’re going to go into the workforce.

And so, this is the challenge that I see my colleagues see is-- it may be in the younger generation because they’re not going to have this impact that we have. We’re going to have a generation of workers coming out, where face to face interaction is going to be novel. And that’s something that-- the AI is interesting because there’s part of the University that’s fully embraced it and saying, we’re going to teach our students in it. And there’s part of the University that says, we should not allow students to use it.

And so, I use it in my research. I’m a quantitative researcher. And so, we do a lot of machine learning. It’s the norm. It’s part of the business. If you’re going to teach your student to go out and work, they need to know how to use these tools that are available. And so, it’s the same way that you would never tell somebody not to use Google. That’s part of our life now.

And so, the University itself has to adapt to these new tools and the jobs that will be created with these tools. And so, we’re going through a transformation at a university because we have some traditional disciplines. That’s saying that it should all be human created. And you have some universities-- Wisconsin, South Florida-- where they are creating centers of AI and English and so forth. They’re going all in. And so, these are going to be interesting moments when we go back and look at how did universities transform with AI.

Chalise: Yeah. No. This is definitely-- I did a roundtable in Louisville with young adults a few weeks ago. And one of the things that they obviously brought was AI. And there was somebody who just started a job, an entry level work. And he said that their team used to be a team of five people. And when somebody left-- two people left. They just didn’t hire. They were like three people plus AI, you can do the same work.

And I think when you say productivity, that was a really good example. And there were other students, who were-- other young people who were finishing college who were maybe were not learning about AI. And you can-- they shared their nervousness or frustration about not feeling prepared to get into the labor market. So, we are definitely in a very interesting time. I don’t know if you wanted to add anything about the skills gap from your presentation.

Gascon: No. I think let’s go and see what questions we have in the audience.

Chalise: OK. Sounds good. We can open it up either for virtual. If anybody here has a question, please do raise your hand. All the way back there.

Audience Member #1: Microphone?

Chalise: Yes. It’ll turn green.

Audience Member #1: This question is more for-- I believe it’s Dr. Sandoval. You talked a lot about just this net migration out of the region and the birth and death ratio. But when you look at places in, like, Europe, like Scandinavia, or even Western Europe, they’ve instituted policies that really do promote families and the ability to stay in the region actually be family friendly. Have you seen a shift in policies or a desire to shift toward policies that are more family friendly? Like, paid maternity leave, longer maternity leaves in places like Denmark and things like that. How do those things sort of factor into—

Sandoval: Yeah. So, I think in the United States, we are a little bit behind the curve compared to where the other countries are in terms of policy discussions. So, some examples on-- some of these countries that are trying to promote-- to be more pro-family is to give families a minivan. And this is what you’re going to need for a family. We’re going to have these discussions in the next couple of years, the United States. It’s going to come very strong.

So, one of the policy proposals that I anticipate emerging in the new administration will be a proposal for free childbirth. And so this is going to be controversial because right now childbirth is not free. Parents are expected to have a deductible. But what’s happened if you pay attention to that deductible, it’s been increasing over the past 15 years significantly.

And so, the average person with really good insurance, they’re paying on average $5,000 deductible. And then because we don’t have paid maternity leave, the mothers typically taking about a $15,000 to $18,000 cut in salary. And so, these are going to be discussions that are going to come forward. We’re probably going to look at policy discussions around tax credits for partners, who stay at home to take care of children-- to recognize that is labor, and that parents who decide to make that decision should get some type of benefit.

That’s just where we’re at today. The United States-- this trend is not going to go away. We live in a state that’s going to be one of the first states that’s going to enter this new demographic change. Right now, Missouri’s 12th in the country in terms of more people dying than are born. And so, Missouri is not going to make it because we simply have too much-- we have an older population-- a number of baby boomers.

And our fertility rates are declining in the state. But St. Louis is still close. And so, one of the points that can happen is St. Louis needs a very large increase in Latinos and a very large increase in immigrants to try to change those population curves. And right now, St. Louis is ranked number one in the country in terms of immigrant growth. And we’re number four in terms of the Latino population growing-- in terms of percent growth.

So, that’s what you need, but the way I tell people-- if I was to switch Charlotte’s Latino population with St. Louis, we would be a top 20 Metropolitan region and growing. And we’re the same size-- metro region. But Charlotte has 350,000 Latinos. And it’s growing. And they have a large birth rate. We have 106,000.

So, the St. Louis Metropolitan region is missing about 200,000, 250,000 Latinos. And we’re missing about 200,000 immigrants. And so, we are an outlier. The region truly is an outlier compared to the top 25 Metropolitan regions demographically.

Chalise: All right. On the gray part-- and it will turn green.

Audience Member #2: Uh, there you go. So, I wanted to build on that. So, I’ve had the benefit of living in different parts of the country. So, I lived in Kansas City, Dallas, Orlando and here for the last 10 years. So, specifically about Kansas City. When I lived in Kansas City, I oftentimes looked at St. Louis as, wow, that’s just so much farther ahead than Kansas City.

And that-- I think we’ve been-- we left Kansas City probably about 15, 20 years ago. And now, I go back to Kansas City because I got sisters there. And I look back at what Kansas City has done in the last 10, 15 years, and I’m in awe of what’s happening in Kansas City. The downtown is much more vibrant. New airport, lots of growth, at least visually. It seems like lots more growth, right? And Ness, you talked about comparing St. Louis to Charlotte and Pittsburgh and so on. I’m curious if you’ve done any analysis between St. Louis and Kansas City and because at least visually, it looks like Kansas City is growing at a different pace. And I’m just curious what their population trajectories are and maybe what’s happened that’s driven that growth, if you will.

Sandoval: Yeah. So, I we have done this analysis. And so, Kansas City is very different than St. Louis demographically. It’s got a different demographic profile, and so it’s growing. It’s got a very large Latino population, double digits. It’s got a very large immigrant population. But more importantly, it’s a lot younger. It has more families with children. There are more babies born or relative to deaths in the region.

And so, Kansas City looks like Nashville. It looks like Charlotte. It looks a little bit like Dallas and Austin. St. Louis looks like Cleveland and Pittsburgh. That’s the demographic reality. And so, we’re trying to change this, but the discussion we’re having today should have happened in 1980. The data was there in 1980 that St. Louis needed to intervene and change its demographic mix.

It never happened. And so now, we’re trying to intervene with the Mosaic Project. We have different other initiatives that are happening to try to bend the arc of our population curves. And it can happen. But we won’t see any of that benefit, until 20 years from now if we’re lucky to change things around because the growth of the United States is leveling off. Because there’s these general trends of people dying versus—

So, the CBO estimates that around 2040, for the United States, there will more people dying, in our part-- for the entire United States. And so, 100% of the growth is going to come from immigration if you want to grow. And there’ll be some pockets, like Texas and California, that will still have more babies born than people dying. So, this is coming. And so, every major metropolitan region that wants to grow is actively trying to develop policies to change those population groups. Pittsburgh’s doing it. Pittsburgh’s actively trying to change its population curves because they realize that they’ve been in this for a lot longer than St. Louis.

Gascon: I want to build off of that a little bit. So, when we think about the region as a whole, it’s often we think about the aggregate output, aggregate employment, aggregate population. When you look at the per capita numbers, they still look pretty good. So, they’re not as weak as the headline numbers do. So, with that slow population growth and generally pretty healthy productivity gains and pretty healthy wage gains, per capita numbers continue to improve. And they say standards of living in the region continue to get better.

So, there’s that side of it that’s important. If you can do more with less, we’re all better off and can be wealthier. In the background and what Ness is describing is that ultimately more people delivers underlying demand to an economy. And that’s what helps your restaurants, your retail, a lot of the local demand, your hospitals continue to have people to service.

So, there’s two parts to this that I think we have to keep in mind, which is on a per capita numbers are very, very important. But for those-- when you think about migration patterns, if high school graduates are not seeing job opportunities in the region, in a growing region, they’re less inclined to stay. So, it’s how do you present economic opportunities for people to feel like their standards of living and their economic well-being is going to be better off by staying here than it is by moving to another place.

And I think that in the background, that’s a lot of what the underlying population growth looks like. Is it creates those more job opportunities in local demand, but we still see on a per capita level, the region still is faring quite well, even with that slower growth. But it doesn’t necessarily look that way and necessarily the built environment the same way it would in a place like Kansas City.

Audience Member #3: Speaking of immigration, how will the new—

Sandoval: so, the question was about immigration and the new administration. So, I don’t think that-- so if you go back, and we have four years to look at when President Trump was in charge, the numbers-- where we saw changes were on refugees. We did see a significant decline in the refugee numbers.

But in terms of legal immigration into the United States, it was roughly the same. It didn’t see too much of a decline. The United States is-- these are my words-- dependent on labor from Mexico, legal labor from Mexico. If you look at the data and you look at immigrants who are coming in to work, Mexico is the largest sender of labor into the country and then followed by Canada. I don’t anticipate that to change.

I think there will be efforts of deportation. I don’t see the St. Louis region being impacted. We just don’t have a very large undocumented population in St. Louis or in Missouri. I think we’re going to see that impact is going to be Texas, Chicago, California, Denver. But I don’t anticipate-- the amount of money that would be spent in Missouri would return so few. If you look at it from an efficiency perspective, I anticipate that you’re going to see this happen more in Texas, and Arizona, and California.

Chalise: Megan, can I come to you with a question, as we are talking about demographic shifts? I know in the IT sector, there is more remote jobs and work from home opportunities. How does this regional population demographic shift impact workforce for your organization but industry in general? Is it similar to others or different? And then maybe I’ll come for maybe an online question.

Soto: Yeah. The trend is back towards hybrid. And I don’t foresee that going anywhere post-pandemic and even during the pandemic. It was heavy remote workforce that impacted who also was getting jobs within St. Louis and the region around us. We have swung all the way back to onsite but hybrid. So, I think-- and that’s for all industries from what I’ve seen. There will always be companies and organizations that require you to be on site five days a week.

But for me, what we’re seeing, hybrid is here to stay. Most organizations, at least within St. Louis, they’ve shifted policy, RTO policy, probably, five or six times. Most of you could probably look at where you work and giggle about the chaos that’s ensued there. For me, hybrid, I think, is here to stay because of the appeal and the flexibility it gives the workers.

Gascon: Now, with the hybrid does that-- I assume there’s proximity to locations. So, that means that these people would be located in the Metropolitan.

Soto: Yeah. And I think what I’ll say there is there will always still be a need for specialization from a skill perspective. And that talent will come nationally-- will come from a remote workforce population. But here and for most companies within the cities that you live in, there will still need to be the resource who comes on site, is interacting with humans, helping solve problems, and collaborate.

And more to what Dr. Ness was saying around-- I think that skill is undervalued right now, and it’s going to be extremely hard to find as our workforce ages out and a new batch comes in, so we’ll still need people on site.

Another question.

Fed Staff: So, this is a little bit of a throwback question to one of the earlier questions, but I know it’s of particular interest to both you and Chuck. Can you speak to how much is a shortage of daycare hurting employment in general and women’s employment overall in St. Louis?

Gascon: Yeah. So, I spent a decent amount of time on this space. When you look at the aggregate numbers of the share of parents who are participating in the labor force today relative to prior to the pandemic, it’s higher. So, that means that at face value, the constraint is really difficult to pin down because we do have more parents participating in the labor force today-- both men and women-- than we had prior to the pandemic.

So, the shortage is coming in part because there are more parents participating in the labor force. Therefore, the demand on child care is higher than before. And to what Ness was talking about, the constraint on child care is still labor. So, you can’t just magically open up more centers because when I talked to child care centers, they’ll tell you they’re having a hard time hiring workers.

So, the capacity issues are on are still on the labor front. Second of all, when you look at formal care and who’s getting formal care and sending their kids to centers, it’s primarily higher income and higher educated individuals because the labor cost for child care is still child care workers getting paid relatively low wages but still $15 an hour. In some cases, maybe even higher.

So, that means the median worker or somebody making $20 an hour probably is never going to be able to afford that center. So, they’re still going with informal structures of care. So, the real binding constraint on child care is often for higher income and higher educated families that are looking for formal care. But those constraints have been there for a while. I mean, my daughter’s 11 years old now, and we had to wait seven months to get her into day care at that point in time.

So, it’s a constraint, but the labor ultimately is still the constraint, which is why some of the things that Ness talked about, where parents have to manage caregiving responsibilities very differently than they’ve ever had before because with an aging population, you have more parents, although a smaller share of them. There’s more of us than we have to try to figure out how to make it work. And there’s just not the labor to support massive growing of the child care sector.

Chalise: Yeah. And just to add to the labor for child care, it’s not just the entry into that workforce, but even from a career pathway, you need credentials, licensing to be able to be a child care provider. And then when you gain experience, you realize pretty quickly that child care doesn’t pay as much. So, that becomes a pathway for you to become a teacher at a public school or a private school.

And so you still have-- even the trained ones, the experienced ones, there is attrition. So, there is a constant leaving of workers, but then not a lot of workers want to come in. Or even if they come in, they stay for a very short time because of pay. And these are a lot of times young folks. So, yes, this really challenging. That is a great question.

Sandoval: I would like to just to add one thing. So, in terms of the projection, where we’re going to probably see a labor force shortage related to care will be adult care. And so, this is where I think a lot of young people are going to start to recognize who’s going to take care of my parents if they go into retirement. We’re going to start seeing not enough people will be in these positions. And that’s when it’s really going to hit young families.

Why didn’t we grow? Because there won’t be enough people to take care of mom and dad when they go to retirement house. And this is going to be the 2040 time period. But if nothing changes, that’s when people start to recognize we should have done more to encourage younger families to come to our region.

Chalise: Somebody had their hands raised before we went to virtual. Yes-- right there.

Audience Member #4: Thank you, everyone, for being here. Can I ask your thoughts on tariff implications on the local labor force and in general, and then what kind of the uncertainty around what industries will be impacted will affect hiring decisions of businesses in the near term versus the long-term impact it could have.

Gascon: Yeah. I can touch upon it briefly. So, steel is a big industry in the broader Midwest and along the Mississippi River Valley and a big part of our district. And that’s an area that’s been impacted over the last few years. It depends on where these businesses are along the supply chain as to either if a higher tariff is a benefit or if it ultimately raises their costs. And that ultimately plays a role in their employment decisions.

So, it hits firms differently. And so it’s hard to put it into specific numbers. The other impact was on the Ag sector, which was retaliatory tariffs hit the state or the U.S. economy pretty hard, particularly in corn and soybeans. And those are crops that are grown a lot in our region, as well as a lot of businesses that are impacted by those. What it ultimately has ended up doing over the last few years is it just drastically changes trade flows.

So, U.S. export soybeans to Brazil. Brazil exports soybeans to China, versus U.S. just exporting soybeans directly to China, and Brazil exporting their soybeans elsewhere. So, it causes a lot of global reallocation. And then as for how businesses are impacted, it depends on what line item you look at as to where the tariffs are placed. And is it on finished goods? Is it on unfinished goods? And then what percentage of those overall costs make up that product.

So, is it a higher tariff on an input that makes up 40% of your overall cost, and that’s a bigger impact. If it’s screws, and you’re only using five or six of them to build something, it maybe doesn’t have much of an impact, and that’s generally what we’re hearing from businesses. It really depends on the details.

Soto: And I’ll just add to that the wild card there is technology. And so, you’ve got companies like Bayer working on cutting edge technology to help with predictive analytics. That even if it yields 10% more for a farmer, that direct impact to the amount of product being pushed into the market, it’s hard to track. It’s hard to know what that will look like. And that’s for all industries. Disruptive, in a good way, hopefully.

Gascon: And we saw this even with over the last few years. I was talking to an appliance manufacturer recently, and as they saw some of their input costs go up, they realized, well, if we just buy more of this material, we can get a discounted price. And then they get account for what that means for their holding costs. And so, there’s a lot of different levers that they pull, and we have a very dynamic economy that adjusts accordingly. And so, I think, ultimately, that’s what makes it difficult to know what the aggregate impact is going to look like.

Chalise: Yes.

Audience Member #5: So, I moved to St. Louis about a year and a half ago, and before I moved out here, I was on the West Coast in Arizona. And the question I would get asked is, why are you moving to St. Louis? And once I got here, the question I got asked is, why did you move to St. Louis. And so, my response is, I love it here. The cost of living is affordable for a young professional. There’s less competition for jobs.

But how do we change the local narrative to change the national narrative to say this is a great place to live? There’s entertainment. There’s everything you need, and it’s affordable in retrospect to living on the coasts.

Gascon: So, I think what you just outlined is really the key is like, well, what are the drivers that lead people to move. Job opportunities is a big one. And particularly for younger people in their early in their career, that’s first and foremost.

And that’s talked about housing. One of the things that you also see in the data is once people own a house, they rarely move. So, homeownership and increasing homeownership ownership is a key driver to people having that stability. That reduces those migration flows. And then the other part of it is how should we think about affordability and cost of living? And what does that mean for worker pay and overall compensation?

And the way I think about cost of living is that it is a value of the amenities that you have in the region. So, a low cost of living is not necessarily a good thing if it means that you have lower amenities. So, if I move to the most desirable place in St. Louis, where the housing is the most expensive, that may be a good thing because the cost is higher there, but I’m getting higher quality.

If I move to another part of the region where the costs are very low, it’s also reflected in those amenities. So, I think when we think about the overall cost of living, it’s important to think about it relative to compensation. And historically, the St. Louis area has been pretty competitive in that our wages are nationally competitive, and we have that low cost of living and how you script that narrative into one that says you have more money to then spend on travel, or leisure, and maybe consumption on other areas outside of your housing.

But it’s difficult to sell low cost of living as a positive because it oftentimes reflects the amenities in the region. And so, I think that’s always been a challenge in the broader Midwest. Is say, well, why don’t people want to live here if the cost of living is so low? Well, if the cost of living is low because the amenities aren’t as great as they are because you don’t have an ocean view, that’s the tradeoff that’s being made, and that’s what we’re all thinking about.

If we sit in a cube in our office, and then we just go home, and we sit-in a windowless house, we won’t care where we live. We just care about what the costs are and what we get paid, but that’s not the world in which we live in. So, it’s how do you build up value of amenities and realize that maybe cost can go up a little bit, and that’s OK if you’re bringing in amenities along with it.

Sandoval: I was going to say-- so I work with young students, and oftentimes, the cost of living is the last thing that they think about in decisions. They’ll go to San Francisco and pay $5,000 a month in rent. They’ll go to Seattle, Los Angeles. And so, with the new generation of workers, I think it’s pretty clear. Compared to my generation, when you got your job, you thought that this was my permanent job.

The new generation of workers-- I’ll give you five years. And then I’m going to try a different city and another five years. And so, there’s a lot of mobility happening.

Soto: Well, and that’s-- I would say not even five. I’ll give you two years. I’ll give you a year.

Chalise: Yeah. Yeah.

Sandoval: Yeah, exactly. So-- and we’re just not in the imagination of that younger generation. And part of it is I’m not a football fan, but I have to recognize that losing a football team is important in the imagination of a young adult, like having a football team in the city. I’m in a major city, and this is not to say anything about baseball, or hockey, or soccer, but the NFL drives the imagination of the symbolic image of a city.

And the fact that St. Louis has lost two teams impacts that imagination. So, I have students from Charlotte-- like, why did you come to St. Louis? Well, my parents met here at the arch. But nobody in their classroom had even imagined what St. Louis looks like, other than the arches. And so, we’re losing that-- in the same way with Pittsburgh. I asked my students, how many people want to move to Pittsburgh?

Nobody. Nobody wants to move to Pittsburgh. It’s a very beautiful city-- a great quality of life. But it’s lost the imagination of young people. And so, we have to capture-- I think cost of living is the wrong sales pitch. It is about the quality of life, and it’s about the water, about the hiking, about biking, about the cultural experience of the city. But I would never leave it.

It’s cheap to live here because that’s not what young people want. They want to experience city life. They want to experience the museums, the forest parks, the rivers, the hiking. And so, we should-- We, should lead with our natural capital, our resources, rather than it’s a great place to live because it’s cheap. You’re not going to get that many young people.

Gascon: And now, if you look at a place like Springfield, Missouri, just a couple hours away from here, that’s really been their big focus-- what they’ve struggled with, they’ve realized they have great amenities in the region, and now, they’re seeing as a result of that, some of their costs are going up because they’re seeing a pretty strong inflow of population in the region.

So, getting to those value propositions that these things are accessible, and that it’s more than just the job. And that the region has a lot of amenities to offer is really key. And then you can afford to do the things that are out there.

Chalise: There’s a center called CABI, I forget the full form at WashU. They did research with WashU undergrad and graduate students, recognizing that that’s a very biased sample. But these are students who have spent three, four years in St. Louis, and they got to rank different factors. And I believe one of the top factors for leaving St. Louis was vibe. I believe that was the result.

The conclusion is that the vibe is not right for young adults. You got to get somewhere where the vibe is a little bit better. I don’t know. I’ll let you interpret that yourself. I believe we have time for one last question, and then I’ll ask the panelists to take just 30 seconds to wrap up some key points that they want audience members here and virtually to remember right there.

Audience Member #6: Talking about the Rams leaving, it did make me think of the Rams settlement money. I know right now there is somewhat of a push to use some of it for subsidized child care. In terms of the birth to death ratio, labor force, do you think any policies like that could maybe set St. Louis apart and maybe rightsize the birth to death ratio or any other policies that you could think of?

Sandoval: Yeah. So, I’ve been involved in this discussion. So, I think when you think about child care, I would want to work with employers and trying to make sure-- so there’s a question whether the city should be doing this, or the city should be helping employers provide child care. I’ve been in discussions with the International Institute. So, I’m thinking about building capacity. And so, it gets back-- they have a lot of workers there, who could start small businesses.

And so, I’d rather see an investment in building capacity and creating small business owners, creating child care centers, rather than-- that’s just my personal-- rather than a subsidy. Because once the subsidy is over, it’s over. But if you build capacity, and you create small business owners, then that’s something that’s different. It has a different type of longevity.

But I believe I’m a “spend it” type of guy. St. Louis is at a critical moment. It’s not terribly bad, but if these population curves don’t change, then it can lead to a future that we don’t want. And so I’d rather see us spend it and make good decisions now rather than to-- so I’ll use Cincinnati. So, Cincinnati’s got the same issues. But their leaders are saying we need a culture of yes-- yes, now. Develop now.

And in St. Louis, I wish we would have that culture. Yes, there are a lot of people who want to develop, but we’re like, well, we’re just going to wait, or we’re going to say, no, we don’t want to rezone. I think we need a culture of, yes, and we need to do it now. Doing it in 15, 20 years is not going to help us to change our—

We have to be intentional and change our direction now and invest that money. And part of it is St. Louis City is the brand for the region. It is not-- I’m not trying to offend anybody, but it’s not Chesterfield. It’s not St. Charles. The St. Louis City is the second largest city that gets out of state movers in the state. Kansas City is number one. St. Louis City is number two.

So, when out-of-state movers move in, their introduction to the region is the city. So, we have to fix the city. It is the gateway into the region. And so, I would invest in downtown. I would invest in North St. Louis into Grand Avenue. The city needs to build a lot more housing than it has. It is part of the solution to our housing crisis.

If you look at the amount of vacant land in the city, but then you look at the amount of hurdles that a developer has to go through to build a medium-scale type of developments. Building a one- or two-unit house is pretty simple, but to get to that 25, 30 housing development, it’s very difficult in the city. And so, I would spend the money. That’s just my personal belief. OK. I’m going to punt on that one, so we’ll leave it at that.

Chalise: OK. Maybe down to 20 seconds. Megan, starting with you, key takeaway for our audience members from today.

Soto: Key takeaway? So, I think from my lens, which TEKsystems is a $7 billion company, and we work with over 200 companies across Missouri. Control what you can control in the short term-- so culture of your organization and what it’s like to work there. Skill gap will continue to widen, but open your appetite for development of skills, especially for entry level workers, through things like soft skills.

I think that’s going to become more valuable. Leveraging technology partners to solve problems that your business can’t do quickly. That will never go away. And to your point about Latin America, I think there’s been a shift from offshore outsource to nearshore-- Canada, Mexico. And I think a couple other things are around prioritizing upskilling and reskilling of your current employee base. What are you doing to help incentivize that within your organization?

And I’d probably leave it at that. Well, I guess the last thing would be what kind of vibe are you giving anyone interviewing within your organization? Are you pleasant to sit down with? Is that team of people that you have speaking with others, welcoming, and getting someone excited to come be a part of your organization? Because if you’re not, you won’t win that person over. And that person does now have multiple opportunities. And that went away for a little while. So, a little more than 20 seconds, but that’s where I’d leave it.

Chalise: OK. Dr. Sandoval, 20 seconds.

Sandoval: I think we need a culture of yes. Population growth is just one metric. We can think about quality of life. If I put my policy hat on-- I’m very optimistic about the region in terms of quality of life, in terms of the amenities we offer. And so, the population growth numbers, in many ways, they’re baked in because of our age structure. And so, we can look at the types of jobs, the quality of jobs to build on. And so, we should think about the quality of life that we can create for new families and residents.

Gascon: I think in the near term, the foundations are pretty good. We see businesses are looking to increase their employment. There’s a lot of opportunities out there for growth. And I think as we talked about here, there’s still long-term challenges that are pretty clear at this point and evident that need to be addressed.

But we have a dynamic economy, and firms continue to look to ways to improve things. And I expect that to continue. And my hope is that we continue to see productivity gains that we have over the last few years moving forward because that ultimately is what can generate improvements in everyone’s standard of living.

Chalise: Thank you. Thank you all-- Chuck, Megan, Doctor Sandoval, this was a really insightful conversation. Thank you, everybody, for joining. Hope you enjoyed. If you missed part of the presentation, a recording will be available. Watch out for an email with the survey and other details. Thank you so much.