Sep 15, 2024 7 min read

Why the Job Market Is in Shambles Right Now (Plus Weekend Open Thread)

I’m Umair Haque, and this is The Issue: an independent, nonpartisan, subscriber-supported publication. Our job is to give you the freshest, deepest, no-holds-barred insight about the issues that matter most.

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Strange and terrible things are happening to the job market. I want to take a moment to explain why.

By now, disturbing stories like this one—“I’ve applied to more than 2,200 jobs and I’m ready to give up”—are popping up almost ubiquitously. People speak of a white collar recession, an invisible depression, and much more.

It goes without saying that the political class and elites are pretending to be blind to this situation.

The statistics, though, for those who choose to glance at them, are brutal. The economy’s destroying full-time jobs, and creating part-time jobs. The full-time jobs that are destroyed are largely in white collar professions, and the part-time jobs that are being created are concentrated in “low-wage service work.”

“In August, the number of full-time workers decreased by 438,000 while the number of part-time workers increased by 527,000.”

“According to the U.S. Bureau of Labor Statistics, the number of Americans reporting full-time employment dropped by more than 1.7 million jobs from November 2023 to the end of March 2024.”

However we slice the data, the picture doesn’t look good. It looks... weirdly bad, in a kind of historic and menacing way. And by the way, any decent economist should do much more than just point at a “low unemployment rate” in a situation like this, when we see growing stories of people in absolute despair. Unemployment statistics leave much to be desired in the way of accuracy to begin with, and so we should always try to discern what they mean. In this case, there really is something going in the job market, that’s looking increasingly seriously troubling.

So. The job market. Why is it so bad? How troubled should we be by it? What’s up with people searching for work for a year or more, sending out thousands of applications, only to be “ghosted,” ignored, left in the dark, not even rejected, thus driving more and more people to despair?

The first thing to understand is that all this is real. It might not be real for you, in which case you’re lucky. But the job market appears to be undergoing a structural transformation, not just a cyclical one, and that may just wreak havoc in its wake. We’ll get there, but first let’s discuss why the job market is in such deepening trouble.

The job market is in the crosshairs of four shocks. And if you suspect that many of these jobs may never be coming back, you may be correct. Probably, a very large number aren’t.

The first reason that people point to is high interest rates, the Fed’s explicit goal being to “discipline” workers. Funny how nobody else gets “disciplined," huh? That’s economics for you, a field that doesn’t trouble itself to think too hard about the world anymore.

But high interest rates don’t explain that much, and this point is sort of crucial. What we’d expect to see is, yes, job creation slowing down. But we wouldn’t expect to see this dramatic transformation in the structure of the job market. That means: we wouldn’t expect to see full-time jobs being outright vaporized, and replaced by entirely new categories of “low-wage service work.”

For nerds, interest rates should affect the quantity of jobs. But this startling implosion in their quality? Only deeper causes can explain that effect.

This cause is subtler to understand. It has to do with the changing nature of the global economy.

Globalization has failed, and as a result, something paradoxical’s happening. Trade barriers are rising. And trying to get ahead of even more trade barriers, boardrooms appear to be hoping to get ahead of the curve with turbo-charged last ditch attempts offshoring while they can. The thinking appears to be that if even more trade barriers are going to rise, let us offshore as hard and fast as we can, now.

Meanwhile, deglobalization—a mouthful of a word—also implies that a lot of those jobs aren’t going to come back. If we’re going to live in a world with many more barriers to trade, not to mention labor’s mobility, then of course, there are going to be fewer white collar roles period. Less stuff for white collar workers to manage, administer, account for, oversee, market, brand, and so on.

So there’s this paradoxical effect of globalization failing. Think of it sort of as a bank run, as barriers rise, boardrooms try to offshore while they can. Meanwhile, they’ve learned from Covid that fewer white collar workers are really necessary in full time positions, while interest rates choke off investment. And as barriers rise around the globe, for people, capital, products, services, boardrooms begin to understand that yesterday’s legions of white collar workers are becoming a thing of the past—they were the class that made globalization go, after all, and without it, what’s their future?

All that creates a kind of haze of uncertainty. In that haze of uncertainty, what does capitalism try to do? It shifts it to others’ shoulders, and in this case, that’s job-seekers. Hence, the macro factors above begins to lead to the bizarre effect that we see now: people applying for thousands of jobs, usually highly skilled professionals, only to end up throwing their hands up in despair.

The brutal truth is this. The jobs just aren’t out there. People are beginning to sense that, which is why they’re giving up.

Yet right about now, we should begin to ask: are they going to come back? Because if they’re not, then we are in deep trouble as societies. Even if only half of them return, what does that mean for social stability, prosperity, and class structure, let alone politics?

Those are the macro level factors shaking up the job market, and they’re historic ones.

Meanwhile, at the micro level, there’s a new set of factors coming into play. They have to do with technology. Whether or not HR departments want to admit to using AI, they’re using systems of various kinds of automation. That attempt to match candidates with jobs in different ways, screening for various kinds of criteria. And these systems just don’t work.

Because there’s so much uncertainty, people applying for jobs—if they’re lucky to get this far—are then invited to do round after round of interviews, often presentations, tasks, and so forth. This shouldn’t be happening. One round, for extremely technical jobs, maybe. But otherwise? Four? Five? Seven? It’s a deadweight loss, as economists say, meaning, it’s just a waste of everyone’s time and effort.

The automation isn’t helping. It’s not working. It’s backfiring, and only making it harder to get people into what few jobs there are—if it was helping, why these intricate, endless, dances?

Meanwhile, in the end, applicants are often told the job doesn’t exist, or isn’t going to be filled, or has been cancelled. That’s because of the various kinds of uncertainty we discussed earlier, at the macro level, which are leaving everything hanging, without a clear resolution.

At the same time, corporations and HR departments are taking advantage of the anxiety and despair people feel, lowering salaries, posting the same job a hundred times, gathering CVs, running endless interviews, all for no real purpose except to harvest data, maybe, or more to the point, to make it look as if they’re hiring, because admitting you’re not is a warning sign to financial markets.

So. That’s three shocks so far. Interest rates. Globalization and deglobalization. Technology. What’s the fourth?

The fourth is that even when and where globalization remains, there’s not enough demand to fuel the global economy into another decade of growth. That’s why, for example, the IMF uses words like “sluggish” and “anemic” to describe the future…all of it. China, for instance, didn’t get rich—young people can barely find jobs, which means there’s a lack of demand as we go down the generations. But that’s also true in Europe, and in America, too. In America, for example, delinquencies are rising, and Millennials won’t be able to consume nearly as much as their parents, while Gen Z will be even worse off.

So demand is slowing across generations, across regions, and over time. That’s because our economic paradigm is failing now. The gains concentrate at the very top, leaving too little over for the rest. But if people can’t live stable middle class lives, of course, they’re not buying endless amounts of middle-class stuff, either. And that is giving rise to another layer of uncertainty in boardrooms.

Think of how many industries lately have said, startled, things like, our revenues were down due to macro factors. That’s true in luxury, beauty, tech, media, autos, and many, many more. Those macro factors though don’t just mean interest rates. Boardrooms were startled because they expected globalization to work: it was supposed to make everyone rich enough to keep on consuming at higher and higher rates in perpetuity.

That didn’t happen, and so today they’re baffled. Who are the customers of the future? Not as in ten years, even just tomorrow? The luxury and beauty industries are now desperately trying to find them. Where will growth come from now? Tech’s betting big on AI, but people aren’t exactly buying the hype. The fact is that in an economy that hasn’t made yielded stable, secure middle classes anywhere—not America, not Europe, not China—boardrooms have some tough questions to ask. That’s why CEOs are falling like dominos, by the way, from Starbucks to Nike (soon enough) and more’s to come. And of course when they fall, that’s a sign of how troubled the rest of the economy is.

So the job market is in real and serious trouble. It’s not just cyclical trouble. Probably, we’re on the cusp of a structural change. Blue collar work is returning and surging, as we enter a new world of deglobalization, barriers, and closed economies. But at the same time, we have generations who’ve been highly educated—and highly indebted—to become white collar workers. What will become of them?

I’ll discuss that more this week. Of course, there are other factors, the election, AI, etc, and we’ll talk more about them too.

For now, I wanted to give you a little insight into why the job market feels so troubled. That’s because it’s changing, in dramatic ways, as the old economic paradigm cracks apart. For people, though, without more support, guidance, and investment—all this could spell a generational wave of trouble, a lost generation or more. It’s already igniting a wave of bewilderment, despair, and grief—and while our elites and political class won’t acknowledge it enough, if at all, that only puts paid to the growing gulf between them, and people, reality, and the future.

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