“It will mainly be a white-collar recession”: economist Milken William Lee on how the next economic downturn will be different

“It will mainly be a white-collar recession. And the blue-collar recession will not be in the same places we have seen in the past ”.

It was William Lee, chief economist at the Milken Institute, a think tank based in Santa Barbara, California, in an interview with MarketWatch, speculating on the nature of the next American recession.

Amid growing expectations among economists of a recession – commonly referred to as two consecutive quarters of negative growth – Lee said there is still a demand for workers in services and manufacturing, which will help protect those workers in the event of a recession.

Even with a low unemployment rate of 3.6%, low-income workers are still vulnerable in any economic downturn, but adding to comments he made to Bloomberg Radio earlier this week, Lee said that this time around they could there are exceptions to this rule.

“The Joe Six Pack, who was the first guy to be fired, may be less concerned if he has one of these high-demand jobs, like the Amazon storekeeper, the delivery boy, the guy who works in the ghost kitchen. ‘


– William Lee, chief economist of the Milken Institute

“The Joe Six Pack, who was the first guy to be fired, may be less concerned if he has one of these high-demand jobs, like the Amazon storekeeper, the delivery boy, the guy who works in the ghost kitchen,” Lee said.

The US created as many as 372,000 new jobs in June, despite forecasts of a broader hiring slowdown and growing fears of a recession. Economists interviewed by the Wall Street Journal had forecast 250,000 new jobs. Employment growth was particularly pronounced in manufacturing, wholesale, retail, transportation and warehousing, data from the Department of Labor showed.

William Lee is the chief economist of the Milken Institute, a think tank based in Santa Barbara, California.

Courtesy of the Milken Institute

Lee warned that young professionals entering the workforce will be among the first tranches of workers laid off in the event of a sharp economic slowdown. “The entry-level white-collar guy will have to be careful. This will be the surprise of this recession, “she said.

The tech sector, meanwhile, has heralded a wave of job losses. Shopify is laying off about 1,000 jobs or 10% of its workforce, the Wall Street Journal reported this week, due to a slowdown in online shopping after the worst days of the pandemic.

A spokesperson for Shopify SHOP,
+ 11.70%
directed MarketWatch to a blog post from the company’s CEO and co-founder, Tobi Lütke. He wrote: “We bet that the mix of channels – the share of dollars that travels through e-commerce rather than physical retail – will leap forward permanently by five or even 10 years.” But that bet, he added, did not pay off.

Last month, Coinbase COIN,
+ 11.15%
extended the freeze on hiring and revoked some accepted job offers, citing current market conditions. (Coinbase declined to comment.)

Microsoft MSFT,
+ 6.69%
slowed down the hiring and managers of Meta Platforms, Inc. META,
+ 6.55%
(ex Facebook) and Google GOOG of Alphabet,
+ 7.74%
they warned employees of difficult times to come. (Microsoft, Alphabet, and Meta weren’t immediately available for comment.)

When the pandemic hit, many people improved their skills. So waiters and warehouse workers have retrained to become truck drivers and possibly accountants, and are looking for better jobs.


– William Lee

Lee said white-collar workers with limited skills, such as entry-level accountants, were more vulnerable as companies updated their business models after weathering the worst of the pandemic. Many of these entry-level roles have been replaced by apps and new technologies; alternatively, companies simply no longer need some low-wage white-collar workers, Lee said.

With inflation at its four-decade high and showing little sign of slowing, the U.S. Federal Reserve on Wednesday announced a rate hike of 0.75 percentage points to push the benchmark rate down to 2.25 – 2. 5%. This brought the Fed’s tightening pace to the fastest pace since early 1981.

The consumer price index, which measures the rate of rise in the prices of goods and services, reached 9.1% in June from last year, a 41-year high. The wages did not catch up, however. In June, wage growth increased 6.7%, according to the Wage Growth Tracker of the Federal Reserve Bank of Atlanta.

Due to labor shortages in key sectors, Lee noted that by mid-2021 low-wage workers were receiving higher wage increases than pre-pandemic ones.

“When the pandemic hit, many people improved their skills. So waiters and warehouse workers have retrained to become truck drivers and possibly accountants, and they’re looking for better jobs, ”she said.

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