Chief Gig Economist (kinda)

I can't wait until Gig Wage has a full time Chief Economist but until then I'll have to do.

Here's my thoughts on the current macro environment and the role the Gig Economy can play as the market navigates the uncertainty.

The US economy is currently experiencing a tight labor market, with an unemployment rate below 4% and over 10 million job openings available. This has led to upward pressure on wages, with average hourly earnings increasing by 4.1% in the past year. As a growing company that did a bit of hiring over that last couple of years, we felt the impact of wage inflation in the midst of competing for top talent.

However, this tight labor market has also contributed to general inflation, with the Consumer Price Index (CPI) increasing by 6.2% in the past year, well above the Fed's target of 2%. As a result, the Fed has been raising interest rates aggressively, with the federal funds rate increasing from 0.25% in early 2022 to 2.5% by the end of the year.

Despite this inflationary pressure, the US consumer remains strong, with personal consumption expenditures (PCE) increasing by 3.9% in the past year. However, savings rates have declined, with the personal saving rate falling from 9.2% in early 2022 to 4.8% by the end of the year. At Gig Wage we've seen monthly earnings increase across this same period.

In this context, the gig economy can provide important benefits. The flexibility and competition it offers can help to fill any gaps in the labor market, while also improving productivity and efficient regarding how work gets done. This can help to mitigate the inflationary pressure caused by the tight labor market, which is a key concern for the Fed.

Also, the gig economy can help to stimulate entrepreneurship and innovation. For example, a recent study found that 15% of gig workers had started their own businesses, compared to just 8% of traditional workers. This can lead to more job creation and again higher productivity, which can have positive effects on the overall health of the economy.

Although this all makes sense for the current environment, I'm careful not to be held captive by the moment. I'm bullish and extremely long on the positive impact of the Gig Economy in any macro environment.

Let's explore a different scenario.

In an economic scenario where unemployment is high, let's say above 7%, and there are fewer job openings available, wages are stagnant or declining, and inflation is low again, the gig economy can still have several positive impacts on the US macroeconomy.

First, the gig economy can provide workers with new opportunities for employment and income. In a tight labor market, many workers may struggle to find traditional full-time employment, but the gig economy can provide a flexible alternative. This can help to reduce the unemployment rate, as workers are able to find new sources of income. To be fair gig work still isn't properly tracked and accounted for by the government but I believe that will eventually change.

Second, the gig economy can provide opportunities for workers to up-skill and gain new experience. This can lead to improved productivity and employability in the long term, which can have positive effects on the overall health of the economy.

Third, the gig economy can help to fill gaps in the labor market. For example, during the COVID-19 pandemic, gig workers played an important role in providing essential services, such as food delivery and online tutoring. In a weak labor market, the gig economy can provide a flexible source of labor that can help to meet the needs of businesses and consumers.

Fourth, the gig economy can contribute to innovation and entrepreneurship. By providing workers with the opportunity to start their own businesses, the gig economy can lead to new ideas and products that can drive economic growth.

Overall, in a weak labor market with high unemployment and stagnant wages, the gig economy can provide important benefits. By providing workers with new sources of income and opportunities for up-skilling, the gig economy can help to reduce unemployment and improve productivity. Additionally, the flexibility of the gig economy can help to fill gaps in the labor market and promote innovation and entrepreneurship, which can have positive effects on the overall health of the economy.

Bull or Bear the Gig Economy is always there.

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