We’ve been watching slumps ripple through various parts of the economy over the past 18 months: technology startups and stocks, regional banks and growing concern about commercial real estate. Yet we’re still waiting for the wider labor market to feel the downturn.
Does it even have to? Prior bubbles or periods of economic excess have featured too much hiring and investing like we saw during the late 1990s boom. Or we’ve had excessive credit creation and construction, as we confronted during the mid-2000s. The downturns that followed those periods involved unwinding some of that activity, which led to declines in employment and investment.
But the excess we had in 2020 and 2021 at the national level wasn't about too much hiring or investing — it was mainly about the mistaken belief that interest rates would remain low. That’s the excess now being unwound. And while it’s painful for those making the adjustment, it doesn't need to lead to the kinds of job losses we’ve had in the past.
