Wednesday's Market Minute: This Article Combines AI, Employment, And Powell

The future is not one of manual labor. With each new generation, mankind skews a little further toward his intellectual capacities, away from the physical. The great invention of capitalism is the stock market, which allows for prosperity by way of investment. Use your mind to pick the right businesses, and your palms stay eternally smooth. Sure, some of those investments rely on the physical toil of a worker down the line, but as machines and AI bear more of the load, on an infinite time horizon, the contribution of human physical labor to the economy approaches zero. 

It's not hard to see a future in which people’s livelihoods are determined entirely by their investment ability, because that future is right in front of us. The truly extraordinary thing about COVID, a generally horrible thing, was that it expedited elements of a future that was already clearly on track to happen. It’s easiest to see this through a financial lens: demand soared for products and services that were already changing the way we work, as we realized the capacity to sustain a great deal of our productivity without the physical labor of a commute into an office. So tech sales surged, and who were the great beneficiaries of the COVID economy? The people holding the most shares of technology companies.

The great monetary experiment of COVID was also perfectly consistent with our preexisting trajectory – almost suspiciously so. Without much hesitation and early on, policymakers decided the best response to the economic strain likely to come was more easy money and interest rates at zero (a destination most economists believed we were headed to already). Eventually, a few blocks down in Washington, the White House decided to fulfill another common view of the future by introducing a form of Universal Basic Income via the stimmy-checks.

Where did a bunch of that stimmy money go? Buying stocks and crypto.

If our future is of less work and more investment, then periods of economic slowdown will increasingly push people back into a freshly outdated, more labor-oriented version of the workforce. This is probably what we are seeing right now.

For the first time in history, thanks to government support and a huge rally in asset prices during a period of unprecedented trading, incomes rose as the number of people with jobs went down. To reiterate: for the first time ever, total personal income rose alongside unemployment during a recession. This is the key to understanding why good data is bad for stocks, why the labor market is confounding economists, and why inflation is going to be an incredibly tricky beast for Powell to tame. To be continued.

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