What you need to know about the ‘white collar recession’
What is the future of our economy? Nora talks with William Lee, chief economist at the Milken Institute, about the possibility of a recession, why he thinks it will be a “white-collar recession,” and how it will affect jobs. Then, Julia Pollak, chief economist at ZipRecruiter, gives a status update on the labor market, which industries are aggressively hiring, and how to take advantage of what she calls the “best job-seekers' market of all time.”
Host: Nora Ali
Video Editor: Sebastian Vega
Production, Mixing & Sound Design: Daniel Markus
Fact Checker: Kate Brandt
Senior Producer: Katherine Milsop
VP, Head of Multimedia: Sarah Singer
Full transcripts for all Business Casual episodes available at https://businesscasual.fm
Nora Ali: For Morning Brew, this is Business Casual, bringing you convos with people you know and some you may not know yet, to make business less intimidating. Because money talks, but it does not have to be dull. I'm your host, Nora Ali. Now let's get down to business.
I've gotten some requests from some loyal listeners to help demystify what the heck is going on in this economy. While we will hopefully have many more episodes on how economic shenanigans impact you, we decided to start with something that is hyper-relevant to nearly all of our listeners. This episode is important if you're someone with a job, or aspire to have a job, or are even looking to switch jobs. The buzzwords abound: the recession, the Fed, interest rates, inflation. But what does this mean for you specifically as it relates to your current or future employers, the job market, and the future of work?
The Fed's battle with inflation has caused more and more economists to predict a recession in 2023, and CEOs are preparing for the worst. Keep listening to the episode to find out what all that actually means. According to a KPMG survey of 400 leaders of large companies, 91% expect a recession in the next 12 months. And in preparation for the downturn, companies are doing what they do to save money: cutting expenses. And what's often the biggest expense? Human capital, aka employees. But don't let the headlines scare you into thinking that it's all doom and gloom. Much like the economy, it's much more nuanced than that. That's why today we have two experts who will help break it all down and tell us what we really need to know about the state of our economy and what we can do to prepare for the future.
First, we'll hear from William Lee, chief economist at the Milken Institute. William has spent his whole career breaking down complicated economic concepts, and he cleared up some common misconceptions about the looming recession. As he says, "It's not quite all or nothing, but something that happens in stages." And what's different this time is what he calls a white-collar recession, which could impact certain office roles. You've seen the headlines, and maybe it's impacted you, your friends, or your Twitter acquaintances. People are getting laid off, and a lot of that is concentrated in tech. William gives us the scoop as to how we got here and what to expect.
Then Julia Pollak, the chief economist at ZipRecruiter, gives her diagnosis on the labor market. She calls it the best job-seekers' market of all time, and she says employers are pulling out all the stops in order to retain their talent. While the headlines are reading "recession," Julia says the labor market remains resilient. Let this episode be your primer into what exactly is going on in the job market, what it could mean for you, and how to best position yourself for a flourishing career. That's all next, after the break.
William, we're excited to have you on Business Casual. Before we get into all the fun knowledge about the so-called white-collar recession, a quick icebreaker. It's a segment called OG Occupations. I would love to know, William, Bill, what was your first ever job that you've ever had?
Bill Lee: I worked for the New York City Highway Department, where I drove around the streets of New York City. In fact, that's how I learned to drive and tailgate buses. And it was a time way before most of you guys in the audience was born, when the mayor of New York City wanted to shut down Fifth Avenue. So they wanted to get a record of what was the traffic patterns before they shut down Fifth Avenue. So I spent the summer driving up and down the streets of Manhattan, just timing traffic.
Nora Ali: Any takeaways you can remember about the traffic patterns?
Bill Lee: Best-laid plans of mice and men just never come about. You've never heard of the Fifth Avenue Mall because it never came to fruition, but it was one hell of a summer job. I learned to drive then, and as I said, I'm one of the best tailgaters around.
Nora Ali: That's amazing. Bill, let's establish a base of knowledge for our listeners before we get into the nitty-gritty. There's a lot of terms that we hear on the news and just thrown around, especially in this current macro environment. So to set the scene from a macro perspective, let's start with inflation, which is a part of our very common vocabulary now. So what exactly is inflation, and why is something like the consumer price index such a common measure of it?
Bill Lee: I'm really glad you started with inflation, because I think people sort of associate inflation with various things. "Oh man, prices are high." Yes, prices are high, and when prices go higher, that's called inflation. Inflation is the change in prices, and when prices go up, that's inflation. When prices are steady, even though they're incredibly high, that's not inflation. So I think that's a concept, I think, that people have to get through their heads. Inflation's measured by all of the prices we pay for stuff, whether it's eggs from the grocery store, or a beer at the bar, or your last airplane ticket. Those are the prices that people care about, and that's called the cost of living. The Consumer Price Index is supposed to give some sense of what the cost of living is for a typical consumer's basket. So we look at that index because it's an average of all the stuff that we pay for.
So inflation is something we all care about because if prices are going up and they're going up faster than our other income, our other wages and salaries and stuff, that's a problem. That's a problem, because how do you make ends meet? So that's why the Federal Reserve has brought about this notion that the toughest problem facing the economy right now is inflation, because it's a cruel tax on everybody. A tax because prices go up, and you don't have the money to pay for it, and you've got to reach somewhere to get the resources to pay for it.
Nora Ali: You brought up my next phrase, which is the Federal Reserve. It has a dual mandate. Its job is to keep prices relatively steady, so combat inflation, and to maximize employment, as the central bank of the United States, in very basic terms. So Bill, what are the tools that the Fed has to achieve its goals?
Bill Lee: The Federal Reserve...I used to work there, and it was the place I really wanted to work after I got my PhD because that was the place where economists went, where all the good economists went, because that's where we could get together and say, "How do we actually solve the economic problems of this country?" And the big ones are inflation and unemployment. And as you said, that's the Fed's mandate, is to make sure that the economy's operating at a place where as many people who want to look for a job are getting jobs, and inflation is steady at a level where you just don't think about it anymore.
When we talk about price stability, we're talking about a rate of inflation that's about 2%, because people have kind of measured where it is that people care about inflation or where it is that it suddenly sinks into the background. So that's what the Fed is all about, to try to reach those objectives. And in order to do that, it either incentivizes people to spend money, or it incentivizes people not to spend money. And how does it do that? Well, it only has one tool, and that's the interest rate. And the interest rate is what we pay for borrowing money.
When times are good, businesses want to expand, and generally they don't have enough money to expand and buy all the machinery they need and expand their facilities. So they borrow money, and they borrow from a bank, or they borrow from the financial markets, bonds and stuff like that, because a bond is just nothing but a loan. When they start to borrow money and the price of borrowing money, which is the interest rate, goes up, they think twice about borrowing that money. And that's what the Fed does. It incentivizes people to borrow money because they keep the interest rate low, or they incentivize people to say, "Hey, maybe I can put off buying that house for six months because the mortgage rate is suddenly 7%, and I can't afford that. Maybe next year it'll come back to 5%." So that's how the Fed really works, is to try to raise the level of interest rates in the economy or lower them to incentivize people to change their spending habits.
Nora Ali: You already defined my next phrase, which was interest rates. You explained it very well: the cost to borrow money. What usually happens when the Fed raises interest rates, and how did the pandemic shape the impact that the Fed's actions have? It's in many ways less predictable.
Bill Lee: Well, there are all sorts of machinations between what the Fed does and the interest rates that we care about change. Do we really care about what interest rate businesses borrow at? Not really, not unless you own a small business. But we do care about mortgage rates. We care about the interest rate we get on our bank deposits. We care about our credit card rates and personal loan rates. That's the range of stuff that we care about. So the way the Fed operates is to change the supply of funds that banks have to lend out, of different gradations, from commercial banks that lend to businesses, to the mortgage lending banks, the credit unions, and the banks that kind of specialize in lending to people who want to buy housing of one sort or another, whether it's an apartment or a single-family residence. The rise in interest rates, as I said, disincentivizes people to buy stuff. And by lowering it, it tries to say, "Now's a good time to buy."
Nora Ali: How about the impact to the stock market? Because we see a lot of volatility, and investors very closely watch anything that Fed Chair Jerome Powell says. So what have we seen historically as the tie?
Bill Lee: That's a great question, because what does the stock market have to do with these interest rates, right? And I think one of the things that you learn in finance is the magic that connects stock market prices to interest rates. And the magic happens to come pretty intuitively, which is to say, if I'm not going to get stuff until a year from now or two years from now or 10 years from now, I need to compare money that I get a year from now or 10 years from now with money that I have today. And in order to do that, it's called the interest rate. So I ask myself, "If I had a dollar today and I didn't eat it up and I saved it, how much money am I going to get in 10 years' time?" Well, if the interest rate is 10% a year and I'd wait 10 years, I'd probably double my money. So that interest rate connects tomorrow to today, and stock prices are all about tomorrow.
Nora Ali: I would love to have a full episode on the stock market with you, Bill, but we've got to talk about the recession. So various surveys and polls show that the majority of Americans, at least at this point, think that the US is already in a recession. One factor in defining recession is seeing two consecutive quarters of a decline in GDP, or gross domestic product, in the US. But in this case, there are a lot of conflating factors, like you've got a relatively strong employment base. Spending is pretty robust at this point. Do you, Bill, think we are in a recession now?
Bill Lee: People talk...use the word recession like, "My god, I got the plague. I'm going to die. Are we in a recession, or are we not in a recession? If we're in a recession, ah, I'm going to die." I think it's not quite that all-or-nothing thing. It's more like "I really don't feel well" is a recession. And how bad do I feel? Well, if I've got a fever, then it's a bad recession. If I just have the sniffles, it's not so bad. So I think we should think of recession as something that has different stages to it. And generally speaking, when a recession is really, really bad, people call it a depression because everybody's laid off. The unemployment rate starts to hit double digits. The growth of the economy, the production of goods and services, it's called GDP, not only stalls but actually declines. Those are the indicators for a very bad recession, when we really have all that stuff come together.
So when we talk about, "My god, we're in a recession today," or some people say, "No, we're not really in a recession," it's because not all the stuff is lining up: the employment numbers, the labor market. People are still having a pretty easy time finding jobs. In fact, there are probably two job openings for every unemployed person out there. Jobs are being created 220,000 to 250,000 per month, and people say, "Gee, things look pretty good." On the other side, you start to see growth is starting to slow down. We're not producing as much as we did last year. Everyone around the world seems to be slowing down, and so the danger that's causing us to worry is that what if the slow-down gets even worse? That's the scenario, I think, that people are concerned with.
Nora Ali: So like you said, the Fed is trying to slow down growth or slow down inflation, and one of the tools they have is to raise interest rates, which you did such a good job of explaining. But then you have these employers who are thinking and anticipating that the slow-down is going to get even worse over time, and that's one of the contributing factors to the so-called white-collar recession. So explain to us, first of all, what you're talking about when you say white-collar recession...what kinds of jobs, and how did we get to this point? Why do you think we're going to see that?
Bill Lee: I came up with this term "white-collar recession" because when you think about who gets laid off first in most recessions, especially if you look over US economic history, the first people to get laid off are generally the lower-skilled, because when companies start to lay off people, what's the first thing they do? They start getting rid of people they don't really care about that much, or they get rid of people they think, "I can always get that person back when I need to revive my business again."
So when you look at the different occupations out there, the people who tend to get laid off have been the laborer, the guy who works in construction, the guy who works in the warehouses, the blue-collar guys. And white-collar guys seem to have a nice, steady employment possibility out there because the notion was, "It took time to hire this bookkeeper. I had to really search through a lot of people to find somebody who was qualified, who fits into my team. So once I hire this guy or gal, I'm not going to fire them because it's going to be hard for me to find a new person."
Well, that was then. Now, especially in this post-Covid world where companies have spent a lot of money on buying new technology, new software, putting in new equipment, that says...that low-level white-collar guy, in the past, was just doing his job, just pulling the data together, organizing it, and putting it in place where the more advanced partners in the firm would be using it. Well, right now, the new technology has replaced the need for that data collection, and so a lot of these white-collar jobs that were skilled, but kind of low-level skilled, are being automated out of existence.
On the flip side, take Amazon. If you ever walked into an Amazon warehouse, you see the robotic stuff all over the place. The skills that they need for a warehouse worker is no longer the person that drives the forklift, but rather the guy who's able to operate that console where they get all that crazy stuff, or the person on rollerblades that's really, really fast. Right? So either you're really good at rollerblading or you're really good at the computer console, but you've got some skills that really bring you head and shoulders above what the old warehouse worker used to be. So we have a change in the composition of workers out there and a change in the kind of workers that companies want.
Nora Ali: A phrase that we heard a lot during the pandemic from employers was re-skilling, because a lot of people's jobs were becoming irrelevant, or needs have changed in terms of customer demand. From an employer perspective, is it more cost effective for them to re-skill their existing employees, or to lay them off and either to not replace them or to rehire people who are more skilled in the ways that they need?
Bill Lee: That's a great question. That depends on the flexibility of the worker. And that generally is a case-by-case basis, because even in the same establishment, half the people will say, "Geez, I'm not going to do that, or I'm not going to go to classes to learn the extra stuff that I need to work the new software because I've been doing this for 20 years, and I know what I do is good." So the people who tend to be less flexible and more stubborn about what they're certain they can do and contribute tend to be laid off. The people who say, "Gee, here's a new opportunity for me to learn something," those are the people that are not only kept on, but they're the ones who are given the salary increase once they master the new skill, because generally these new jobs require more skills, and people are more productive when they do these jobs. If you're more productive, your salary goes up.
Nora Ali: We're going to pause for a very quick break. More with Bill when we come back.
So if we look at tech, right? Let's look at Peloton, Robinhood, Wayfair, et cetera, these companies that flourished during the pandemic but have since had to lay off either hundreds, in some cases thousands of employees, what went wrong in those cases? Did employers over-hire? Are they just worried about the future? Was this avoidable? Is this kind of a reset point, where companies will become a little bit more efficient and more thoughtful about hiring? Because we saw that it's not sustainable, and the robust growth and bull market we've seen for so long is not sustainable in itself.
Bill Lee: I think one thing that we have to realize is that we will never reach that nirvana where things grow steadily at 2.5%, 3% a year, employment just steadily rises by 150,000 people a year, just enough to absorb the increase in the labor force. That has never happened. It probably never will happen. I think we're always going to be in a world where managers are overly optimistic about where business is or overly pessimistic about how business is getting worse. So people tend to lay off more than they need to. They tend to hire more than they need to, because they just don't know. And to be safe, I'd rather not have a payroll I can't pay than the other way around. So I think that that kind of excess, going up and down, is something we're always going to have.
The question is how big a fluctuation is it going to be? Is it going to be that the unemployment rate kind of rises from full employment—which, by the way, is way above 3.5%, where we are now. Full employment tends to be closer to 4.5% or 4%. So we're way below where we are now, which is why people say it's such a hot labor market. The unemployment rate rising from 4.5% to 5%, maybe 6%, and going down to 3.5%, that level of fluctuation is what the Federal Reserve and most policy-makers are trying to minimize. But we have to accept the fact that overly optimistic and overly pessimistic actions will always be with us.
But as someone who's in the labor market or someone who's about to hire somebody, the smart thing to do, of course, is to look for attitude, right? Look for attitude of the company that says, "They care about me as a worker, and they want me to progress from the entry-level person to the managing director. There's a career path for me in this company, and it's very clear what I need to do to get there." And the flip side is, "This kid has what it takes to be my boss, and so I'm going to try to hire this guy or this gal." That's really the key to staying alive and thriving in this economy.
Nora Ali: Okay, Bill, before we let you go, we're going to play a quick game. It is called Bullish or Bearish: Future Jobs Edition. So I'm going to give you a topic, and you let me know whether you're bullish or bearish on this job existing and/or thriving 20 years from now, and maybe some context on what you think that job might look like in 20 years. And these are things that you have...some of them you've touched on. So the first thing is warehouse fulfillment worker.
Bill Lee: I'm very bullish, as you can imagine, on these warehouse jobs because the stores of the future are going to be the home delivery, buy the stuff and you get instant delivery. And if you don't like the stuff, return it. And if that's the future, then we really have to have a phenomenal supply chain, a phenomenal set of logistics, where you can actually handle all this traffic. The linchpin of all this would be that fulfillment worker, who's able to grab stuff quickly and get it out to the customer, and get it back from the customer and put it back on the shelf to be resold. So I'm very bullish on that.
Nora Ali: The workers of the future, though, are the ones who can interact with the robots, right? Because Amazon, for example, they had bought Kiva Systems in 2012. It's now called Amazon Robotics, but they've deployed...this is according to TechCrunch. They've deployed more than 520,000 robotic drive units across its fulfillment and sort centers. So the warehouse workers of the future are the ones who can handle those.
Bill Lee: Not only the robotics but also the web services, right? So you're not going to just connect with the stuff that's in your warehouse, but all the neighboring warehouses, and that's all through the web.
Nora Ali: Or the dude with rollerblades. Okay, number two, are you bullish or bearish on this type of job in 20 years: long-haul truck drivers? So with the rise of things like autonomous trucking companies, what are your thoughts?
Bill Lee: There are things that are called vaporware. And vaporware is just stuff that are pipe dreams that people promise and just never show up. Autonomous driving is one of these things, where it may actually show up and become the greatest thing since sliced bread, or vaporware. And I tend to go for the vaporware side, because even if we have the technology and software that allows a car or a truck to be driven safely, 100% no accident, you're going to have to get it through the insurance industry, because it's very unlikely the insurance industry is going to go for 100% no driver and to have liability assigned to the company, because the company's not going to accept it. So I think the big stopping point about autonomous driving is going to be the insurance industry. Keep in mind, the insurance industry is not just one industry. There are 50 of them, 50 independent state insurance commissioners that have to approve the stuff. Good luck on that.
Nora Ali: So from your perspective, it's not necessarily a technological hurdle. It's regulation. It's legal. It's all the social hurdle.
Bill Lee: Yeah.
Nora Ali: Yeah. All right. Last one for you. This job of a digital artist. And I ask, and you know why I'm asking, because of DALL-E and DALL-E 2. I think some of us are familiar with it. It's this platform made by OpenAI, where it's AI image generation. You type in a phrase. I'm actually going to read the description according to AssemblyAI. "With only a short text prompt, DALL-E 2 can generate completely new images that combine distinct and unrelated objects in semantically plausible ways like the images," which maybe we'll link in our show notes, "which were generated by entering the prompt 'a bowl of soup that is a portal to another dimension' as digital art." That is an example. And this is top of mind for me because I was playing around with it for the first time yesterday, and I typed in "Darth Vader playing the violin in an orchestra" because those are a couple things that I'm interested in, and it's amazing. Anyway, I'm talking too much. Bill, are you bullish or bearish on the digital artist and the role that they play?
Bill Lee: I am super bullish on any digital technology that's out there that's able to integrate arts with regular people. And as someone who cannot draw a straight line or even a stick figure, I have always prayed for some kind of software that would enable me to create a picture of what it is that I'm thinking of.
Nora Ali: Yes.
Bill Lee: So for me, the hurdle that has kept me from being able to express myself in pictures or artistically is narrowing. And I think one of the things that I definitely look forward to would be these software advances that are able to integrate words with pictures. I spend most of my time with words, whether it's writing or it's spoken words. I would love to be able to illustrate the stuff with some nice pictures.
Nora Ali: It's really fun. I'm also bullish on this technology. But there's plenty of think pieces out there that debate if DALL-E and AI-generated images will replace actual artists, and I don't think so. I think actual artists will also thrive and exist. Do you agree? Like human artists.
Bill Lee: That's a huge controversy. I think that that comes back to, what is a machine? Can you actually find a machine that interacts with you in such a way that you don't even know it's a machine?
Nora Ali: Oh my goodness.
Bill Lee: I think that quest is something that we have yet to...
Nora Ali: And yet another topic for a whole other episode. Bill, we will leave things there. This has been a pleasure. I've learned so much. Thank you so much for joining us on Business Casual.
Bill Lee: This has been a pleasure. Thank you for having me.
Nora Ali: William Lee is the chief economist at the Milken Institute. After a quick break, we're going to dig a little deeper into the current job market and see why things may not be so bad for job-seekers. That's next.
Julia, a lot of people have heard of ZipRecruiter, and we think of it as a job-search platform both for job-seekers and employers. But as the chief economist at ZipRecruiter, what are your primary responsibilities?
Julia Pollak: My role is to look at ZipRecruiter data and measure the health of the labor market using our high-frequency data on billions of interactions between businesses and job-seekers, and then also to detect trends in that data and help job-seekers and employers prepare for the future of work.
Nora Ali: A very useful job, and we'll get to specific questions on the future of jobs and what the trends are that you're seeing. But let's start with how you might describe the labor market, the state of jobs right now.
Julia Pollak: If I were talking to job-seekers, I would say this is: It's still the best job-seekers' market of all time. With such a tight labor market, employers are pulling out all the stops to attract and retain talent, and that means better opportunities, more opportunities. When I'm talking to employers, though, they seem to have a different perspective, which is that this is the year in which they've had the most profound talent-management crises ever. Fewer candidates per posting, lower-quality candidates, far lower retention than they're ever used to seeing, lower productivity. The list goes on and on. So it's been a huge challenge for employers. They've never seen challenges like this, and it's prompted some very creative thinking.
Nora Ali: What is your hypothesis as to why we're seeing things like lower retention and lower productivity? Why is it so challenging for employers right now?
Julia Pollak: Well, I mean, the pandemic was a massive jolt that caused people to reevaluate their lives. It also changed the relative attractiveness of different occupations. So it ushered in this enormous change to the way we do business, this huge shift towards remote work that made some jobs much more attractive than they were before, like call-center jobs, which have largely become remote, and made others less attractive, like teaching or restaurant jobs, or you name it, all of the jobs that need to be done in person, which people now realize are more risky to their health and which are less flexible than the other jobs around.
Nora Ali: You said employers are pulling out all the stops to try to attract and retain talent. What are the things that have been working for employers to get that talent?
Julia Pollak: I mean, one of the first things that employers do when they're in such a supply-constrained environment is to reduce the requirements in job postings. And when they recruit more broadly and open the doors to teenagers, say, or to workers with disabilities, or to workers who are pregnant, or to the kinds of candidates they would have tossed aside in the past, the criteria that they tend to rely on to sift out candidates often aren't really good measures of who will really succeed in the role, who will really be productive. So when you hire for degrees and for past experience, you're not actually hiring for skills. And when you're forced to pivot your thinking and to become less discriminatory, you find better ways to measure skills. So that's one thing that I think is very exciting about what employers have done. And I think some of them, by shifting to measuring your skills directly rather than relying on all these proxies, have shifted to doing something that they're going to do forever, even in a tighter labor market.
Nora Ali: How does that happen functionally from the employer side? It's harder to tell with the resume, is basically what you're saying. So how are they sussing out what skills people have that'll be the most appropriate for that particular job?
Julia Pollak: Many are just thinking more broadly about the skills that they see in a resume, but many are also shifting towards measuring skills directly, so giving more skills assessments in the job posting. And this could be a really great way to do things, because instead of saying, "Hey, that person's probably awesome. They went to an Ivy League school," they're saying, "Let's really look at the person, not at the resume, and give everyone a fair chance."
Nora Ali: But even to get to that point of looking at the person, they...How did they, I guess, get past that first phase, right? Because I've hired before. Resumes are daunting to have to go through everyone. So you have to have these sort of tangible criteria that you use to sift through those resumes. So how do you get past that first phase to get to the person?
Julia Pollak: Well, I think what happened with many, many companies is that they received so few applications, far fewer than usual, that the ordinary criteria would've resulted in them having nothing. So when it took months and months longer to fill roles than companies wanted, they had to go back to the drawing board and say, "Wait a second. Let's change the way we do things. Let's no longer say we need five years of experience in this role. Let's scratch out that line and be open to considering candidates who are younger, newer, and more junior, et cetera."
Nora Ali: Let's zoom out for a second. There were 263,000 jobs added in September. That was more than expected. Unemployment is at 3.5%. That was also lower than expected, or better than expected. Why do you think the labor market overall has been so resilient, given all the macro conditions, which we can get into?
Julia Pollak: Yeah. In February of 2020, when companies all instituted hiring freezes or laid off workers sort of at once, it was because they were all seeing their own numbers decline very rapidly. Everyone was canceling their orders, canceling their subscriptions, pulling out money, asking for refunds, et cetera, et cetera, et cetera. That's not the case now. Business is actually doing well in most industries. Consumers are spending. Spending is strong, and so your typical business still very much needs to hire. It's understaffed relative to the volume of business they're doing. So the headlines can tell them that a recession is coming and tell them that a downturn is coming. Sure, they'll be a little bit more conservative. They'll take care not to over-hire. But when push comes to shove, they've got customers streaming through the door, and so they're going to need to step forward broadly and boldly into the unknown and keep hiring, come what may. Right? They know things could get worse in the future. For now, they still need to hire.
Nora Ali: Yeah. And we are seeing, in certain industries, hiring slowing down. There's been layoffs, especially in tech. We spoke with the chief economist at the Milken Institute, William Lee, earlier in this episode about the white-collar recession, which he believes is very likely. So the biggest layoffs in a downturn would come from tech, finance, real estate, et cetera. What is your take on a so-called impending white-collar recession?
Julia Pollak: Anytime interest rates rise like this and stock prices fall and the dollar is very strong, there are several industries that are disproportionately affected. First of all, of course, you have a slowdown in the housing market. So we saw activity in finance, mortgage lending, industries like that sort of slow down a lot. So those industries, sure, are laying off workers. Anytime businesses face an uncertain environment like this, they try to cut spending and sit on cash so that they're insulated a little bit from whatever happens. So the first thing they do is cut marketing spend. So in this last jobs report, we saw advertising agencies shed almost 5,000 jobs.
Anywhere you look, there are sort of pockets of pain. Major enterprise companies and big tech companies that get the majority of their revenue abroad are also suffering because of a strong dollar. Those nondenominated transactions don't look so good on their balance sheets anymore. But the diffusion index, which is a measure of the breadth of job gains, is still incredibly high and much higher than it was before Covid. And that's sort of a testament to the fact that, yes, although hiring is starting to slow and kind of go back to a more normal pace, job gains are still extremely broadly distributed across the economy, with far more industries contributing gains than losses. And where there are losses, they're still pretty muted.
Nora Ali: Who is hiring the most aggressively right now? Which industries, which types of employers?
Julia Pollak: Transportation companies, warehousing companies, hospitals—those are the kinds of industries that are hiring very, very aggressively. And then, of course, in leisure and hospitality, it's your restaurants and hotels that are kind of roaring back to life, casinos. Business travel is even picking up again. So many industries there are also finally staffing up again.
Nora Ali: And for people who are, say, early in their career, what do you think are the most defensible skills right now? What should people really double down on to protect themselves for whatever the future of work might look like?
Julia Pollak: With this shift towards hiring for skills rather than degrees, employers are increasingly willing to invest in your training, and also, they are looking for soft skills more than usual. So they're looking for things like communication skills, people skills, reliability, things like that.
Nora Ali: If only that were required courses that you had to take in school: people skills.
Julia Pollak: Right. Employers tell us things like they never realized how important good writing skills would be before, and now they realize that someone who can write well is valuable in almost every occupation.
Nora Ali: It's so true. What types of employees do you think are the most vulnerable right now?
Julia Pollak: Anyone in anything related to housing is pretty vulnerable right now. We've seen activity slow down in mortgage lending. Real estate agents are having a tougher time, especially in some parts of the country. It's likely that companies in construction could also see a pullback in activity in the coming year, if housing purchases remain so low. There's a range of industries. And then there are industries that are kind of related to each other. So once advertising shrinks and those ad dollars dry up, well, then the media have to make cuts because there are fewer dollars rolling in. We've already seen a major layoff at Gannett, at US News. So those could expand if things get really tough.
Nora Ali: What is the best way to stand out as a candidate when you're applying to a job? I know that's a big question. It's a tough question. But if you had to give us one takeaway in this job market as a candidate, what would it be?
Julia Pollak: Of course, you need to have a good, strong resume or profile, a job-seeker profile. Many companies don't really care about resumes or cover letters anymore, but you do need to have a profile that includes relevant skills and experience to the extent that you can. And employers are kind of risk-averse, and they're very worried that they can't observe who you are. So the more information you give them, the better. If you list two past jobs that you've held rather than just one, it makes a huge difference in the likelihood that you'll be called back. So try to give the employer as much information as you can that help them to feel like they know you and they're comfortable with you as a candidate.
Nora Ali: Are you pro-cover letter? I know that people debate whether you should write a cover letter or not. What do you think?
Julia Pollak: I think the view at my company is that cover letters are unimportant, and no one reads them anymore anyway. Because I often hire for writing skills and for communication skills, I do look at candidates' cover letters, and they matter to me because I think they can be extremely revealing about your ability to communicate your ideas.
Nora Ali: I agree. I like a good cover letter. Keep it short...short and sweet.
Julia Pollak: Yes.
Nora Ali: I don't want to read a novel.
Julia Pollak: Nope. No.
Nora Ali: Well, Julia, we're going to play a very quick game before we let you go. Our producer, Raymond, put it together. It's really fun. It's called Guess That Applicant. And I'm going to list off three accomplishments per person as if you were looking at this person's resume, and you have to identify the applicant. They're famous people. So with each accomplishment I list out, it should get easier for you to identify the person.
Julia Pollak: Okay.
Nora Ali: So we want to see if you're able to guess as correctly and quickly as possible. There's no real reward except putting it on your Twitter bio that you won the game. So first person, first accomplishment: After being fired from the company I founded, I designed one of the early computers that were specifically used for classrooms. And at any point, you can guess.
Julia Pollak: This is Steve Jobs.
Nora Ali: Wow. She's a genius. That's amazing. You're so smart. That's it. Yep. I think you get extra points for that because you only needed the one criterion. I'll read the other two just for funsies. So the other two criteria: In 2005, I gave a commencement speech at Stanford University that became the most-watched commencement speech of all time, with 40 million views on YouTube. And in 2007, I introduced the mobile phone that would eventually become an all-in-one personal computer. There you go, Steve Jobs. Number two, the first criterion for this second person: In 2009, I was listed as number 12 on the first-ever Forbes Most Influential Women in Media.
Julia Pollak: Hmm...
Nora Ali: I'll give you the second accomplishment: I launched my own company to build the first-ever product suite designed to diagnose burnout before it happens.
Julia Pollak: I should really know this.
Nora Ali: No, it's okay. Those are kind of tricky, actually. Third accomplishment: In 2005, I co-founded and was the editor in chief of the very popular Huffington Post.
Julia Pollak: Ah, Arianna Huffington.
Nora Ali: That is amazing. Yay! Okay, you're doing great.
Julia Pollak: I have been looking at some of her stuff on burnout lately, actually. Yeah, a very interesting topic to be talking about today.
Nora Ali: Definitely. Okay, last one, first accomplishment: I am the second best-selling female musical artist of all time. It was recently announced that I will be this season's Super Bowl halftime performer.
Julia Pollak: Ooh, Taylor Swift?
Nora Ali: Not quite. I'll give you the last criterion.
Julia Pollak: Okay.
Nora Ali: This'll do it for you. Not only am I one of the most successful musicians of all time, but I launched my own fashion brand under the luxury fashion group, LVMH, and it's called Fenty.
Julia Pollak: Yes. Rihanna.
Nora Ali: Woo! Yay! Three for three. That's amazing. You did great. You know how to read resumes really well, Julia. Awesome. Well, we'll leave things there. This has been such a pleasure. Thank you for joining us on Business Casual.
Julia Pollak: Thank you so much.
Nora Ali: This is Business Casual, and I'm Nora Ali. You can follow me on Twitter @NoraKAli. That's Nora, the letter K, Ali. And I would love to hear from you. If you have ideas for episodes, comments and thoughts on episodes you loved, fun segment ideas, just shoot me a DM, and I will do my very best to respond. You can also reach the BC team by emailing email@example.com, or call us. That number is 862-295-1135. And if you haven't already, be sure to subscribe to Business Casual on Spotify, Apple Podcasts, or wherever you listen. And if you like the show, please leave a rating and a review. It really, really helps us.
And guess what? We are on YouTube. So if you've ever wondered what I look like, what our guests look like, or what anything else looks like, full episodes are available on our very own YouTube channel. That's Business Casual with Nora Ali. Again, Business Casual with Nora Ali on YouTube. Business Casual is produced by Katherine Milsop, Olivia Meade, and Raymond Luu. Additional production, sound design, and mixing by Daniel Markus. Kate Brandt is our fact-checker. And AB Silver is our senior booking producer. Sebastian Vega edits our videos. Our VP of Multimedia is Sarah Singer. Music in this episode from Daniel Markus and the Mysterious Breakmaster Cylinder. Thanks for listening to Business Casual. I'm Nora Ali. Keep it business, and keep it casual.