"That dichotomy is exemplified in the tech sector, which has seen profits soar while employment has been in a "recession" for three years, he said in a Monday note titled "A Jobless Profit Boom." "We suspect that job losses in tech have been driven mainly by AI displacement," Zhao added, pointing to recent cuts at Amazon, Meta and Salesforce. "These layoffs, however, are happening amid exceptionally strong profit growth in these companies-a significant departure from the past, when job cuts typically followed declining profitability.""
"In fact, while overall private-sector payrolls have rebounded from the early days of COVID, it is still 5% below where the pre-pandemic trend would have been by this time. "In other words, there has been a permanent loss of jobs since the pandemic crisis, even as corporate profits have surged to record highs," Zhao said. At the same time, productivity has been surging in recent years, and it is currently growing more than twice as fast as it did in the previous decade."
Corporate profits have surged to record highs even as the labor market has weakened, producing a divergence between earnings and employment. The tech sector exemplifies this pattern with soaring profits alongside a multiyear employment "recession" and widespread layoffs at major firms. Job losses in tech are attributed mainly to AI displacement, while payrolls remain about 5% below the pre-pandemic trend, implying a permanent loss of jobs. Productivity has accelerated, growing more than twice as fast as in the prior decade. Aging demographics and immigration restrictions have reduced labor supply, creating a new equilibrium of lower hiring but sustained low unemployment thanks to higher productivity.
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