Silicon Valley And The US Economy Heat Up

In December, the US economy and the American tech sector ($COMPQ) showed who is boss in the world economy by blasting past employment expectations.

This comes at a time when every professional economist is calling for a gloomy outcome in the short term.

From the tech side of the equation, remote jobs are rebounding at a blistering pace.

Full-time workers plunged by 1.5 million in just one month to the lowest since February 2023.

Part-time workers made gains of 762,000 the highest on record.

Multiple jobholders hit a time-high 8.56 million.

What does this tell us?

Work from home can do more than one job and those are mainly tech jobs. A lot of the time they are IT and software engineering jobs as well.

The other group this could have affected is the group affected by Bidenflation which has crippled the budget of many low-income workers living in the US and this cohort needs two low-paid jobs.

The reality is that these multiple job holders are a mix of each group.

It’s now highly common for remote workers to work 3 or 4 jobs at once because these workers don’t need to be physically present in any office.

They can simply clock in and clock out when they choose to and this has been a boon for tech companies who have taken advantage of this trend and fired many full-time workers who became too pricey.

For the past year, Silicon Valley has taken a machete and chopped off the fat from its business model.

Their leanness was a massive reason for the overperformance of tech stocks last year and even though that same boost won’t happen to the same extent in 2024, it has given the blueprint to management on how to run a tech company.

The largest economy in the world saw the addition of 216,000 new jobs in December 2023, surpassing projections of a decline from the previous month, as per data from the Labour Department.

The joblessness rate remained steady at 3.7 percent, a figure that is notably low historically and counters predictions of a slight increase.

These impressive job market statistics arise amidst the context of rising interest rates. The Federal Reserve has aggressively raised and maintained high rates for the benchmark lending rate to moderate demand and control inflation.

In terms of wages, December witnessed a consistent rise, with a 0.4 percent increase from November 2023, according to the Labor Department. Year-over-year, average hourly earnings went up by 4.1 percent.

Tech jobs are evolving into a different type of existence with agility becoming more important and that is highly positive for tech companies.

Silicon Valley was at the forefront of the firing spree last year, but job numbers were more than compensated by the additions in government, health care, and services.

The strength of the US economy means that it’s painfully obvious that traders are still too early betting that the Fed will drop rates by 1.5% by the end of 2024.

My belief is that we will end up with a drop of .5%-.75% of Fed Funds rate cuts which means we have a little ways to go to reverse from this overshoot.

This idea that the economy is stronger than people think is verified by rising wages and lower unemployment.

I do believe that high inflation and high rates are here to stay and the 0% rate of yore was just a weird anomaly that defied historic data.

Delaying the “recession” yet another year means once we absorb this pullback, tech stocks will be off to the races again.