Hi there, fellow passengers!

We’ve been in the “brace” position for so long that it seems unbelievable that the long-expected economic crash may not happen. But as we unpack below, just about every economic indicator - including the labor market - points to a soft landing in 2024.  

Speaking of labor, a WSJ article about miserable workers went viral last week. Are US employees truly that gloomy, or is it just fake trend-spotting? And is remote work the key to happiness or a contributor to employee dissatisfaction?  

As usual, we have plenty of other bits and pieces, including recommendations for podcasts, books, shows, charts, and tweets of the week, before finishing with a final chuckle.

Let’s get going.

Industry Highlights: The Landing Might Be Soft, After All

A “soft landing” is a controlled and gradual slowdown in economic growth. It's a situation where the economy eases into a period of slower expansion without experiencing a sudden downturn or recession. The idea is to manage the deceleration in a way that avoids abrupt shocks and maintains overall stability.

Economists have reduced their forecasts for a recession, with WSJ’s recession-probability tracker falling below 50% for the first time since 2022. Goldman Sachs (GS) has come out with a bolder prediction, placing the probability of a US recession at a mere 15% over the next 12 months and projecting a 2.1% GDP expansion.  

GS tells us that the worst phase of the inflation battle is now in the rearview mirror. With inflation on a downward trajectory and a buoyant job market, their experts foresee the Federal Reserve maintaining steady rates until a late 2024 rate cut, followed by a gradual series of quarter-point cuts until the second quarter of 2026.

Despite an expected modest drag on growth in 2024, consumer spending is touted as a key driver, with real disposable income projected to rise by nearly 3%, supported by solid job gains, real wage growth, and increased household income.

However, not all sectors are expected to thrive. Business investment is anticipated to decelerate, influenced by a tougher financing environment, especially for commercial real estate. Home sales are predicted to be lackluster due to high mortgage rates, although a recovery in foreign economic growth is anticipated to stimulate US exports and contribute to narrowing the trade deficit.

And what about the labor market? GS predicts job growth will hover at around 175,000 per month, with an anticipated slowdown to 100,000 in the latter half of 2024. The unemployment rate is projected to persist in the mid-to-high 3s, reflecting pre-pandemic normality.

Let’s check this prediction against the latest BLS report, with analysis from the WSJ.  

First, employers added 199,000 jobs last month (seasonally adjusted), which is consistent with gains before the pandemic. Discount the impact of auto-worker strikes and the November job gain was around 169,000.

Secondly, the unemployment rate decreased to 3.7%, marking a recovery from the 3.9% observed in October. If you were watching the BLS back then, you may remember a sudden climb from 3.4% in April sparked concerns because (historically) a significant rise in the unemployment rate often precedes the onset of a recession.

In November, an additional half-million Americans entered the labor force, and a considerable number of job seekers successfully secured employment, as revealed by a household survey. Notably, wage growth experienced an uptick on a monthly basis, but has cooled from its peak of 4.7% earlier in the year. 

More recently, job openings are falling, and workers are quitting their jobs less. A glance at the chart below shows Information (which includes Tech) deep into negative territory, but there’s plenty of hiring happening in Healthcare, Leisure & Hospitality, Government, and Construction:

The overall picture is one of a return to balance, with the number of available workers growing while hiring needs are easing. This means businesses can look forward to a 2024 less beset by labor shortages and wage pressures.  

The Future of Work: Are workers happier or unhappier than ever?

“You’ve never had it so good!”

When former UK Prime Minister Harold Macmillan shouted these words at the British public in 1957, he was frustrated that the polls seemed to be turning against him despite a period of affluence and prosperity. 

This utterance came to mind this week when I was reading about how dissatisfied US workers apparently are despite their employers ramping up benefits and value propositions. 

On the face of things, American workers should be happier than ever. But after winning so much during the pandemic; wage increases, more paid time off, and flexible working, employees appear to feel more angry, stressed, and disengaged. Fortune 100 companies have increased spending on employee benefits by 20%, but the extra spending hasn't translated into increased employee happiness.

The WSJ presented a handy round-up of some of the research in this area. Gallup’s 2023 State of the Workplace survey found that just under one-third of workers feel engaged by their jobs. BambooHR’s “Great Gloom” survey reveals job satisfaction scores have plummeted 10% in 2023 alone, while the landscape has shifted with high-profile layoffs in tech companies and declines in knowledge-worker and professional jobs. According to Alight Software, 34% of surveyed employees “dread starting their workday”, up 11% since 2020.

What’s going wrong? 

The discontent is almost certainly linked to the backlash against companies mandating some level of office attendance - even when a compromise such as two days onsite per week would have been unthinkable pre-pandemic. Yet, at the same time, remote work may contribute to unhappiness, with challenges such as isolation and increasingly transactional relationships between coworkers. 

Concerningly, the honeymoon phase - the period of enthusiasm about a new job -  may also be threatened. More workers in new roles report dissatisfaction after discovering new jobs are not a great fit. Employers who are rapidly rebuilding teams may have dropped the ball in terms of onboarding, leaving new employees feeling unsupported. One dissatisfied 20-something-year-old worker told the WSJ that remote colleagues were unwilling to show him the ropes, invite him for coffee, or make any other small gestures that are important for a new starter. 

The battle over flexible working is by no means over. For every survey that broadcasts the benefits of remote work, there appears to be another that claims the practice impacts team cohesion and productivity. 

But wait: are people really that miserable? Or are workers, in fact, happier than ever? 

An article in The Atlantic pushes back on the WSJ’s claims, noting that a longer-term view of the Gallup survey shows that worker engagement and satisfaction has barely shifted in 10 years: “Americans keep telling Gallup that work is consistently ‘blah,’ not that they’re more and more miserable.”

In fact, the same Gallup survey revealed U.S. workers “are astonishingly engaged compared with the rest of the rich world,” beating Australia, Canada, Japan, and every country in Europe. This statistic surprised me, given that America trails well behind other wealthy countries in the world’s happiest countries surveys year after year. 

In a gotcha moment, The Atlantic also noted the WSJ published an article titled Workers Are Happier Than They’ve Been In Decades in March this year. You can’t have it both ways, WSJ … or perhaps you can, so long as readers keep clicking on these sorts of headlines.

AI Insights

• How the AI fuse was lit: Perhaps one day, the survivors of the robopocalypse will ask themselves: “How did we get here?” This article tells the story of a 2015 dinner debate between Elon Musk and Larry Page, the founding of DeepMind with Peter Thiel, and the emergence of OpenAI. Most of all, this article highlights the ongoing debate on whether AI will ultimately benefit or harm humanity.

• How ChatGPT changed Silicon Valley in one year: Can you believe ChatGPT is only one year old? This article charts how the meteoric release of ChatGPT set off a scramble where Google, Meta, Microsoft, and other players raced to reorganize around AI, reshaping Silicon Valley in only 12 months.  

• Microsoft in partnership with AFL-CIO: Microsoft has teamed up with the AFL-CIO, America's largest labor union, to address AI's impact on jobs and shape government regulations. Unlike other tech giants resisting organized labor, Microsoft's approach involves initiatives such as providing AI training for labor leaders, supporting employee unionization, and influencing public policy.

The Supply Aside

📕 Read - The Tao of Charlie Munger

It wouldn’t feel right if I didn’t offer a tip of the hat to the late Charlie Munger this week. The Tao of Charlie Munger is a collection of quotes pulled from interviews, speeches, and annual meetings by Buffettology author David Clark. There are plenty of insights into Munger’s amazing financial success and more than a few investment tips that readers might want to put into practice. 

What Else I’m Reading

• Small business optimism hits a six-month low: In a counterpoint to the talk of soft landings and economic recovery, almost one-third of small businesses have reported a drop in earnings in the past three months as customers become more cautious about where they spend their money.

• Online ads are not reaching the most coveted audience: People with money to spend are increasingly opting for (and paying for) an ad-free online experience. Advertisers are likely to shift their spend to areas where even wealthy people can’t look away - sports advertising, billboards, and online influencers.    

• Major nerd alert: Microsoft Excel Championships: Who would have thought Excel had its own championships? Known as the “Olympics of competitive spreadsheeting”, this competition features screaming fans, niche celebrities, high-stakes spreadsheets … and Clippy.

📺 Watch - Killers of the Flower Moon and Napoleon

The upcoming break is my chance to catch up on the latest epics from two of the greatest living directors, Martin Scorsese and Ridley Scott. Set in 1920s Oklahoma, Killers of the Flower Moon is an epic Western crime drama based on the murders of Osage Nation members by opportunists greedy for oil riches. Napoleon charts the rise and fall of one of history’s greatest military leaders, his relationship with Josephine, and portrays half a dozen of the 66-or-so battles waged throughout Bonaparte’s Revolutionary Wars. I haven’t seen either movie yet, so I’ve been doing my best to avoid spoilers! Pun intended. 🙂

👂 Listen - Modern Wisdom Podcast: How to Become A Clear Thinker with Shane Parrish

After covering Shane Parrish’s book (Clear Thinking) in a former issue, I was keen to check out his appearance on the Modern Wisdom podcast. Parrish, the Founder of Farnam Street and an ex-Canadian Intelligence Agency Operative, argues that it makes sense to spend time learning how to think more rationally and shake off behavioral defaults to become a more effective decision-maker.  

💡 Think - The Hollow Chinese Economy

As the good economic news dominated headlines this week in the US, I wondered how the other major economy has faded from the headlines.

In 2023, China's economy hit some rough spots. Politically, they're seen as this big economic player, but the reality is different. Their own policies, like dropping their Zero COVID strategy and issues in the real estate market (think of the whole Evergrande mess), really hurt their economy. 

Plus, they're dealing with a ton of debt. Provinces borrowed loads for big projects, and now they're struggling to pay it back – we're talking trillions in debt. And despite warnings to cut back on borrowing, they kept going. This has led to questionable investments, like building stuff nobody uses. So, even though China looks strong on the outside, it's actually facing some serious financial headaches. It remains to be seen if 2024 will be the year of a real recovery for them or if their economy will go the way of a long-term stagnation associated with Japan.

Charts of the Week

Quote of the Week

Tweet of the Week

The Final Chuckle

Thanks so much for reading. I’d love to know what you think about this issue and how I can make it more useful to you.

If you have suggestions or topics you’re interested in seeing me address, shoot me an email at [email protected]!

Want more?

If you’d like to read more of my writing on the supply chain, entrepreneurship, or the future of work, check out my website.

For timely updates follow me on LinkedIn and Twitter!

Wishing you all the joy of the season - have a Merry Christmas, a rejuvenating holiday, and a very happy New Year!

-- Naseem