Job Market and the Economy of the Future
Yesterday the Fed chair Jerome Powell held a press conference where he announced the decisions made in the latest meeting of the Fed board. The most anticipated of them, the drop of the interest rate by 25bps, and the likelihood to have two more cuts this year, thus, some perspective.
Now, the reasoning behind the decision. They seem to have taken into consideration two main indicators that pulled in opposite directions. On one side, the inflationary pressure requires a high interest rate to fight against it. On the other side, the US job market numbers are lower than expected, and that would require rate cuts to make borrowing less expensive.
That's what the traditional theory says, the one the Fed follows.
Something else was said. That new jobs created dropped as immigration lowered. That makes sense, since immigrants would take many of the new jobs, particularly the kind that nobody else would. It is interesting to remark that both demand and offer of jobs lowered in the US, not only one side. If only one side would have dropped, there were likely mechanisms to easier adjust the job market so that a balance is reached and the number of jobs increase. But no, apparently there is a balance and the number of jobs is lowering.
That can be the effect of a slowdown in the US economy coupled with lower job demand due to fewer immigrants, as it's been said, but there is another possibility, which I haven't seen mentioned, at least not at the Fed press conference.
That is AI and robots taking more human jobs. I don't know if at the whole US economy this trend is big enough to mess up the job market numbers, but it could be...
I don't think anyone has a viable solution yet for humans that have been and will be replaced by AI and robots at their workplaces in more and more domains, other than the potential of new types of jobs appearing and a pseudo-solution where they would receive some kind of UBI, which has enough flaws, among them being that a large category of humans would become dependent for life of the payer of the UBI (likely government), possibly turning them into people with nothing to look forward to. I believe to some degree paychecks already did that for some people, but at least they had to do something to get them, other than exist.
But as we know, companies do try to optimize their costs, especially when economy isn't going well, and in doing so, they will let go or not hire more people if they have an automated system doing the job at a similar or good-enough level, which only needs to be paid for once when it's purchased, or maybe with a recurrent cost that is lower than the salary and benefits of a worker or several that it replaces.
Does this influence the job market? I think it already does, but it surely will even more in the future. So, the question is: let's say 10 years from now (likely sooner), does it even make sense for the Fed to consider the job market as a basis for its decisions? Or will the definition of "employee" change by then to include both humans and non-humans (unlikely)?
Let's say a series of rate cuts by the Fed would incentivize businesses to borrow more. The question is what is more likely for them to do: hire more people or adopt new technologies that allow them to cut costs and increase production. I think we know what would happen...
That's fine for profits. But if viable solutions for people won't be found too, I don't see good times ahead.
I don't think there are quick fixes for the job market. I've seen people say that the US just can't ramp up manufacturing due to a lack of suitable workers who could compete with other countries. I'd be interested to see stats on what jobs are already being replaced by AI. I expect some are safe. Companies will want to cut costs and so will drop workers if they can. It is a new sort of industrial revolution and will will have a big impact. I'm still waiting for the Star Trek future where we all live a life of leisure with time to explore the galaxy.
hahahahaha... I had the same thought around C19, when they were printing money, giving everyone... Why wouldn't we have all that we need, and not think about the money at all? There is enough for everyone in the world... those who say there isn't are liars!
If you could spread the billionaire wealth around it could go a long way. I don't think they work 1000x harder than me :)
I'd be ok with "own nothing and be happy" if it started with them. But we know that will never happen...
I'm not saying they have to give up everything, but if you can't be happy with $1B, then $100B won't make you happier.
Yeah, I know. I was plugging into the WEF's prediction for 2030.
I've seen such claims too. Could be true, because the US has been focusing on importing the best brains in the world (and not only) for a long time, while others focused on "updating" their educational system. We have the same issue here, by the way, maybe worse then the US.
Yes, that would give us a measure of the current impact it has and perhaps what's coming in the near future.
Yes, most likely. Both interesting and hard to live during such times.
They did get their asses kicked while exploring the galaxy too. :)
I don't know how much ai is replacing humans at work in the US, here i can safely say that almost no one lost his job due to Ai unless being working for a big Corp like Google and such... At least the cut could make the alt season start
That's what I'm thinking too, that there is still a big lag in many places, but eventually this AI wave will hit. Unfortunately, for the many people who will lose their jobs.
Smaller companies wait to see the solutions corporations come up with and they need some products developed that they can use and implement for their business models. These are being developed, but they are at the beginning, and not many want to be guinea pigs, and prefer to let others test them first and then adopt them later, once clear results and pitfalls are well-documented.
It is possible. More than that, the announcement that two more cuts might come until the year end. That could fuel the final push of the bull market in crypto.
yeah, im a dev in a small company and for now they are not even thinking about it
The Powell-Trump theater was nice and amusing to follow, but we knew the result from the beginning... I mean, if the numbers aren't as you wish, you just rigged them and they will be... 😃 I'm still very much worried how 2 people are deciding about the future of the world...
But, on the other side, I align with your thoughts regarding AI and job markets... It's interesting how they try to ignore the elephant in the room, somehow, I would say deliberately avoiding public discussion on AI... I mean, investors know about it, but the "general public" is very much in ignorance about it... I'm not a big fan of UBI either (I got a feeling that you aren't too 😃) as I see people living in caves, spending their UBI on drugs and small pleasures... Sorry for the negative outlook... 😃
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I think they genuinely dislike each other, because they are very different. The acting was mostly on Trump's side, as always. But the decision to cut rate was known for a good while now.
Yes, they do try to avoid the subject as much as possible, because they don't really have a solution, and they can't slow down on the AI and robots side since it's a race where the winner takes all (controls key sectors as soon as the race is settled and we have a clear winner). By that time, we should expect both AI and robots to be significantly more developed than today.
I have the same low-confidence that UBI could be a solution. If anything, it would bring humankind lower than it has already reached.
And this is before the real AI robots are out like Optimus from Tesla. Once those hit mainstream the job losses will be stunning...
Yeah... I see every day clips with robots becoming more and more human-like and being able to reproduce so many of our movements, including the difficult ones. I even saw one that mimicked very well the movements of a drunk person (without falling).
I think most companies will opt towards expanding their tech infra than employing more humans. Looks objectively like the more favourable bet to take, especially in terms of cutting costs.
I'm not very sure how "AI productivity" will translate into the GDP. Perhaps, the AI agents will become autonomous individuals that are "registered" as citizens liable to pay taxes like they did with humans :D
Or perhaps humans will be excepted from paying taxes on profit/income. Since the world seems to be heading toward some kind of Star Trek, I wonder if we will end up as the Federation or the Ferengi.
I think that companies will always try to earn more profits, and AI is a huge concern. The time are changing, and I don't think there is much the Fed can do at all.
I agree, Fed can't help with this. But perhaps it is time for it to change/update its methods, because soon they will be obsolete if they aren't already. As for AI, yes, it is a concern, and it's been recognized by (some people in the) companies that build it, without stopping them to push forward.
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