White collar stagnation

Daily Data: The struggle is real as the knowledge economy continues to tread water

In today’s dispatch:

• ‘white collar stagnation,’ a recap

• metros aren’t making ‘em like they used to

• senior management, need not apply

• college degree isn’t worth what it used to be

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White collar stagnation

It’s not an observation that wins elections, but it’s an observation that is nonetheless correct: it’s getting rough out there for high-earners.

Random Walk has written about white collar stagnation a number of times, but the gist of it is as follows:

• Low rates and cheap capital were good for the folks specializing in the intermediation of capital, i.e. finance. The ‘Finance Bros’ had plenty of capital to intermediate, which means they got paid (and asset prices went up), and so did the rest of the ‘information economy,’ that rounded out the ecosystem—consultants, lawyers, business managers, founders, etc.

• When rates started rising, however, ‘facilitating capital’ stopped being a growth industry. Companies made a point of belt-tightening, and generally stopped spending on new growth initiatives. No deals, no exits, no acquisitions, no big fundraises, and no big paydays. Wage and job growth for higher-income/white collar workers immediately began to chill.

• In the meantime, Finance Bros have done little but sit on their “dry powder” and watch their extremely illiquid assets “appreciate,” even though no one is buying what they’re selling, least of all them.¹ Sure, there’s been some paper shuffling, in the form of ‘extend and pretend,’ but raising-and-deploying lots of fresh capital (for something other than extending-and-pretending) just hasn’t been a thing, and so the white collar types who specialize in that sort of thing (i.e. all of them, more or less) have been treading water, as well.²

• All of this stands in stark contrast to the incredible run that lower-income, blue collar service workers have enjoyed. An aging nation (and a pull forward of retirement) precipitated a “worker shortage,” which led to a massive jump in lower-income wages. Huge subsidies to both “clean” and strategic industries, plus the secularly expanding National Nursing Home, have put even more wind in the blue collar tail.³

To summarize, the poor have gotten richer, while the rich have been nervously shopping at Walmart (and earning a tidy 5% on their cash from Uncle Sam).

In terms of what the experience has been like, sure, various consumer services and other luxuries and/or discretionary items have been out of reach, but it hasn’t been terrible . . . it’s just been stagnant.

And after years of eagerly signaling upward mobility, ‘stagnant’ just isn’t a thing most white collar people want to talk about, and so it culturally flies under the radar (even if it shows in the data). PE/VC pretend everything is fine—because their livelihoods depend on it (and, in the end, they may well be right)—but the reality is that no one is getting paid. If they’re not getting paid, than the various industries that fill out that ecosystem are also not getting paid.

Anyways, that’s the theory, and now that the windup is done, here’s a little more data to prove it.⁴

Big Cities not minting Big Shots, like they used to

The first is kind of interesting, in that it dovetails with another Random Walkian theme: urban migration.