I think a lot about jobs. Specifically how a lot of politicians use them in their campaigns as some sort of gift to the people. There’s barely any mention on the quality of job, or type of job, or level of job — just more jobs means more votes. Today, unemployment is stand an at all time low at 3.9%. Which, on the surface sounds pretty great, everyone who wants to work can find work somewhere. But Americans also just racked up $1 trillion in credit card debt, inflation is still high, and savings are diminishing each day. What’s worse than not having a job is having a job that doesn’t pay enough; and frustrated workers create angry voters Around me, I notice the job market for quality jobs is actually tough, and it doesn’t seem to be getting any easier.
Taking it Slow
On Tuesday, data was released showing job openings decreased to 8.7 million in October, the lowest level since early 2021. This revealed a gradual cooling in the labor market, something that the Federal Reserve has been eagerly waiting for. As the Fed keeps interest rates elevated to bring down inflation, policymakers are hoping the labor market softens through less demand for new workers rather than employers cutting jobs. Why does this matter?
This all has to do with inflation. If worker demand is high then it can lead to wage inflation. Increasing wages leads to increased spending power which, in an overheated economy, can further fuel inflation. A cooling labor market reduces the upward pressure on wages and, subsequently, on prices. There’s also the psychological impact of fewer jobs since it creates a sense of caution among workers, who would be more likely to stay at their current job than jump ship for higher pay, a common trend over the past couple of years.
At the peak last year, more than four million people were quitting their jobs every month — reflecting confidence in their ability to secure new positions, often with much better pay. That’s now stabilizing: The so-called quits rate, which measures voluntary job-leavers as a share of total employment, held for a fourth month at the lowest level since early 2021. - Job Openings Hit Two-Year Low in Cooling to Be Welcomed by Fed, Bloomberg
Raising rates is one of the only levers the fed has to work through inflation. As they increase, the cost of borrowing money becomes more expensive. This leads to a slowdown in business expansion and investments, thereby reducing the number of new jobs created. While this sounds pretty shitty, purposely slowing down the economy which effectively leads to more Americans earning less or being unemployed, this may be the best-case scenario.
Work around Work
Last week, I spent some time praising Spotify and their Wrapped efforts. In response, they decided to lay off 17% of their staff.
In a memo sent to staff, Ek (CEO) said slowing economic growth and rising costs were to blame for the cuts, which he said would make Spotify a leaner company. “Today, we still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact,” Ek wrote. “As we’ve grown, we’ve moved too far away from this core principle of resourcefulness,” he later added. - Spotify to lay off 17 percent of its workforce in latest round of job cuts, The Verge
I know I’m starting to sound like a broken record, but this is because of AI. The past year in AI has shown us that a lot of the first jobs to go will be busy work. Just look at the latest announcement from Google, introducing their new AI model, Gemini:
I like to think of work around work being the planning meeting before the weekly catchup before the team meeting. If you pair all this work fluff with raising rates, basically decentivizing business expansion, well then you’re gonna get a lot of cuts. And this is where the problem lies across the board: there’s too much fluff at big companies.
The days of easy money are over and now begins the path to profitability. We see it at Spotify, Uber, and the rest of the bunch that are now trying to actually make money (rip WeWork). Trends toward sustainable businesses reward good work and lead to a healthier economy. And with AI, it makes it easier for anyone to start a business which is probably the answer to a lot these cuts and layoffs and decreases in available jobs. Instead of looking for a job, why not make your own?
If we really take a look at the past few years, easy money just leads to bad behavior. The economic response to the pandemic inadvertently added fuel to the fire of an already heated economy. We saw this with the craziness of the markets with stocks like Gamestop and AMC, over-hiring due to the influx of capital that came from government programs like PPP loans, and of course our favorite scam, Crypto. Widespread recklessness led to straight-up fraud and while many made a lot of money, many also lost a lot of money. While the slowing of the American economy is not the best situation for many Americans, it is necessary to neutralize the erratic market behavior. Incentivizing profits effectively incentivizes good behavior. The best way to reap the rewards of the changing landscape is to just be a part of it. Start a business.
Thank you
I think we’re starting to see the death of the conglomerate. Big companies are just too wasteful and it’s becoming more and more clear. So many jobs spent doing things that no one enjoys for not enough pay. And even when it does pay well, it just creates more of an incentive for them to find a way to cut the job. Having had a corporate job at a big ass company, sure it’s easy, but it’s also very boring. The hours I spent waiting for simple data points, arguing with some random guy in India over IT support, or building slides for decks that don’t even get passed the 3rd slide are simply wasted hours. I always get asked about how I would feel if my current job was replaced by AI. My response? Please replace me. The less time I spend moving numbers around a spreadsheet, the more time I can spend actually working (and writing these little posts). As always, if you have any questions, want more explanations, or strongly disagree, comment below, follow me on Twitter (X), follow me on Threads, follow me on TikTok, or shoot me an email.
Disclaimer: These views are my own, and do not necessarily reflect the views of any organization with which I am affiliated with.