In this episode of Motley Fool Answers, Alison Southwick is joined by Motley Fool personal finance expert Robert Brokamp and Dr. Rakesh Kochhar from the Pew Research Center. Robert starts the show by providing a market update and sharing some 401(k) stats and tips on getting the right financial advisor. Later in the show, Alison is joined by Rakesh in a one-on-one session to get a better understanding of unemployment in the U.S. and much more.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on September 21, 2020.

Alison Southwick: This is Motley Fool Answers. I'm Alison Southwick, and I'm joined, as always, by Bubba Brokamp, Personal Finance Expert here at The Motley Fool. Hey, Bro.

Robert Brokamp: You're just saying that because I grew up in Florida, but thanks a lot.

Southwick: In this week's episode we're joined by Rakesh Kochhar from the Pew Research Center. We're going to talk about unemployment in the U.S., including how the numbers are compiled and who has been hardest hit because of COVID-19. All that and more on this week's episode of Motley Fool Answers.

So, Bro, what's up?

Brokamp: Oh, I have a few things for you, Alison.

Southwick: Three things?

Brokamp: Maybe three things.

Southwick: Okay.

Brokamp: And the No. 1 thing is, the market is a many splintered things. So, as longtime listeners will remember, when we were going through the downturn of the COVID crisis, we would begin every episode updating basically some sort of market update. Haven't done that in a while, I thought, hey, let's do one, shall we? And I should say we are recording this on Monday, September 21st, all the numbers I'm going to give you are as of the close on Friday, looking at the market today, it's down 1% to 3%, depending on when you look at, so you can take a little bit off the top here. But basically, where are we so far this year; this crazy, crazy year?

Well stocks are up, S&P 500, with dividends, up 5.3%. But as you know probably, a lot of that is driven by the FANGM stocks, the biggest stocks. We're talking about Facebook; Amazon; Apple; Netflix; Google, otherwise known as Alphabet; and Microsoft. All of them are up double-digits. The one that is having the "worst year," that's Alphabet at 11%, best Amazon 63%. But according to CBS MarketWatch, 55% of the stocks in the S&P 500 are actually down for the year. So, it really does depend on what kind of stocks you own. So, give you an idea of what might be affecting the performance of your portfolio so far this year, it's probably due to the size, sector, and U.S. versus international.

So, the two best sectors this year: Technology, up 23%; consumer, cyclical 16%, that's mostly due to Amazon but also due to stocks like Home Depot and Starbucks, like that. Worst performing sectors: Financials down almost 20%; and energy down 42% this year. And then there is size, and I think it's the best size, and I should say style. So, if you look at the Vanguard Growth ETF, that's Large Cap Growth, up 22% in the year, [laughs] compare that to Small-Cap Value, down almost 20% for the year.

Another sector that has struggled, REITs, Real Estate Investment Trust. We've talked about why they're probably struggling. Retail, office, places like that, they're down 12% for the year. International doing OK, down only 3% for the year.

Bonds, up 7%, they're actually outperforming the S&P 500. So, if the year were to end today, it would be one of those rare years where bonds actually beat stocks. And [Treasury] Inflation-Protected Securities, otherwise known as TIPS, they're up 9% this year, indicating that investors do expect there to be some inflation. And we have seen that over the last three months, where inflation has gone up significantly. Depending on which month you're talking about, it's the most monthly inflation since the 90s or the 70s, depending on which categories of inflation you're looking at. So, we'll see what happens.

We are entering what is generally the most, I don't want to say "dangerous," but the most subpar time of the year, that's September and October. A great source for stats on the market, in general, comes from Ryan Detrick of LPL, follow him on Twitter; he's always got some great stats. He pointed out that as of the end of last week, it was the first three-week losing streak for the S&P 500 since last year. And then he also pointed out that this morning -- so during an election year, the S&P 500 peaks, generally, on September 21st, and bottoms during the last week of October. So, again, pointing out that September and October, especially during election years, tend not to be so good. But of course, it doesn't always happen, and wouldn't it be so 2020 if things were different this year?

Item No. 2, 401(k) fun facts. So, I recently wrote an article about 401(k)s for my Rule Your Retirement service. And I came across all types of stats, so I thought I'd share a few with you all, so. And by the way, all this information comes from various sources, so some Fidelity, Vanguard, and a great article by Christine Benz at Morningstar, who basically listed 100 401(k) facts. Most of these facts are as of the end of 2019. So, obviously they're going to be a little different if you were to look today, but the general idea is still accurate.

So, there's almost $10 trillion in defined contribution plans, so that's 401(k)s, 403(b)s. There's actually more, over $10 trillion, in defined benefit plans, like the traditional pension. So, we talk all the time these days about how 401(k)s have taken over the traditional pension, but there's actually still more money in the classic pension plan than there are in 401(k)s and 403(b)s. As for IRAs, IRAs have more than $11 trillion in assets. So, when you look at the whole, sort of, retirement planning industrial complex, it's $30 trillion. Which is a lot of money, but I also think, these days we hear a lot about the stimulus plans, either that have already been passed or being proposed, that are $2 trillion, $3 trillion. I think it puts it in context when you think of the potential stimulus that is going on this year being a significant portion of the entire amount of assets in retirement accounts.

Some other stats. 56% of workers are covered by some sort of plan, which means 44% of workers do not have an employer sponsored plan. Of all those plans, about 43% have a 401(k); 21% of workers still covered by a traditional pension plan. Of the people who do have a pension plan, about three-quarters participate. Depending on who you ask, the total contribution rate that people are saving, that is how much they're putting in with the employer match, about 11% with the folks at Vanguard, over 13% with the folks at Fidelity. 12% of people are maxing out their 401(k)s. And just as a reminder, the max in 2020, $19,500, with an additional $6,500, if you'll be 50-or-older by December 31st.

How much do people have in their 401(k)s these days? While all these figures I got come from Fidelity's report that was as of the end of the second quarter, so as the end of June 30th. Since then, the S&P 500 has gone up about 7%, plus people have been putting more money in their accounts. So, if you were to look at the numbers today, they'd be a little higher. But generally speaking, the average 401(k) balance is $104,000, and the average tenure is 9.2 years. But of course, how much you have in your 401(k) depends on how long you've been participating and how much you're making. So, they also were kind enough to send me some figures for anyone who's been participating for 15 years consecutively, and by generation. So, if you're a millennial, you've been saving for 15 years, you have almost $200,000. Gen-X, $375,000. And the boomers, $450,000. So, the more you're making and the more you can contribute, the more money you're going to have.

There's also some interesting stats, and again, this comes from the Morningstar article about basically how many plans we have by size. The majority of plans have less than $1 million in assets, 55%. And another third have only between $1 million and $10 million in assets. The reason this is important is because, the smaller your plan, the more you're going to pay. So, the average all-in cost across all 401(k) plans, that includes administrative costs as well as the cost of investing in the mutual funds within the plans, 0.58%. But for plans with less than $1 million in assets, 1.4%. That's how much those people are paying each and every year. Also, the smaller plans are less likely to have a match. So, it's a real problem that even if some of these people have a 401(k), chances are it may not be a very good 401(k).

And since I mentioned the match, if you're curious whether you're getting a good match at your office, the most common match formula is $0.50 on the $1, up to 6% of your salary. So, if you contribute 6%, your employer puts in 3%. If you're getting a match higher than 3%, you have an above average match.

So, a couple of things you might be thinking about if you've heard all this, is you think, well, maybe I don't have such a good 401(k), can I get the money out of my 401(k)? And there are three basic choices. No. 1, if you no longer work there, right? If you switch jobs or you're retired, you can always roll that money over to an IRA. Another way is, the majority of plans do allow in-service distributions, which basically allow people to move money out of the plan even if they're still working, although the plan usually has some criteria, the most common criteria is, if you've reached age 59.5. So, if you don't like your plan or if you're a Motley Fool reader or listener and you like investing in individual stocks and your plan does not allow that, you're 59.5, you can move money out of the plan if your employer allows it.

And then the third one, we've talked about this before, and that is due to the CARES Act. If you have suffered some sort of financial hardship or you've gotten sick due to the coronavirus, you can transfer up to $100,000 from your 401(k). Don't have to worry about the 10% early distribution penalty. If you keep that money out, you have to pay taxes, however, you have up to three years to put it into another retirement account. Now, the question at the beginning was, does it have to go into the same account it came from? I originally thought, yes. We had Dan Caplinger on the show earlier in the year, another Fool contributor, former attorney, he thought, no, it did not have to go back into the same account. Just to be sure, I emailed Vanguard; Fidelity; and Ed Slott, who's sort of considered the national expert on IRAs and has a great site, Each of them very kindly got back to me and each of them said, no, the money does not have to go back into the same account. So, if you have suffered one of these IRS approved coronavirus-related hardships, you can get money out of a 401(k) and put it into an IRA, which likely will lower your costs and increase your investment choices. The only thing about that is, not every plan has to allow it. So, your plan has to have been amended to allow for these coronavirus-related distributions. And make sure you visit the IRS website to make sure you have suffered one of these approved hardships. It was basically you, your spouse or a dependent who got sick, someone lost their job, someone had their hours cut back, you couldn't work because you had to do day care, there's a long list of them. And just for good measure, you probably should check with your accountant, just to make sure you're doing everything right.

And then finally, No. 3, find a fiduciary. So, we recommend, if you're out there in the market looking for financial advice, get a fee-only financial advisor who acts as a fiduciary, which means they legally must put your interests at the forefront, you would think all financial advisors and planners would be required to do this, but it's not true, only those who do serve in a fiduciary capacity. So, a recent study highlighted the value of the fiduciary standard, it was called "Conflicting Interests and the Effect of Fiduciary Duty -- Evidence from Variable Annuities" by three economists, Mark Egan, Shan Ge, and Johnny Tang. First of all, they looked at the incentives to sell annuities. And what they found is, brokers do respond to the incentives and, in fact, there are higher incentives to sell the worst annuities, and they measured the worst by basically high cost and which annuities received the most complaints after investors had already bought them.

To help limit this conflict-of-interest, the Department of Labor proposed a rule in 2016 that would hold brokers to the fiduciary standard when dealing with retirement accounts. And the Department of Labor thought that they could do this, because their purview is retirement accounts. And they said, OK, if you're dealing with rollover IRAs, you have to act as a fiduciary, even if you're just a broker and you normally don't have to. The study looked at what happened to annuity sales after that. [laughs] They basically found that high expense variable annuity sales fell 52% after this proposed rule. And to take a quote from the study, "Based on our structural model estimates, investor welfare improved as a result of the fiduciary rule under conservative assumptions." In other words, imposing the fiduciary standard on these people worked.

Unfortunately, that 2016 rule has been defeated in the courts by the financial services industry with the help of a lawyer named Eugene Scalia. Do you happen to know what Mr. Scalia's job is now? He is the Secretary of Labor in charge of protecting our retirement assets. He was asked about whether he could do his job objectively after representing the financial services industry during his confirmation hearings. He said, "I'm not necessarily my clients, I will seek to defend them, to vindicate their rights but that doesn't mean that I necessarily think what they did is proper." [laughs] Which is like the most lawyerly thing to say, ever. Now, we don't want to get too --

Southwick: [laughs] That sounds like something a lawyer would say though, with a martini in one hand. I mean, I'm not. I mean, you know, come on! We all know. We all know. We know.

Brokamp: So, we don't want to get too political here on the show, both parties have a history of putting Wall Street insiders in powerful positions going back to FDR. When he created the SEC, the very first SEC Chairman he named, Joseph Kennedy Sr. And Roosevelt supposedly said, he appointed Kennedy to the SEC because it takes a thief to catch a thief. Although, there's some debate about whether he said that. But I do think it's a mistake not to require a fiduciary level of advice on retirement accounts from all advisors, not just some.

And as the study about annuities shows, clients are more likely to get better products from fiduciaries. So, if you work with a financial advisor, make sure she or he is legally required to put your best interests first.

And that, Alison, is what's up.


Southwick: Joining us is Dr. Rakesh Kochhar. He's a Senior Researcher focusing on employment with the Pew Research Center. Thank you for joining us, Rakesh.

Dr. Rakesh Kochhar: You're welcome. My pleasure.

Southwick: So, before COVID-19, my morning routine was to eat my cereal and watch a little CBS This Morning before trotting off to work. And whenever they said "The Jobs Report came out today," I knew it was going to be a good day, because that meant it was the first Friday of the month, which is also Cake Day at The Motley Fool. But now, there's no Cake Day and the unemployment [laughs] rate isn't sitting at a pretty little 4%. So, Rakesh, your most recent research has centered on how COVID-19 has impacted employment in the U.S., but before we get to that, I'd like first, to get a better understanding of how the Federal government actually calculates unemployment. So, I guess we'll start with Cake Day. What exactly is the Jobs Report?

Dr. Kochhar: Well, the Jobs Report is put out by the U.S. Bureau of Labor Statistics, comes out every Friday each month, as you noted; the cake is optional, unfortunately. But the report gives us the government's official estimates of employment and unemployment in the U.S. economy and it also tells us how the employment situation varies across demographic groups. So, if you're interested in how men and women are doing or how White, Black, Hispanic, and Asian workers are doing or how workers of different ages or education levels are doing, you would want to look at the jobs report. And if you also want to see how industries are adding jobs and cutting jobs, that's additional information available in the Jobs Report.

Southwick: So, I'm sure it's a very complex process, but how do they actually collect the data?

Dr. Kochhar: So, it's based on two major surveys. One is a survey of households. Each month, the government interviews about 60,000 households. And that adds up to more than 100,000 people surveyed each month. And this survey is known as the Current Population Survey. The labor force, or the working age population which it covers, is people 16-and-older, they are included in the survey. And it asks them a set of detailed questions about their work activities, what work were they doing, how many hours did they work? If they were not working, what have they done to look for work? And so on, so forth.

And this tells us whether they're employed or unemployed, and is the official basis for the unemployment rate. The official estimate of employment itself comes from a survey of businesses. So, they survey about 145,000 businesses every month, which collectively have a payroll of about 700,000 workers. And so, they're looking at job additions or cuts month-to-month, how many people are on business payrolls, and that becomes the official estimate of employment. It is a much larger survey, it gives you more precise numbers with respect to employment, but note that it does not give you estimates of people by their demographics. We don't know what their racial or ethnic characteristic is, what their age or education is, we only know their gender.

Southwick: That's a lot. [laughs] I mean, that's a lot of people that they're talking to every month. How do they do it, do they call you, do you get an email or do you get a letter? I almost feel offended that I don't think I've ever been asked to take part.

Dr. Kochhar: Well, don't be offended, there are more than 300 million people in the United States, [laughs] so the odds are not so high. But they do, when they first get in touch with you, it's an in-person interview, and subsequent interviews are done on the phone. And once you are contacted, you are committed to eight months worth of survey. So, they survey you for four months in a row, then you are retired, so to speak, from the survey for eight months, and then you come back for four more months. So, the way this works is you can actually track some people from year-to-year in the household survey. So, if I'm interviewed in January, I will be interviewed again next January. And you can get some information about me from year-to-year.

That's a complex process, and the COVID-19 pandemic did have a serious impact on it. Because of the need for social distancing, for example, the first contact could not be made in-person. So, recently we've had a cutback or a fall in the response rate to the survey. Historically, survey response rates have been in the 80% to 90% range, and they fell to 70% or even touched less than that. So, it's a difficult process.

Southwick: So, often when the jobs report comes out, the reporter will say something like, but the real number of unemployed people is probably much higher. Why is that?

Dr. Kochhar: Well, it has to do with the official definition of unemployment. There is an official definition. You have to be available for work and you have to be looking for work. So, if you have not looked or done anything to look for work in the month prior to your survey, you are not counted as unemployed, but instead the government is likely to put you in a category called discouraged workers. So, you are unemployed but you are discouraged from seeking work. You know, which is not an unusual state of affairs if you have been unemployed for three, four months, you've been knocking on a lot of doors, you may be discouraged. But the government counts these people and actually gives us a count of how many people are discouraged. And you can go to the government report, and many people prefer to do that, they like to look at how many people are discouraged or how many people are working part-time when they would actually want to be working full-time or because of the economic situation they have been forced to go part-time. So, this is a count of underemployment.

So, if you add up all these people who are discouraged or maybe underemployed for some reason or the other, then the unemployment rate is higher, and people prefer to say then, well, the unemployment rate in August it was 8.4%, but if you count up all the discouraged workers or the other marginally attached workers, as they are called, the unemployment rate is 14.2%. But keep in mind, both numbers are coming from the same government survey. And the government is making this data available to us every month.

And the other important thing to keep in mind is that these various definitions track the same way over time. So, from the point-of-view of making policy, whether unemployment rates are going up or down, all these unemployment rates give you the same idea.

Southwick: Yeah. What is a good unemployment rate? I assume it's impossible to go to zero, but we were hovering at right around, what, just under 4% for a long time before COVID-19 hit.

Dr. Kochhar: So, as you noted, it is impossible to get to zero. And the reason for that is there is something economists like to call the structural unemployment rate. So, if you have just graduated from college, you're looking for your very first job, there's always some number of people doing that, you are unemployed. Maybe you quit your job and you're looking for a better job or a job that gives you different flexibility and work hours and so on, you are unemployed. Maybe you moved where you live. Your wife got a better job somewhere, you moved with your wife, and now you're looking for a job. So, there's always some of that going on at any point in time, and there will always be some people unemployed.

Now, regarding what is a good or a not good unemployment rate. We can all agree that a lower rate is better than a higher rate, but how low? That is the question. And most economists will tell you that there is a point at which you can push it so low that wages and prices begin to accelerate upwards, so you have higher inflation. And so, maybe we should not go that low. And so, how low is this rate? It was believed to be in the 4% to 5% range, but more recently consensus is building that it is more like 2% to 3% because we've had unemployment in that range for a number of years without inflation. So, that would be the current consensus.

Southwick: And I'm just curious, what is the lowest and the highest that the unemployment rate has ever been in the country?

Dr. Kochhar: Well, in the past 100 years, the Great Depression probably is when we had the highest unemployment rate. The definitions at the time were a little different, but the unemployment rate was registered or recorded as being about 25% or higher in the Great Depression. In the 1950s and 1960s, the unemployment rate often hit the 2% or 3% level. That's the post-war era, economic growth was very healthy during those years. So, that's the lowest we've been. We have not been in the double-digits, except in the Great Depression or in the recession in the 1980s or now.

Southwick: Okay. Let's pretend it is the first Friday of the month, the jobs report is just out. What is the very first number that you are scrambling to go read? I mean, this must be so exciting for you every month, what are you rushing to get to?

Dr. Kochhar: So, I am, I guess, a little more professionally relaxed than most. [laughs] But it is not the headline number that I immediately look at. I mean, that of course, is the one that's there on the front page and you can't help but miss it. But, both for professional and personal interests, I tend to look at how different demographic groups are doing, how White, Black, Hispanic, Asian workers are doing, how are people in different age groups doing. That sheds light on how well the labor market is working for all, and whether historic inequities are showing any signs of narrowing. So, that's what I tend to look at.

Southwick: Oh! Well, let's actually then shift a little bit and talk about some of the recent research that you've done on the impact of coronavirus and jobs in the U.S. So, what is the most recent Jobs Report telling us?

Dr. Kochhar: So, the latest job market report is for the month of August. And what it tells us is that the unemployment situation is improving. The unemployment rate in August was 8.4%, officially, down from a high of 14.7% in April. So, things have improved, but unemployment still remains elevated and the count of people who are employed in August is still about 11 million or 12 million less than in February, so there's still a long way to go.

Southwick: I thought one thing that is interesting, I believe I saw in the last report was that 24% of employed people are actually teleworking because of coronavirus. Which, it seems like such a high number, it's fascinating that for about 24% of us, we're kind of adjusting, but we're still taking a paycheck, it seems like we're pretty lucky. [laughs]

Dr. Kochhar: Well, in terms of telework, before the pandemic, the government data tells us that about 25% of people did telework at least part of the time. And if you look at the culture of people working in occupations that potentially can be teleworked, a researcher can telework, for example, but a waiter cannot telework. So, we can classify people by the ability to telework, and potentially upwards of 40% of people can. So right now, the fact that 25% or so are indeed teleworking full-time is within the realm of possibilities.

Southwick: Yeah, I guess I just feel lucky that I'm able to do my job and Zoom with you and that we're able to kind of carry on more or less, a little bit annoyed, but I think I'm [laughs] also the lucky one that get to keep my job and keep going. I think, I remember during the Great Recession that men were hit harder than women, what are you seeing now with coronavirus?

Dr. Kochhar: So, the COVID-19 recession is different from the Great Recession, in that it is driven by the need for social distancing. So, in the Great Recession, the downtown was centered in the construction sector, which is dominated by men, but in this recession, the service sector is up front-and-center, the sector most at risk, where personal interaction is necessary, such as in child care services or education and so on, and that is where women tend to work. So, it has had a disparate impact on women. Initially, their unemployment rate before COVID-19 was actually less than the unemployment rate for men. It jumped well above the rate for men, but now as businesses have started to reopen, we're seeing a narrowing of the gap again. The unemployment rate for women in August was almost the same as the unemployment rate for men.

Southwick: And what about age demographics, who are you seeing getting hit, sort of, the hardest when it comes to how old people are?

Dr. Kochhar: So, when it comes to workers classified by age, it is not uncommon to see that young workers are hit harder than older workers. They tend more likely to be part-time workers or otherwise less attached to the workforce, less seniority, for example, less experience. So, in this recession too they were much harder hit. And one factor driving the spike in their unemployment rate, particularly among workers 16- to 24 years old, is that half of them worked in the restaurant or hotel industry, leisure and hospitality. So, in April and May young workers were especially hard hit. But this is something we see often in recessions. And now, as before, we are seeing that the unemployment rate is lower if you are older.

Southwick: And how about when we look around racial demographics, if you're an immigrant or perhaps your education level?

Dr. Kochhar: So, if we look across racial and demographic groups, we see the unemployment rate being higher among Black, Asian, and Hispanic workers than among White workers. This is true both among women and men. But one interesting turn of events this time around is that the unemployment rate for Asian workers has climbed higher than the rate for White workers. The reason for this is not clear, usually it's the other way around. On average, Asian workers are much better educated, are more likely to have a college degree than any other group of workers, and they tend to have the lowest unemployment rate in the economy. So, it is an interesting turn of events this time around that their unemployment rates, for this highest educated group, is actually about the same as the unemployment rate for Black and Hispanic workers. The reasons for this are not entirely clear; I have not parsed it in that much detail.

Southwick: Oh. So, going back to February and March, when we were all coming to realize that this was going to be a potentially serious pandemic impacting our economy, what was your outlook, how worried were you as an economist who focuses on unemployment, and did it, kind of, play out the way you expected or anything that surprised you?

Dr. Kochhar: Well, the pandemic started shutting businesses down in the middle of March, and by late-March I had written a report looking at the likelihood of who might lose their jobs in the coming months. And this likelihood was based on this idea of social distancing. Businesses at risk included restaurants and the leisure and hospitality sector, and transportation, because airlines were shutting down and things like that. So, we took a look at the demographics of who works in these industries. And two things stood out. One was young workers. 50% of them worked in these high-risk industries. And the other was, low-wage workers. They tend to be in these industries too. And that's how things played out in a way. They just increased and unemployment happened among low-wage workers, young workers, lesser educated workers, those tending to be in the service sector businesses.

And now we also saw, a little bit going further into the pandemic, as you noted, that being a teleworker helped. That's another thing we were able to look at, the likelihood of unemployment among workers who could or who could not telework. And unemployment was indeed higher among workers who could not telework.

Southwick: At The Motley Fool, we focus a lot on investing in the stock market. And I think for, I don't know, speaking on behalf of Bro and I, I think at times we've been scratching our heads wondering why the stock market didn't fall even more than it did. And I'm saying this, of course, as right now the stock market is also having, kind of, a rough few days. So, we were here, as people who like to invest, like to look at the stock market, thinking why are things really not cratering, why are things not really bad? Also, Bro would call himself an awfulizer. But even I was feeling pretty awful, even though I'm quite the optimist. So, were you surprised at how things are starting to turn around? It seems like they're starting to turn around already or should we start feeling optimistic or should we be worried that it's only going to get worse? I know you probably can't prognosticate too much, but I know, for me, I'm kind of wondering, why is it not worse?

Dr. Kochhar: Well, I can't prognosticate at all, partly because I'm at the Pew Research Center, but also because economists are really bad at it. [laughs] At a personal level, I guess we should all probably be somewhat grateful that things have not turned as sour for the stock market as they did in the Great Recession, for example. You know, so many of us have our retirement tied up in 401(k)s, for example. But as to why, that's a hard story to unwind, I don't think that story will be understood for some time to come, except perhaps to note that the stock market is inherently forward-looking, perhaps at least some people are more optimistic than other people. And economists are also pointing to the easy availability of credit as a reason now, because of the monetary policy. But just how things turn out remains to be seen.

Southwick: Yeah. And as far as, from your point-of-view, looking at unemployment and labor, does it feel, are you like, phew! the worst is behind us, or are you still like, I don't know, shoes could drop?

Dr. Kochhar: Well, in one sense, I think there is a reasonable amount of certainty that we will probably not go back to the extent of business shutdowns as we did in April and May. But then there is a great deal of uncertainty about how this plays out in the long run as unemployment continues to remain elevated. What happens to consumer expenditures, what happens to an unemployment level of 30 million, 40 million, 50 million, how does that affect the economy in the long run? And what happens globally? It's not just what's going on in the U.S. So, there is probably still a great deal of uncertainty about what next.

Southwick: Yeah. Well, Rakesh, I want to thank you so much for joining us. And before we go, I just wanted to ask a couple more questions generally. I'm going to ask you our Mac Greer question, he's a guy who works at The Motley Fool and this is one of his favorite questions, but from when you were a first budding economist, kind of, what has been the biggest shift in your thinking when it comes to employment or unemployment labor in the U.S.?

Dr. Kochhar: So, as a younger economist, I was just mostly focused on the overall picture, on the headline number, as most of us tend to focus. But over time, I have come to understand and appreciate that not all things are equal in the labor market, that there is a sizable and persistent gap in employment outcomes across racial and ethnic groups, and that these gaps are not only persistent, but they're not easily explained away by differences in education or age. Now, they do vary a little bit by the state of the economy. So, there was, for example, a 10-year long economic expansion in the 1990s. And that greatly reduced the unemployment gap between Black and White workers, for example. But then we had the recession in 2001, and then the Great Recession, and this gap jumped right back up again.

So, likewise, we have this persistent gap between White and Hispanic workers. The Great Recession greatly increased the unemployment rate among Hispanic workers. This gap, again, disappeared during the economic recovery, and it might even have been a leading indicator that perhaps this gap is closing, because lo-and-behold we have now a recession that has pulled this gap right back up.

So, it seems like there is a stubborn gap in the unemployment rate among demographic groups that historically the economy is unable to close for whatever reason.

Southwick: And finally, what is your parting advice for our audience when it comes to, sort of, evaluating the data around unemployment? So they can sound smarter when they're talking to their friends on Cake Day.

Dr. Kochhar: Well, one thing might be to look beyond the headline number or just the month-to-month change in the number. I already talked about demographic differences and how they may tell us whether the labor market is working to the benefit of all or not. And it is also of value to look at other indicators, which people don't often look at, such as the labor force participation rate. How many people in the U.S. are actually either employed or looking for work and are active in the labor market? Did unemployment go up because more people entered the labor force, for example? That may not be such a bad thing. Or did unemployment go down because people left the labor force? And that is not such a great thing either. So, scratching beneath the surface can tell us a little bit more about why the unemployment rate is going up and down and whether it's a matter of concern.

Another useful indicator, I find, is the employment rate, which is simply the share of the population that is employed. And in the long run, that drifts up or down with changes in the nation's demographics. The U.S. is currently aging, for example, so fewer of us are willing to work, we're retired or wanting to retire, and the employment rate is drifting downwards in the U.S. Which means, in the long run, fewer of us are at work needing to support the U.S. population.

So, these rates can tell us something about why things are happening and where things are headed.

Southwick: Well, thank you so much for joining us. Again, this has been Dr. Rakesh Kochhar with Pew Research Center. Thank you again for joining us and helping explain everything around unemployment, I've learned a lot here today. So, thank you.

Dr. Kochhar: Thank you. You're welcome.


Southwick: Well, that's the show. It's edited employably by Rick Engdahl. Our email is [email protected]. Get your questions in, I'm sure we have a mailbag episode right around the corner. For Robert Brokamp, I'm Alison Southwick, stay Foolish everybody.