An article in the April 10, 2023, edition of The Wall Street Journal by Katherine Bindley titled “Tech Workers Seek Jobs Outside Tech” called to mind Feb. 9 comments from Bloomberg’s Joe Weisenthal where he highlighted Hertz (the rental car firm) as a microcosm for how non-tech companies are beginning to enjoy a looser employment market for tech talent as a result of the layoffs at large tech companies grabbing headlines recently.
Here is Hertz CEO Stephen Scherr from the company’s February conference call:
“In terms of operating expenses, we have made progress, as I have noted, but we are not done. We continue to replace third-party employees with Hertz badged employees at lower cost, including project engineers where we are seeing a broader pool of talent at more affordable price points, aided by current dynamics, at large technology firms.”
Evidence of the economic effect of this nascent trend is mostly anecdotal. However, some figures are emerging. For example, the previously referenced article from The Wall Street Journal cited Revello Labs data showing that the percentage of technology employees moving to non-tech industries when changing roles began rising last year after being in secular decline post-Financial Crisis.
One more anecdote – A friend of mine who runs a private software firm shared the following profile with me of one of his friends who formerly lived and worked in Silicon Valley. Within the last year this individual lost his tech job and moved to a middle America city where he purchased a chimney sweeping business, probably the most prosaic operation I can think of. In any event, this individual is apparently now projecting a couple hundred thousand dollars of annual income run rate owing to hustle and via running the business in a way that takes advantage of productivity enhancing tech. Importantly, we are not talking about some propriety chimney cleaning tech. We are talking implementation of basic workplace technology.
Regarding U.S. labor productivity generally, annual growth in worker productivity has been disappointing in recent years, averaging 1.4% (per U.S. Bureau of Labor Statistics) since 2008, compared to 2.2% since 1947, when data is first available from the St Louis Fed’s FRED database. All else equal, increased labor productivity would increase economic output in a way that reduces inflation, clearly a welcomed outcome.
A conundrum of the last decade-plus is that an explosion of technology has not resulted in major efficiency gains for U.S. workers as most of the major breakthroughs have been consumer rather than business facing. Although I suspect generative AI is, perhaps we do not need major new technological breakthroughs to drive labor productivity. Perhaps a broader disbursement of tech talent throughout the economy can carry a lot of freight.
Chas Craig is principal of C.E.C. Wealth Management (www.cecwm.com).