2024-25 Economic Trends Affecting the Job Market

I am often asked what I’m seeing. The short answer: the job market is better than last year and seems to be improving. I’m testing the market and consuming reports for you. Analysis from this past week:

Highlights from the LinkedIn newsletter The Work Shift (“Keeping you informed about the economy, labor market and evolving world of work through data-driven insights”):

• The Fed cut interest rates, inflation continues to cool, and the job market softens in general. (But since interest rates affect startups and tech growth materially, hopefully the tech market will be better.)
• 2024 is “on track to become the hottest on record”, unfortunately hottest temperature, not hot market.
• Only 23% of workers report feeling engaged on the job. This I believe.
• AI and soft skills remain very important. Check. LinkedIn data confirms “soft skills — like communication, problem-solving and teamwork — are closely linked with faster promotions.”

NPR’s Planet Money (“the economy explained”) summarized what the market was betting on post-elections:

• Three sectors that are expected to benefit the most are banking, crypto, and big tech because of likely deregulation.
• Industries expected to be hurt are those affected by a trade war, e.g., foreign car makers, companies dependent on imported goods, and US exports to China.
• Renewable energy is expected to take a hit, though the Inflation Reduction Act, which “created subsidies and tax credits to help people buy solar panels and electric cars,” may be hard to repeal.
• Inflation may go back up. This was behind the sell-off of Treasury bonds, and “the logic for the sell-off is this. If inflation is high in the future, then the value of your government IOUs goes down. ‘Cause when it’s time for the government to pay back your IOUs, those dollars are worth less.”
• Yes, interest rates are dropping now, but may go back up under the new administration (also illustrated by the big sell-off of Treasury bonds: “If you think interest rates are going to go up, you’re not going to want to hold onto your government IOUs anymore.”) The market thought interest rates may go up because it was “mostly reacting to the possibility of big budget deficits that could come as a result of all those tax cuts Trump has proposed… [W]hen it became clear that Trump would be president, we had that giant drop in bond prices, … partly because deficits under Trump are projected to be even bigger than they would have been under Kamala Harris.”