What the Summer of Strikes Means For The Broader Economy

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1:41Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. You are going to be listening to a special episode of the Odd Lots podcast that we recorded live at the Bloomberg Screen Time conference in Los Angeles in early October. That's right. Odd Lots takes Hollywood. We are speaking to one of our favorites, Omer Sharif of Inflation Insights, and we are talking to him about the macro impact of some of the recent strikes we've seen this summer from the Screenwriters Guild, from the Actors Guild, as well as the United Auto Workers. Take a listen. Omer is one of our favorite economists that we speak to regularly on our podcast, where we typically cover markets, finance, and economic stuff.

2:26That's right. And today we're going to try to join the two worlds of entertainment and Hollywood with more of the macro economic stuff that we do on a day to day basis. Right. So obviously one of the big macro stories here is the ongoing strikes. We got the news last night. The actors are continuing the strikes, despite the fact that, you know, maybe it was expected to wrap up sooner. There's also more strike activity nationally. We also found out yesterday Ford expanding its strike. So we're going to try to balance out the two stories, talk about what we've learned so far from the economic impact here locally in L.A.

3:02and Southern California and what that might say for the rest of the country. Yeah, let's do it. O'Mara, thank you so much for coming here and making the time and chatting with us. Yeah, nice to be back again. So let's just start with like a basic question, which is, you know, the two strikes, one just wrapped up. Is it showing up yet in economic data? Yeah, so, I mean, we have some national reports we can look at that show some of the impact of at least the writer's strike. There's some data out there right now in terms of work stoppages. So any strike that's more than a thousand people gets recorded by the government.

3:33And some of that data started to show that about 11 ,500 writers were on strike beginning in the June number. So we have seen it over the months. and we've now started to see that impact in the same work stoppages report, for example, showing 160 ,000 actors on strike as well. And of course, it records a whole lot of other strikes as well. So that's probably the main place where we see it. We haven't really seen it quite as much in terms of unemployment just yet. And there's a few reasons for that. I mean, you can imagine, especially with the actor strike, you know, actors also tend to work other jobs, right?

4:06There's very few full-time actors. And so if they're working other jobs and they're making money, they won't be counted as unemployed. And in fact, in one of the surveys, the household survey, depending on how you answer the question about whether you have a job, were you at your job, are you available to work, there's sort of a list of questions you have to answer. And in order to be counted as unemployed, you sort of have to hit all three of these questions perfectly. So unless people answer it in a certain manner, they will not be counted as being unemployed. The one area also within the household survey where you do see the impact is, you know, the number of people who have a job but who are not at work due to a labor dispute.

4:45So that is a very, very specific category that they do capture in the BLS, and that is starting to show some of the impact right now. But, you know, more broadly, we haven't really seen a big increase, for example, in jobless claims. We haven't seen a huge move higher in the unemployment rate data itself, whether that's nationally or even really within LA or California. Wait, can I ask a very basic question? Maybe it's a stupid question, but what does the literature tell us about whether strike action is inflationary or deflationary? Because I could see you, you could possibly argue it both ways.

5:19So if it impacts output, then maybe prices go up because supply of a given thing is in shortage. And of course, If it's successful, then presumably wages for some workers go up. But on the other hand, if things aren't getting done, if things aren't getting made, then you would assume that's a hit to economic activity. Maybe people aren't getting paid. So maybe it's deflationary in that way. Yeah. So one of the interesting things about the strike activity is it typically tends to follow inflationary periods. So it's not that the strike itself isn't causing prices to move higher. where it's that there may have been shocks, like so, for example, the oil shock, now the last couple of years with COVID, that caused prices to shoot up, workers fall behind.

6:04And then eventually that leads to more and more strike activity. So that's the first thing I would say that it really tends to follow big price increases. The question of whether then eventually the pay raises you get afterwards, you know, typically you don't see that as much in the inflation data. I think this time certainly could be different, given, you know, we've got strikes on multiple fronts. And I think the auto sector is the most obvious answer. But that's partly because we're still recovering from a lot of the supply chain issues that, you know, you guys have talked about on the show many, many times.

6:33So when you think about autos, for example, you know, auto production is only just in the last six, seven months gotten back to where it used to be before COVID. So to get a hit now to production is potentially someplace where you could see inflation pop up for new cars, for used cars and other places. But typically you don't see as much of that happen post the resolution of the strike. Right. OK, well, on this note, you know, I realize we are at an industry conference, so I won't ask you to opine on whether or not the writers and the actors strikes are justified. But walk us through what the actual data tells us about wages for this particular subsector of worker.

7:12When I started digging into this, I was actually very surprised to find out some of these numbers. And I think in part because when, you know, I remember hearing about the actor strike initially, and I just remember thinking, well, you know what, I think Tom Cruise is going to be fine, not a few months of pay, right? But what you generally don't tend to think about is all the other thousands upon thousands of actors who are not, you know, the A-list celebrities who are in the magazines and so on. And so I started to look through the wage data. And I said, you know, how much do actors actually make?

7:38So for those of you who can see this chart, the top chart is just showing you a very specific industry, right? So this is the motion picture and video industry. This is where you'll find actors, but also everything from, you know, folks who work in lighting to editing and so on. So the actors are way down. They're way down. So the lawyers are top. They are, yeah, they're just below data entry and amusement park workers and so on. And they make about, you know,$16.70. And that's the median. So half of them make more than that, half make less than that. But$16.70 is where they fit in. Yeah, number one, you would not be surprised, you know, you're not going to be surprised is lawyers in the motion picture industry.

8:15But actors are way down. They're in the bottom 20 % of all workers when it comes to wages in the motion picture and video industry. And another chart I wanted to look at was to say, okay, well, if this is the median, how much do people at the bottom end make versus the top end? And the second chart down there shows you actually the green bars of the US as a whole, so all actors across the United States, and the red is specifically for the LA, Long Beach, Anaheim area. So that's a local look. And you can see locally, the median is actually only about$15.70 for the LA area. So below the$16.70 we see for the industry as a whole.

8:54But look at how little variation there is at the bottom end. If you go towards the bottom 10%, you're still only at about$15.60. So only about a 10 cent difference between the bottom 10 % and the middle. Even at the 75th percentile, you only move up to about$16.70. So only about a buck more per hour. Fast forward to the 90th percentile. Now you're up into the 70s. And for the U.S. as a whole, you're up to over 110 bucks. So you really, you know, if you're an actor, essentially, unless you are in that top 10 percent and quite honestly, probably that top 1 percent, your median wage is probably going to be around that 15 to 16 dollar range, whether that's a local number or whether it's national as a whole.

9:38One of the reasons we love talking to Omer is the level of data that he comes equipped with the numbers. Tracy once wrote an amazing article about mayonnaise inflation. And Omer like do all the different like categories within. He's like, well, you might want to look at like the fats and oil section of the producer price index and the PCE. It's, you know, mayonnaise is captured here. One of the things and you mentioned it, that many actors have other jobs. So even if they're striking, they're not necessarily going to be counted as unemployed. And looking at these wages, I imagine that these other jobs that they can pick up, service industry jobs, pay pretty close.

10:17Like they're probably not taking a big economic hit. Yeah, that's right. So, you know, here I wanted to take a look at some of these other areas where you would see, you know, again, as I mentioned, very few actors are full time actors, right? It's part time. You're taking other jobs. And so I took a look at sort of some of, you know, just picked out randomly some of the areas where you see actors tend to work. And so you'll find places like, you know, occupations like, you know, bartenders, servers, real estate agents is a very popular one in L.A. at least. And so here you can see this is local.

10:50These numbers are for local for L.A. County. And so, again, the actor is$15.70 an hour. Servers are about$15.15 an hour roughly. Bartenders, you know, a little bit above that, about$15.35. Substitute teachers,$23 an hour. Real estate agents around$31. So, you know, that's why kind of the median is as low as it is because some of the other occupations here are, you know, whether it's bartending or working at a restaurant, also tend to be on that lower end of the overall spectrum. So that's partly why you're seeing that number be so low. But again, I think when you look at that distribution, unless you are in that top 10%, the bottom 90 is going to be about 15 to 16 bucks an hour, which tells you just how tough it is to kind of make it in that industry.

11:38Because it's not like if you're in the middle, you're making 15, 20 bucks more than if you were at the bottom. And there's basically no difference. There's the bottom and the top, and most people are on the bottom. Yes. That's my takeaway from your chart.

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13:18Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokered services for U.S.-listed registered securities, options, and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA, and SIPC. Crypto trading provided by ZeroHash. Complete disclosures available at public.com slash disclosures. You knew I used to be a substitute teacher, right? Yes, I was aware of this. Were you also a struggling actor?

13:50I was never. Actually, kind of. But no, just see, I give a shout out to the substitute teachers as a former sov. Yeah. OK. Fair enough. So one thing, actually, going to Joe's point about mayonnaise and all the different data sets that you can look up. One of the things I learned about inflation statistics doing that article was that there are these qualitative adjustments that the Bureau of Labor Statistics does on these numbers where they will look at probably not mayonnaise, But they'll look at something like a refrigerator and say, well, a modern refrigerator is so much better than a fridge from 1985.

14:28It can do so many more things. And so we have to adjust the inflation calculation. I always wondered, for something like movies or TV, can they do the same type of qualitative adjustment? How would you actually measure that? Yeah, to the best of my knowledge, they don't do anything. Services in general tend to be very, very difficult to quality adjust. Some exceptions can be things like your cell phone service, your wireless plan. You get a certain amount of data through it. If that data increases or decreases, they can sort of measure what that would, quote unquote, cost. For movies, though, I think it's, as far as I know, they don't do anything with that.

15:10And in general, services activities are very tough to do. So they really try to stick with goods, as you mentioned, like televisions, refrigerators, cars. The new model, your car comes out. It's got more bells and whistles than the last one. They can look at how much the manufacturer spent on adding better technology to that vehicle and sort of remove that from the price to say, hey, this is the quality adjustment. Services, though, it's very difficult to do. OK, so the BLS isn't watching all the new movies and going, wow, these special effects are so much better. We need to adjust our inflation method.

15:47You know, it's a good question. I will ask them when I get back to work tomorrow. This is the other thing we've learned, by the way, is that the BLS is great. They'll just you can call them up and just ask a question about the economic data and they'll walk you through it. They're happy to chat about it all the time. You mentioned, OK, so unemployment not really showing up in the data. Are there any other sort of like statistics in the regional economy where you can see some effect from work stoppages or certain types of sectors? I mean, I have to imagine, you know, obviously the not shooting affects more than actors, affects makeup people, affects other production people.

16:22Are there other areas or other data sets you can look at to see how the strike is having an impact or percolating up there? Yeah. So actually, you know, if you look at industry employment numbers, right, so specifically here for California and you can look at, for example, sort of the film and TV industry and you can tack on also there's another industry that captures independent writers and performers. So if you kind of combine those two big industries and say what's going on in the job growth in those two sectors in California, since April, so the strike started early May, writer's strike at least, since April combined, they've lost about 17 ,000 jobs.

17:00And most of that has been in the motion picture industry, less so on the independent writer side. But it is clear there that you're seeing some impact in terms of layoffs that are happening. So that's one area. But the second area also is that activity in general in the industry has been contracting probably for the last year and a half. So, you know, I'm not going to, you know, you mentioned earlier about are the strikes justified or not. I don't know if I want to go down into that rabbit hole. But what I will say is that in general, I really like the way Ellen Stutzman, who was the chief negotiator for the Writers Guild, you know, they're criticizing the writers about striking at a time when things are tough for the streaming services and so on.

17:40And she said, look, our job is to ensure that our guild members have good jobs and share in, you know, the value that we create as writers, regardless of whatever it is that the industry is doing. And what the industry has been doing in terms of film and TV is, and you mentioned shoot days earlier, so this is a good number to look at. From 2015 to 2019, before COVID hit, the average number of shoot days in California every quarter was about 9 ,500 shoot days. Real quick question, who tracks the shoot? So this is Film LA. You can Google them, you can find these numbers, they're all available publicly.

18:14And so if you want to get a permit to shoot a commercial, a TV show, whatever, you go through Film LA. So they can track who's shooting, how often, how many days and all that. So typically, on average in a quarter prior to COVID, it was about 9 ,500 days. Obviously, COVID, nothing happened. It went to zero. But by the middle of 2021, we were back to about 10 ,000 days of shooting. Since the end of 2021, so this is about the last five quarters before the strike began, shoot days have fallen every single quarter. As of Q1 of this year, shoot days were 20 % below the five-year average from 2015 to 2019.

18:49So, you know, even before the actor strike started in July and the writer strike started in May, activity had been sort of on a pretty steady downtrend for almost, you know, just over a year, really. So there you can see that, you know, things were already kind of difficult for the industry as a whole before the strikes began. And so that's one area we can see it clearly. You can see the employment numbers as well. But interestingly, as we've talked about, because writers can work other jobs, you don't see it, for example, in the jobless claims data. You haven't seen such a big spike overall. You don't see the unemployment rate in California moving.

19:25So in April, it was 4.5%. Now it's 4.6%. The one thing I would caution is we only have data for California through the month of August. So it's only been about a month since, you know, the actor strike started. So it might just be a matter of time before we start to see it over the next couple of months. But on the actor side, it might just be a little too early to really say. This was going to be my next question. I'm getting the sense that there is a lag involved here, partly because people do have more than one job or actors typically have more than one job. How do you kind of gauge how long that lag might take until you start seeing more of a stark impact on the numbers?

20:05So I don't know exactly what that lag would be, but I think if I wanted to try to track, you know, when is this starting to show up? I would be most closely watching the weekly data on unemployment claims, especially, you know, granular digiting down into L.A., what's happening in L.A. County. partly because the workforce here in that industry is roughly, I think, about three and a half percent of all jobs in L.A. are either in that industry or, you know, in that independent performers. So those two areas you want to watch and if you start to see it happening in L.A., you know, I think it'll be obvious with the jobless claims data when that starts to show up.

20:41It's tough to say because people can transition from acting into other areas as well in terms of those part time jobs. we talked about. So you mentioned earlier that you have to answer three questions in order to be counted as unemployed. Do you know what those questions are out of curiosity? I knew this was going to come up. I should have memorized these. So one of them is, you know, do you currently have a job? The answer would have to be no. Are you available and looking for work would also have to be no. And the third one I'm blanking on right now, but I will get back to you on it. Okay. Two out of three is pretty good.

21:15I want to go back to a bigger picture thing you said, which I think is really important, which is that historically strikes are not the catalyst for the inflationary period, but come after them. And of course, that makes sense. People feel that they're like falling behind. People want to like get their share. And there's this whole idea of like, you know, inflation in general is often like a battle over a result of different competing claims on money. Can you talk a little bit about the big picture, like historical trends of what we see? I know that like strike activity is picked up a little bit, but it's nothing like what it used to be like.

21:46Talk to us a little bit more about that theory of labor tension strikes as a sort of post inflation phenomenon. Yeah. So obviously there's been a ton of attention on unions. Yeah. And strikes the last year or so. What's interesting is if you actually look at the percentage of workers in the private sector who are part of the union. In 2012, it was around six and a half percent. It's actually down to six percent now, which is not something you would necessarily know. So these are people who are in a union. Yeah. Employees who are in a union in terms of all private sector employment. OK. So out of everyone who's working in the private sector, only about six and a half percent of people were part of a union.

22:28Got it. Ten years ago. OK. And now that that share has gone down to six percent. So even though they're getting a lot more attention, that that share of folks who are in the union has actually gone down. The number of people who are currently on strike is about 210 ,000 roughly. That's not even as high as it was several years back. It's nowhere near the several, you know, five, six, seven hundred thousand in the 80s. We could potentially, by the way, get there. There's, you know, the possibility that these 75 ,000 health care workers at Kaiser might strike. Obviously, the UAW is not completely striking.

23:03That's 140 ,000 people right now that, you know, I think only about 15 ,000, 20 ,000 of them are on strike. So we could potentially get to a number that's been the highest since the early 80s. But I think part of, you know, what's going on there is, one, I think, given what's gone on through the pandemic, obviously, there have been a lot of changes in the labor market in general, everything from work from home. But also during that period, a lot of workers, frontline workers especially, continue to work. And, you know, companies did extremely well in terms of profits. And so a lot of these folks are coming back now and saying, like, you know, we ought to be sharing in some of that record profit growth that we've seen over the last several years.

23:42And you can sort of see this in terms of opinions about unions, which used to be much more negative. They're enjoying, you know, some of the best support they've had in decades from the general public, if you will. So that's that's one part of it. Also, I think the other element here is that when you think about some of the industries where we're seeing strike activity, they are undergoing transformational changes. When you think about writers and actors, yes, of course, it's about better pay and about residuals. It's also about the use of AI. And people want to figure out how is that going to impact me down the road.

24:18In the auto worker strike, yes, about better pay and pensions and benefits. Also about EVs. You know, how are the change to electric vehicles going to impact workers? So a lot of these places are seeing transformational changes that are coming. And, you know, workers are trying to figure out how exactly they can sort of protect themselves in that sort of environment. So, yes, there's been a lot of activity. I think the profit story is big. I think obviously inflation is a huge, huge part of that story. For a couple of years, real wages were declining very, very sharply. If you actually look at autoworkers, for example, you go back to 2008, they took a lot of cuts to help the industry survive after 08.