Cost cuts and productivity gains can lift margins and support stock prices, but only so long as demand holds up. The practical line in the sand for demand risk is less about a specific unemployment “level” and more about the speed of deterioration. When the three‑month average unemployment rate rises by about 0.5 percentage points from its recent low (the Sahm rule), that’s historically when the consumer‑spending‑to‑revenue feedback loop starts to bite and earnings expectations get marked down.
Keep in mind, revenues don’t compound on cost savings; they compound on demand. If layoffs broaden beyond junior tech roles, the household sector tightens spending first on discretionary categories and then more broadly. That’s the channel through which cost cutting morphs into top line pressure.
Also, labor data matter in changes, not absolutes. A quick rise in unemployment even from a still low starting point has been a more reliable recession tell than whether the level sits at 4%, 5%, or 6%
And now, sentiment and cash buffers are thinner than early cycles. If job growth slows and confidence wobbles, households pull back faster, which can overwhelm margin wins from automation.
How long can the stock market grow when the underlying economy collapses? If the global economy is cutting rates more than ever, isn’t that a signal that things are not OK?
You also talk about the weakening dollar in other posts, so aren’t you also sounding the alarm bells?
I don’t think we’re trying to be pessimist, I think we’re trying to be realist and not get taken out like 2000, 2009 or worse …1929.
Cost cuts and productivity gains can lift margins and support stock prices, but only so long as demand holds up. The practical line in the sand for demand risk is less about a specific unemployment “level” and more about the speed of deterioration. When the three‑month average unemployment rate rises by about 0.5 percentage points from its recent low (the Sahm rule), that’s historically when the consumer‑spending‑to‑revenue feedback loop starts to bite and earnings expectations get marked down.
Keep in mind, revenues don’t compound on cost savings; they compound on demand. If layoffs broaden beyond junior tech roles, the household sector tightens spending first on discretionary categories and then more broadly. That’s the channel through which cost cutting morphs into top line pressure.
Also, labor data matter in changes, not absolutes. A quick rise in unemployment even from a still low starting point has been a more reliable recession tell than whether the level sits at 4%, 5%, or 6%
And now, sentiment and cash buffers are thinner than early cycles. If job growth slows and confidence wobbles, households pull back faster, which can overwhelm margin wins from automation.
This. This guy. yes.
How long can the stock market grow when the underlying economy collapses? If the global economy is cutting rates more than ever, isn’t that a signal that things are not OK?
You also talk about the weakening dollar in other posts, so aren’t you also sounding the alarm bells?
I don’t think we’re trying to be pessimist, I think we’re trying to be realist and not get taken out like 2000, 2009 or worse …1929.
So efficiency is measured by the ELIMINATION of human workers.
idk if I trust this, read Gary Marcus' substack and see what actual tech workers are saying about AI (that it's often anti-productivity)
using AI in coding doesn't mean it's actually improving productivity
my husband works in tech and a lot of junior roles are being outsourced to India
TONS of outsourcing right now
AI = Actual Indians