11 ms·

Job growth has slowed sharply; the question is why

79 points by paulpauper 1y ago

dileeparanawake 1y ago
Increasing wealth inequality, drives prices inflation, wage stagnation and less disposable income, driving less consumption, driving less revenue for businesses, meaning cuts happen and hiring freezes, drives slowing growth in new job market.
- andsoitis 1y ago
  I think you've got your cause/effect chain a little muddled. I would also assert that the system dynamics are neither linear nor singular in the way you frame it. > Increasing wealth inequality, drives prices inflation How does increasing wealth inequality drive price increases?
  - altairprime 1y ago
    The missing dynamic is that businesses are encouraged to increase growth in profit YoY. Each year, a business needs to grow faster than it did the previous year. If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it. The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending). If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders. AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole. For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation. Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.
    - andsoitis 1y ago
      > The missing dynamic is that businesses are encouraged to increase growth in profit YoY. > Each year, a business needs to grow faster than it did the previous year. It is very reasonable for an investor or a worker wanting the business they have hitched their financial wellbeing to to do very well, which means growing profit. It gives the business more strength and stability.
      - sedawkgrep 1y ago
        I don't think anyone is disagreeing that this is what investors want. I think the point is that it ultimately becomes detrimental.
        deleted 1y ago
        [deleted]
      - altairprime 1y ago
        The difference between “I earned a tidy profit for me and my investors, as well as for my non-investor workers” and “I earned the maximum profit possible for me and my investors, moreso by denying workers as much of those profits as possible” compounds detriment at the difference in profit and wage growth rates, which steadily decreases the maximum profit possible to all firms due to household purchasing powerlessness. Eventually they’ll reach a lower maximum profit than could have be reached if they’d shared more profits as worker wages rather than as investor payouts. Oops.
  - area51org 1y ago
    Presumably because there's a perception that if there are lots of rich people, they can afford to be gouged. This begs the question of how many rich people there actually are, though.
    - sedawkgrep 1y ago
      > Presumably because there's a perception that if there are lots of rich people, they can afford to be gouged. 1) Is this a wrong way to think ? 2) Isn't this what progressive taxation is supposed to do (or *should* do if folks like Musk, et al, actually earned 'income') ?
  - Qem 1y ago
    > How does increasing wealth inequality drive price increases? When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.
    - svieira 1y ago
      Doesn't the lack of liquidity in an economy cause deflationary behavior?
      - Qem 1y ago
        Short term, maybe, as you still have excess production capacity. Long term excess capacity get dismantled, business go bankrupt, scale is lost.
      - Volundr 1y ago
        Obviously I'm not an economist, nor do I play one on TV. One would indeed expect removing currency from the economy to be deflationary, but in GPs example we didn't just remove currency, we removed demand too. If less people have money to buy a car, less cars are produced. When you are making 1k instead of 1m cars, you no longer benefit as much from scale and must raise your prices, which only the rich can afford. Now why might this happen instead of prices dropping to the point the now-poorer people can afford them? Maybe the cost of inputs can't go much lower, or maybe other less-stratified markets are picking up the slack, so demand shifts there. Or maybe the rich have enough money they don't care about the higher prices. Or some combination of all of the above. Economies are complicated beasts, it's rarely as simple as X leads to Y. Instead you have the whole alphabet pulling in different directions and the forces that win out may be quite unintuitive.
        andsoitis 1y ago
        > One would indeed expect removing currency from the economy to be deflationary, but in GPs example the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
  - pasquinelli 1y ago
    > How does increasing wealth inequality drive price increases? i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff. past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?
    - merth 1y ago
      i'm not the person you replied but if wages lag furhter, how rents going up? it should go down since there is noone to be able to pay higher rents. they have no choice but either convince homeowner or downgrade. and Group A(rich + upper-middle) won't rent since they have enough wealth to buy a house, they may upgrade and cause inflation in luxury houses/goods.
      - Hemospectrum 1y ago
        Rent can continue to go up as long as there is room (literally physical space) in whatever housing is still on the market. Ten years ago you might have been able to afford your own apartment. Now you need three roommates. Soon you'll need seven, and then fifteen, and that can just keep going up as long as that number of bodies can be crammed into the same lodgings.
      - motorest 1y ago
        > i'm not the person you replied but if wages lag furhter, how rents going up? The greater the number of people who cannot afford buying a home, the greater the number of people whose only option is to rent. The more people enter the rental market, the higher rental prices get. It would be very interesting to have statistics on how many people share apartments/rent rooms. I'd bet those numbers would be spiking.
  - throwaway2237 1y ago
    If you will please allow me an oversimplified example: A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service. However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example. So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.) Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way. This example is obviously oversimplified for the sake of showing the point
  - xboxnolifes 1y ago
    If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group?
    - andsoitis 1y ago
      > If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group? That's a fantastic question that I don't think I've heard before, but I have a practical answer to. Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets. In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts. So as a tax authority you have to balance getting cash (to run the government) against reducing the productive capacity of the economy (by asking businesses to reduce their capital).
      - xboxnolifes 1y ago
        When i said extract money from, I didn't mean taxes. I meant why would businesses target the group of people with very little wealth, instead of making products that target the rich? At some amount if wealth inequality, the majority of commerce has to be targeting the rich instead of everyone else, no? What does that economy look like?
  - bigbadfeline 1y ago
    > How does increasing wealth inequality drive price increases? Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.
- bitshiftfaced 1y ago
  > Increasing wealth inequality, drives prices inflation Why?
  - AnimalMuppet 1y ago
    I think the claim is that the rich can overpay for whatever they want, driving up the price for everyone else. And that's true. It's hard to square that with "less consumption", though...
    - clipsy 1y ago
      > It's hard to square that with "less consumption", though... Is it? I’m not sure of the truth, but it’s not hard to imagine that wealth inequality drives up the price of housing via the mechanism you describe, and increased housing prices drive down overall consumption as the non-wealthy struggle to afford basic necessities.
  - lantry 1y ago
    when the fed lowers the rates, who benefits?
  - youniverse 1y ago
    The idea is that if you have 1 billion in assets, let's say you make 5% per year, that's 4 million a month income. That money goes to into assets. Plus the fact that in last 5 years assets have gone up so much means there's just a lot of wealth being invested.
  - dileeparanawake 1y ago
    Why does wealth inequality drive price inflation? Good question and not obvious. Here's the answer? How much does a bottle of water cost? - Supermarket? - Festival? - In a drought, when you're standing in line behind a thirsty billionaire? People with a large relative net worths, drive asset prices up, like bids in an auction - even if they aren't the final bidder.
- exabrial 1y ago
  I hate to tell you, the single cause of inflation is not "wealth inequality", it's extra dollars spent by the Federal Government that literally don't exist. The US Government writes checks that always cash, and unlike you and me, they don't have to have anything in the bank account behind it. This is the _sole and only_ cause of inflation. _Its the literal definition_ and is well documented.
  - QuantumGood 1y ago
    Interest rates, supply chain issues, and monetary policy also play a role
duxup 1y ago
>Currently, the data suggest that reduced labor supply is likely the key driver It's interesting as far as people I know looking for jobs, they're supply ... and having a hard time finding jobs. Reduced supply you'd hope you'd get a job. Granted the article addresses this both in the types of jobs and: >The stability of the unemployment rate masks effects of the low-hiring, low-firing labor market. I do wonder, if this continues and a sense of economic slowdown or worse continues, would lowering a rate really fire up hiring? I know small businesses who can't eat /dance around tariffs like big companies, some are seriously terrified / facing hard decisions, others fine.
- mathgeek 1y ago
  Yeah, anecdotally no one I know exemplifies that finding. Everyone who had had to job search ran into a ton of competition and either beat them all out or is under-/unemployed currently. Only way I could see the finding of reduced labor supply is that no one can afford to work in the low wage jobs that are open.
- danaris 1y ago
  I can see one way in which it could be true that the labor supply is reduced, in specific sectors: The ICE crackdowns are both directly removing large numbers of nonwhite people from the labor pool, and indirectly scaring much larger numbers of them away from it, lest they be the next ones sent to the camps. Aside from that, though? No, I think talking about reduced labor supply is anti-labor propaganda at best.
- ebiester 1y ago
  Reduced demand in tech due to constraints of capital, and increased demand in agricultural and low wage jobs where immigrant labor was significant. But funny enough, we can't just ship 100k software developers from the bay to the central valley and it just work.
  - throwaway63467 1y ago
    That’s basically the plot of Stardew Valley. Programmers yearn for the fields.
mlinhares 1y ago
Title is clickbait (we all know why) but its a great read. Its so many shocks to the economy at the same time, and with no goal other than to cause harm that I don't think anything the FED does will have any real impact in the real world. The author goes for an OR between reasons but I really don't see it like that, its an AND, all jumbled together and pushing the economy down.
- andsoitis 1y ago
  > with no goal other than to cause harm My read is not that it is to cause harm / break things down per sé, but instead to deglobalize. At various times, the left and the right have made globalization the bogeyman and something to fight, so this idea has been in the ether. For many reasons (economic, geopolitics, peace), globalization is a great thing. Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
  - duxup 1y ago
    The execution and evaluation (granted, that's part of the execution). If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization: I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good. If you're not bound by any results you don't like then you can't know if you're even winning. Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.
    - thewebguyd 1y ago
      > If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization: And even then, tarrifs right off the bat are the wrong approach. It takes time, a lot of time, to reorganize supply chains and spin up manufacturing. It also requires a ton of capital. It requires a slow roll, local incentives, subsidies, and long term planning. It wouldn't be feasible to expect it to happen over the course of a single presidential term. If I'm a big company and I've got the cash reserves, I'm better off laying off a bunch of people and buckling down for the next 4 years rather than spending a bunch of capital to bring supply chain to the USA.
tcfhgj 1y ago
More interesting question: more spare time for everyone or just for a small part of the population?
- bluefirebrand 1y ago
  More spare time for a vanishingly small part of the population that has wealth, and to hell with the rest of us
devwastaken 1y ago
Red administration is in bed with tech and gives them H1B’s to prevent domestic labor cooperation
davidw 1y ago
I have been enjoying Paul Krugman's writing, now that he's free from the shackles of the New York "both sides!" Times https://paulkrugman.substack.com/p/its-beginning-to-smell-a-lot-like https://paulkrugman.substack.com/p/its-beginning-to-smell-a-... He's obviously got a political angle, but doesn't let that completely color his economic analysis.
- deleted 1y ago
  [deleted]
- 75345d4c 1y ago
  If the political angle is not relevant to the analysis, then why do you enjoy it?
  - lovich 1y ago
    Some people enjoy things that others do not
  - motorest 1y ago
    > If the political angle is not relevant to the analysis, then why do you enjoy it? The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy. This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor. We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.
  - wasabi991011 1y ago
    As thankyoufriend said, "economics is political". Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.
- ecshafer 1y ago
  New York “both sides” Times? There are only a few papers less suited for that monicker.
linotype 1y ago
It definitely feels like many companies have simply given up trying to do anything new. I mean look at the blowback against renewables that happened this election cycle, possibly killing the IRA. Why take risks when you’re making a ton of money just keeping the lights on?
chasd00 1y ago
This is about 2/3 the way through the article: "The employment statistics are broadly consistent with the reduction in immigrant labor supply. Job growth has slowed more this year in industries that have a higher fraction of unauthorized immigrants like construction and restaurants, according to analysis by Jed Kolko at the Petersen Institute." ...I feel like the article answers its own question pretty well. I guess the headline is there for SEO/"engagement".
heathrow83829 1y ago
I think it's a moot point. We've been trying to increase the number of jobs and the amount that jobs pay for most of modern history. And since when has that ever worked? well it worked until about the 70s and then we roughly flat line for about 30 years and since 98, its been nothing but down hill from there (if you dought this, calculate the standard of living: nominal gdp per capita or median wages / case-shiller housing index). by all means try but it's not going to work. There's two sides to personal finance: what you earn and what you spend. earning more, on a wholistic countrywide scale, simply isn't possible anymore (if the last 50 years has taught us anything). The answer lies in allowing the economy to make life more cost effective (removing regulations that force housing costs to be high, making more land available for living, thus driving down it's costs, etc.). The answer lies in controlling costs and spending, both in the personal life and for government.
tylerapplebaum 1y ago
Interest rates are higher than the recent norm. Thats it.
- alphabettsy 1y ago
  Interest rates have been high for a while now. Why would we see dramatic change now when we didn’t before?
  - BergAndCo 1y ago
    [dead]
smitty1e 1y ago
As If Any Intelligent American Indvidual 'Ad Ideas
EGreg 1y ago
What’s interesting is many on HN will do a lot to avoid the obvious answer: AI and automation.
exabrial 1y ago
Not mentioned in the summary at the bottom: crippling inflation. This is the result of policies (Both Red and Blue) put into motion 4-5 years ago. Businesses run on razor thin margins, and when your purchasing power is suddenly reduced 25%, well this result is predictable.
simne 1y ago
World already changed in 2024 (covid era ends, AI era begins, huge trade dis-balance of US actual for many decades, and new administration want to resolve it), but employers not release changed reality immediately (even when plans of conservatives was known in November). Looks like now they slam on the brakes, and first cut new projects and now trying to build new approach. And looks like, tip point was when president Trump demonstrated tables with new import tariffs. What I mean, even when Apple, TSMC and other tech giants already said about huge investments, but they first stopped many already running projects and will spend at least few months before start new jobs (to be exact, on big projects, from budget decision to start hire, usually spend ~1-2 months). What worsened things, some infrastructure giants are not in good shape (Intel, IBM, Ford), so, probably their tops will spend additional time to negotiate with investors new terms.
dreamcompiler 1y ago
Shitty leaders shoot the messenger.
maxglute 1y ago
Deport + limit immigration = degrowth = of course job growth would slow, maybe even turn negative. Perhaps there's this alternative scenario world where pressed Americans start working jobs illegals work, aka the jobs allegedly Americans won't. But Americans are too soft / have too much dignity / employers haven't increased wage (whatever interpretation you wish) for that to happen.
- deleted 1y ago
  [deleted]
more_corn 1y ago
Because the tariffs are raising the cost of goods for both businesses and consumers so business costs go up while sales go down. Meaning businesses can’t afford to hire. People who actually understand economics have been predicting this for months.

79 points by paulpauper 1y ago

Increasing wealth inequality, drives prices inflation, wage stagnation and less disposable income, driving less consumption, driving less revenue for businesses, meaning cuts happen and hiring freezes, drives slowing growth in new job market.

andsoitis 1y ago
I think you've got your cause/effect chain a little muddled. I would also assert that the system dynamics are neither linear nor singular in the way you frame it. > Increasing wealth inequality, drives prices inflation How does increasing wealth inequality drive price increases?
- altairprime 1y ago
  The missing dynamic is that businesses are encouraged to increase growth in profit YoY. Each year, a business needs to grow faster than it did the previous year. If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it. The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending). If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders. AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole. For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation. Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.
  - andsoitis 1y ago
    > The missing dynamic is that businesses are encouraged to increase growth in profit YoY. > Each year, a business needs to grow faster than it did the previous year. It is very reasonable for an investor or a worker wanting the business they have hitched their financial wellbeing to to do very well, which means growing profit. It gives the business more strength and stability.
    - sedawkgrep 1y ago
      I don't think anyone is disagreeing that this is what investors want. I think the point is that it ultimately becomes detrimental.
      - deleted 1y ago
        [deleted]
    - altairprime 1y ago
      The difference between “I earned a tidy profit for me and my investors, as well as for my non-investor workers” and “I earned the maximum profit possible for me and my investors, moreso by denying workers as much of those profits as possible” compounds detriment at the difference in profit and wage growth rates, which steadily decreases the maximum profit possible to all firms due to household purchasing powerlessness. Eventually they’ll reach a lower maximum profit than could have be reached if they’d shared more profits as worker wages rather than as investor payouts. Oops.
- area51org 1y ago
  Presumably because there's a perception that if there are lots of rich people, they can afford to be gouged. This begs the question of how many rich people there actually are, though.
  - sedawkgrep 1y ago
    > Presumably because there's a perception that if there are lots of rich people, they can afford to be gouged. 1) Is this a wrong way to think ? 2) Isn't this what progressive taxation is supposed to do (or *should* do if folks like Musk, et al, actually earned 'income') ?
- Qem 1y ago
  > How does increasing wealth inequality drive price increases? When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.
  - svieira 1y ago
    Doesn't the lack of liquidity in an economy cause deflationary behavior?
    - Qem 1y ago
      Short term, maybe, as you still have excess production capacity. Long term excess capacity get dismantled, business go bankrupt, scale is lost.
    - Volundr 1y ago
      Obviously I'm not an economist, nor do I play one on TV. One would indeed expect removing currency from the economy to be deflationary, but in GPs example we didn't just remove currency, we removed demand too. If less people have money to buy a car, less cars are produced. When you are making 1k instead of 1m cars, you no longer benefit as much from scale and must raise your prices, which only the rich can afford. Now why might this happen instead of prices dropping to the point the now-poorer people can afford them? Maybe the cost of inputs can't go much lower, or maybe other less-stratified markets are picking up the slack, so demand shifts there. Or maybe the rich have enough money they don't care about the higher prices. Or some combination of all of the above. Economies are complicated beasts, it's rarely as simple as X leads to Y. Instead you have the whole alphabet pulling in different directions and the forces that win out may be quite unintuitive.
      - andsoitis 1y ago
        > One would indeed expect removing currency from the economy to be deflationary, but in GPs example the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
- pasquinelli 1y ago
  > How does increasing wealth inequality drive price increases? i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff. past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?
  - merth 1y ago
    i'm not the person you replied but if wages lag furhter, how rents going up? it should go down since there is noone to be able to pay higher rents. they have no choice but either convince homeowner or downgrade. and Group A(rich + upper-middle) won't rent since they have enough wealth to buy a house, they may upgrade and cause inflation in luxury houses/goods.
    - Hemospectrum 1y ago
      Rent can continue to go up as long as there is room (literally physical space) in whatever housing is still on the market. Ten years ago you might have been able to afford your own apartment. Now you need three roommates. Soon you'll need seven, and then fifteen, and that can just keep going up as long as that number of bodies can be crammed into the same lodgings.
    - motorest 1y ago
      > i'm not the person you replied but if wages lag furhter, how rents going up? The greater the number of people who cannot afford buying a home, the greater the number of people whose only option is to rent. The more people enter the rental market, the higher rental prices get. It would be very interesting to have statistics on how many people share apartments/rent rooms. I'd bet those numbers would be spiking.
- throwaway2237 1y ago
  If you will please allow me an oversimplified example: A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service. However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example. So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.) Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way. This example is obviously oversimplified for the sake of showing the point
- xboxnolifes 1y ago
  If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group?
  - andsoitis 1y ago
    > If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group? That's a fantastic question that I don't think I've heard before, but I have a practical answer to. Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets. In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts. So as a tax authority you have to balance getting cash (to run the government) against reducing the productive capacity of the economy (by asking businesses to reduce their capital).
    - xboxnolifes 1y ago
      When i said extract money from, I didn't mean taxes. I meant why would businesses target the group of people with very little wealth, instead of making products that target the rich? At some amount if wealth inequality, the majority of commerce has to be targeting the rich instead of everyone else, no? What does that economy look like?
- bigbadfeline 1y ago
  > How does increasing wealth inequality drive price increases? Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.
bitshiftfaced 1y ago
> Increasing wealth inequality, drives prices inflation Why?
- AnimalMuppet 1y ago
  I think the claim is that the rich can overpay for whatever they want, driving up the price for everyone else. And that's true. It's hard to square that with "less consumption", though...
  - clipsy 1y ago
    > It's hard to square that with "less consumption", though... Is it? I’m not sure of the truth, but it’s not hard to imagine that wealth inequality drives up the price of housing via the mechanism you describe, and increased housing prices drive down overall consumption as the non-wealthy struggle to afford basic necessities.
- lantry 1y ago
  when the fed lowers the rates, who benefits?
- youniverse 1y ago
  The idea is that if you have 1 billion in assets, let's say you make 5% per year, that's 4 million a month income. That money goes to into assets. Plus the fact that in last 5 years assets have gone up so much means there's just a lot of wealth being invested.
- dileeparanawake 1y ago
  Why does wealth inequality drive price inflation? Good question and not obvious. Here's the answer? How much does a bottle of water cost? - Supermarket? - Festival? - In a drought, when you're standing in line behind a thirsty billionaire? People with a large relative net worths, drive asset prices up, like bids in an auction - even if they aren't the final bidder.
exabrial 1y ago
I hate to tell you, the single cause of inflation is not "wealth inequality", it's extra dollars spent by the Federal Government that literally don't exist. The US Government writes checks that always cash, and unlike you and me, they don't have to have anything in the bank account behind it. This is the _sole and only_ cause of inflation. _Its the literal definition_ and is well documented.
- QuantumGood 1y ago
  Interest rates, supply chain issues, and monetary policy also play a role

duxup 1y ago

>Currently, the data suggest that reduced labor supply is likely the key driver It's interesting as far as people I know looking for jobs, they're supply ... and having a hard time finding jobs. Reduced supply you'd hope you'd get a job. Granted the article addresses this both in the types of jobs and: >The stability of the unemployment rate masks effects of the low-hiring, low-firing labor market. I do wonder, if this continues and a sense of economic slowdown or worse continues, would lowering a rate really fire up hiring? I know small businesses who can't eat /dance around tariffs like big companies, some are seriously terrified / facing hard decisions, others fine.

mathgeek 1y ago
Yeah, anecdotally no one I know exemplifies that finding. Everyone who had had to job search ran into a ton of competition and either beat them all out or is under-/unemployed currently. Only way I could see the finding of reduced labor supply is that no one can afford to work in the low wage jobs that are open.
danaris 1y ago
I can see one way in which it could be true that the labor supply is reduced, in specific sectors: The ICE crackdowns are both directly removing large numbers of nonwhite people from the labor pool, and indirectly scaring much larger numbers of them away from it, lest they be the next ones sent to the camps. Aside from that, though? No, I think talking about reduced labor supply is anti-labor propaganda at best.
ebiester 1y ago
Reduced demand in tech due to constraints of capital, and increased demand in agricultural and low wage jobs where immigrant labor was significant. But funny enough, we can't just ship 100k software developers from the bay to the central valley and it just work.
- throwaway63467 1y ago
  That’s basically the plot of Stardew Valley. Programmers yearn for the fields.

mlinhares 1y ago

Title is clickbait (we all know why) but its a great read. Its so many shocks to the economy at the same time, and with no goal other than to cause harm that I don't think anything the FED does will have any real impact in the real world. The author goes for an OR between reasons but I really don't see it like that, its an AND, all jumbled together and pushing the economy down.

andsoitis 1y ago
> with no goal other than to cause harm My read is not that it is to cause harm / break things down per sé, but instead to deglobalize. At various times, the left and the right have made globalization the bogeyman and something to fight, so this idea has been in the ether. For many reasons (economic, geopolitics, peace), globalization is a great thing. Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
- duxup 1y ago
  The execution and evaluation (granted, that's part of the execution). If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization: I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good. If you're not bound by any results you don't like then you can't know if you're even winning. Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.
  - thewebguyd 1y ago
    > If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization: And even then, tarrifs right off the bat are the wrong approach. It takes time, a lot of time, to reorganize supply chains and spin up manufacturing. It also requires a ton of capital. It requires a slow roll, local incentives, subsidies, and long term planning. It wouldn't be feasible to expect it to happen over the course of a single presidential term. If I'm a big company and I've got the cash reserves, I'm better off laying off a bunch of people and buckling down for the next 4 years rather than spending a bunch of capital to bring supply chain to the USA.

tcfhgj 1y ago

More interesting question: more spare time for everyone or just for a small part of the population?

bluefirebrand 1y ago
More spare time for a vanishingly small part of the population that has wealth, and to hell with the rest of us

devwastaken 1y ago

Red administration is in bed with tech and gives them H1B’s to prevent domestic labor cooperation

davidw 1y ago

I have been enjoying Paul Krugman's writing, now that he's free from the shackles of the New York "both sides!" Times https://paulkrugman.substack.com/p/its-beginning-to-smell-a-lot-like https://paulkrugman.substack.com/p/its-beginning-to-smell-a-... He's obviously got a political angle, but doesn't let that completely color his economic analysis.

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75345d4c 1y ago
If the political angle is not relevant to the analysis, then why do you enjoy it?
- lovich 1y ago
  Some people enjoy things that others do not
- motorest 1y ago
  > If the political angle is not relevant to the analysis, then why do you enjoy it? The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy. This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor. We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.
- wasabi991011 1y ago
  As thankyoufriend said, "economics is political". Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.
ecshafer 1y ago
New York “both sides” Times? There are only a few papers less suited for that monicker.

linotype 1y ago

It definitely feels like many companies have simply given up trying to do anything new. I mean look at the blowback against renewables that happened this election cycle, possibly killing the IRA. Why take risks when you’re making a ton of money just keeping the lights on?

chasd00 1y ago

This is about 2/3 the way through the article: "The employment statistics are broadly consistent with the reduction in immigrant labor supply. Job growth has slowed more this year in industries that have a higher fraction of unauthorized immigrants like construction and restaurants, according to analysis by Jed Kolko at the Petersen Institute." ...I feel like the article answers its own question pretty well. I guess the headline is there for SEO/"engagement".

heathrow83829 1y ago

I think it's a moot point. We've been trying to increase the number of jobs and the amount that jobs pay for most of modern history. And since when has that ever worked? well it worked until about the 70s and then we roughly flat line for about 30 years and since 98, its been nothing but down hill from there (if you dought this, calculate the standard of living: nominal gdp per capita or median wages / case-shiller housing index). by all means try but it's not going to work. There's two sides to personal finance: what you earn and what you spend. earning more, on a wholistic countrywide scale, simply isn't possible anymore (if the last 50 years has taught us anything). The answer lies in allowing the economy to make life more cost effective (removing regulations that force housing costs to be high, making more land available for living, thus driving down it's costs, etc.). The answer lies in controlling costs and spending, both in the personal life and for government.

tylerapplebaum 1y ago

Interest rates are higher than the recent norm. Thats it.

alphabettsy 1y ago
Interest rates have been high for a while now. Why would we see dramatic change now when we didn’t before?
- BergAndCo 1y ago
  [dead]

smitty1e 1y ago

As If Any Intelligent American Indvidual 'Ad Ideas

EGreg 1y ago

What’s interesting is many on HN will do a lot to avoid the obvious answer: AI and automation.

exabrial 1y ago

Not mentioned in the summary at the bottom: crippling inflation. This is the result of policies (Both Red and Blue) put into motion 4-5 years ago. Businesses run on razor thin margins, and when your purchasing power is suddenly reduced 25%, well this result is predictable.

simne 1y ago

World already changed in 2024 (covid era ends, AI era begins, huge trade dis-balance of US actual for many decades, and new administration want to resolve it), but employers not release changed reality immediately (even when plans of conservatives was known in November). Looks like now they slam on the brakes, and first cut new projects and now trying to build new approach. And looks like, tip point was when president Trump demonstrated tables with new import tariffs. What I mean, even when Apple, TSMC and other tech giants already said about huge investments, but they first stopped many already running projects and will spend at least few months before start new jobs (to be exact, on big projects, from budget decision to start hire, usually spend ~1-2 months). What worsened things, some infrastructure giants are not in good shape (Intel, IBM, Ford), so, probably their tops will spend additional time to negotiate with investors new terms.

dreamcompiler 1y ago

Shitty leaders shoot the messenger.

maxglute 1y ago

Deport + limit immigration = degrowth = of course job growth would slow, maybe even turn negative. Perhaps there's this alternative scenario world where pressed Americans start working jobs illegals work, aka the jobs allegedly Americans won't. But Americans are too soft / have too much dignity / employers haven't increased wage (whatever interpretation you wish) for that to happen.

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more_corn 1y ago

Because the tariffs are raising the cost of goods for both businesses and consumers so business costs go up while sales go down. Meaning businesses can’t afford to hire. People who actually understand economics have been predicting this for months.