Cracks are showing in the service economy that has powered the last 100 years (Part 1) and alongside bank credit contraction (Part 2) it holds clues to what to expect when everyone is expecting
“Does anyone else see a problem in a data series that ignores the top 15% of workers in a recession that appears to be LED by the top 15% of workers losing their jobs and facing diminished earnings prospects?”
This was one of my favorite details that you highlighted.
I just wanted to extend a thank you to you! It is extremely kind of you to be willing too give out scholarships for those who can’t afford the cost. Not something you see often these days, especially in the finance world.
This article kills it! We keep looking at data trying to find that hidden gem - why is the participation rate so low in the economy, where are the workers, etc. This analogy on servicing the home is a trickle thru on every service! Clarity appreciated.
Just a thought and it's annecdotal from my experience. My Mom is 93 and I take care of her. To give me a break I hired a home care aide for several hours a day, first five days a week, now 7 after Mom's last TIA. When the regular aide is sick or on vacation, getting substitutes is a problem for the agency. I don't think it's salary. In NYS there is a special minimum wage for this profession set by the NYSDOH that goes up every year and my hourly cost (suburbs outside NYC) has gone from $25/hr to $36/hr since 2015, and I have to pay time and a half when they go over a full week and more on holidays. The Agency's owner tells me he has to pay more to keep experienced workers and the substitute problem occurs because those people who work part time often get multiple offers from different agencies and take the best one at the last minute. I've noticed a similar labor shortage at the assisted living facility where my aunt resides. My cousin is a Sr. Supervising Nurse at her hospital and they can't find enough nurses and other workers to be fully staffed at times. So while I agree with you that the data is showing general cracks in the service economy, there are certain areas like health care where the labor market seems very tight, at least locally.
Thanks for the article. I greatly enjoy getting to read your thoughts. Does the way you view the drawdown in bank credit from its peak change at all given the acceleration in credit extension trend kicked off by covid era policies? Said differently, does the drawdown become more meaningful once we revert to the pre-covid trend?
I could be way off base on this, but here's an idea I've been toying with ever since reading Peter Zeihan's work. He talks about the demographics collapse as dooming countries, but I've often wondered if in certain cases a shrinking population couldn't be an advantage?
If AI and other automation technologies (like fancy vacuum cleaners) are going to replace large swathes of jobs, could it not be advantageous to have a smaller workforce hence a declining population that will need some form of government assistance/UBI/what-have-you as their jobs are replaced? Or are in the streets rioting about the lack of work...
In the automated future, are citizens valuable or are they liabilities?
My son first reported his graduating classmates (from a highly selective and overly priced Catholic College) were having their start date for their career-first-post-college job delayed and now hearing its happening to recent College graduates who were hired by Accenture. I suspect there may be a decline in the rental market coming our way. First reported the delayed start date by WSJ seems to become a trend https://www.wsj.com/articles/mckinsey-bain-hire-new-m-b-a-s-but-they-may-not-work-for-months-d805f14b
I have been surprised that employment has been so strong. I work in a warehouse for a large retailer. This time last year all employees were working overtime to work off a huge glut of inventory. This year our hours have been cut by a 1/4.
The company has done a nice job of working off the inventory and dwindling the employee count down by attrition and a hiring freeze.
I think two things we keep hearing that if wrong could have huge implications: first, everyone is expecting a second half bounce this year. The company I work for said this, and I have heard others like TSM say this. Second, there is all this excess savings. So, I believe a lot of companies are suffering from recency bias and are afraid to layoff employees as many struggled with staffing issues during the pandemic. So, instead companies are getting rid of temp workers, and cutting hours. Also, I talk to a lot of my coworkers and they also believe things will pick up, and are relying on credit cards for a temporary solution, and I think many of them are struggling with recency bias.
“Does anyone else see a problem in a data series that ignores the top 15% of workers in a recession that appears to be LED by the top 15% of workers losing their jobs and facing diminished earnings prospects?”
This was one of my favorite details that you highlighted.
I just wanted to extend a thank you to you! It is extremely kind of you to be willing too give out scholarships for those who can’t afford the cost. Not something you see often these days, especially in the finance world.
This article kills it! We keep looking at data trying to find that hidden gem - why is the participation rate so low in the economy, where are the workers, etc. This analogy on servicing the home is a trickle thru on every service! Clarity appreciated.
Just a thought and it's annecdotal from my experience. My Mom is 93 and I take care of her. To give me a break I hired a home care aide for several hours a day, first five days a week, now 7 after Mom's last TIA. When the regular aide is sick or on vacation, getting substitutes is a problem for the agency. I don't think it's salary. In NYS there is a special minimum wage for this profession set by the NYSDOH that goes up every year and my hourly cost (suburbs outside NYC) has gone from $25/hr to $36/hr since 2015, and I have to pay time and a half when they go over a full week and more on holidays. The Agency's owner tells me he has to pay more to keep experienced workers and the substitute problem occurs because those people who work part time often get multiple offers from different agencies and take the best one at the last minute. I've noticed a similar labor shortage at the assisted living facility where my aunt resides. My cousin is a Sr. Supervising Nurse at her hospital and they can't find enough nurses and other workers to be fully staffed at times. So while I agree with you that the data is showing general cracks in the service economy, there are certain areas like health care where the labor market seems very tight, at least locally.
Current FED policy = driving down a mountain red lining the engine while looking through the rear view mirror on where to drive 😂
Thanks for the article. I greatly enjoy getting to read your thoughts. Does the way you view the drawdown in bank credit from its peak change at all given the acceleration in credit extension trend kicked off by covid era policies? Said differently, does the drawdown become more meaningful once we revert to the pre-covid trend?
I could be way off base on this, but here's an idea I've been toying with ever since reading Peter Zeihan's work. He talks about the demographics collapse as dooming countries, but I've often wondered if in certain cases a shrinking population couldn't be an advantage?
If AI and other automation technologies (like fancy vacuum cleaners) are going to replace large swathes of jobs, could it not be advantageous to have a smaller workforce hence a declining population that will need some form of government assistance/UBI/what-have-you as their jobs are replaced? Or are in the streets rioting about the lack of work...
In the automated future, are citizens valuable or are they liabilities?
The irony of using Maxi Balaji's Truflation measure at the end is not lost.
For other readers, two other "realtime" inflation data series are State Street's PriceStats and Adobe's Digital Price Index.
My son first reported his graduating classmates (from a highly selective and overly priced Catholic College) were having their start date for their career-first-post-college job delayed and now hearing its happening to recent College graduates who were hired by Accenture. I suspect there may be a decline in the rental market coming our way. First reported the delayed start date by WSJ seems to become a trend https://www.wsj.com/articles/mckinsey-bain-hire-new-m-b-a-s-but-they-may-not-work-for-months-d805f14b
I have been surprised that employment has been so strong. I work in a warehouse for a large retailer. This time last year all employees were working overtime to work off a huge glut of inventory. This year our hours have been cut by a 1/4.
The company has done a nice job of working off the inventory and dwindling the employee count down by attrition and a hiring freeze.
I think two things we keep hearing that if wrong could have huge implications: first, everyone is expecting a second half bounce this year. The company I work for said this, and I have heard others like TSM say this. Second, there is all this excess savings. So, I believe a lot of companies are suffering from recency bias and are afraid to layoff employees as many struggled with staffing issues during the pandemic. So, instead companies are getting rid of temp workers, and cutting hours. Also, I talk to a lot of my coworkers and they also believe things will pick up, and are relying on credit cards for a temporary solution, and I think many of them are struggling with recency bias.