White-Collar Recession Starts Before Any Official Recession or Downturn
Level 2 - Value Investor
Welcome Avatar! We’ve worded the title carefully. According to official metrics a recession is really just two quarters of negative GDP growth. That said, a downturn can also happen in stocks where it isn’t labeled a “recession”. Such as 2018 and 2022 when they claimed it wasn’t a recession.
White collar workers represent the main artery for consumption. Without high paying W-2 white collar work, there is no real demand for variable discretionary spending. Landscaping, cleaning, car washes, vacations and any other “nice to have” gets thrown into the garbage bin.
We’re going to make sense of the “vibe” as Gen Z would call it. White collar sees it first which is why the current economy is polarizing.
Feels Confusing Because It is
Most people view downturns as “everything is down”. This really isn’t the case right now. If you’re a business owner taking advantage of AI, you’re making more than you could have possibly dreamed. You’re also pretending to be struggling while heading out to nice restaurants on Tuesdays.
The American economy has felt confusing depending on where the person sits. If your goal is to climb **up** the corporate ladder, it doesn’t feel great that is for sure.
This stagnation allows for the headlines to say “resilient labor market”, “low unemployment”, and “improved producitivty/efficiency”.
Then white collar workers star to piece it together:
Recruiters are not calling as much
If you were making $500,000 and get laid off, taking a new role that pays $300,000 to stay afloat you’re “employed” despite a -40% drop to income
Job postings are getting 2x, 3x or 4x the number of applicants
Interview processes get longer and those merit increases are mirroring Fed printed inflation numbers
What was previously an upward trajectory now feels like a flat/frozen organization
That is the story today
White Collar Feels the Change First
If you’re seeing less openings, slower hiring, increased competition and flat pay vs. inflation… this means the asset owners hold all the leverage again. (IE. the Boss/CEO). If a CEO gets 4x the number of applicants? No need to pay up. Easy to replace and no chance the white collar slaves move.
This is why people feel they are behind. One side is getting richer by the second via cost cutting initiatives. The other is clocking in and out (thankful to have a W-2) and doesn’t see line of sight to making it.
Historically, both of these vibes can coexist for a period of time. In fact, we’ve probably been in that pattern for about 4-6 months already. Hiring slows. Openings decline. Fear spreads. Profits for Companies go up - for now. Layoffs pick up. Companies fire too many people. Suddenly need to bring back in talented niche people.
Based on the typical trajectory, we’re somewhere between fear + profits. Still some time to wait.
In short, if you’re feeling the softness it’s because you’re closer to the beginning of the chain of events. Or. You are profiting off the softness by being a business owner using new tech.
Gallup reported that ~27% of college grads said it was a good time to find a quality job (March 2026). This is the lowest reading in over a decade. Hiring is also down about 20-30% depending on the industry. All of this lines up with tech innovation since technology is designed to remove human labor. The easier the task (see entry level), the more likely it is replaced by code.
Abundant white collar opportunities? That is not the case in 2026. Likely over until new roles are created. Anyone with advanced knowledge of AI/software tools will be making more money though!
Now board rooms are asking a different question: How many people do we actually need?
That is the new game. A CFO simply goes through all these line items in excel and sees what type of margins they produce. If it isn’t in the green, he tries to replace the bulk of their work with code, give it to his manager and bump up his pay 5-10% to justify the additional work. Essentially making one guy do 3-4 roles and pay him like he does 1.5. Big margins. Big profits.
We’re not going to bother calculating the exact job loss. Our assumption is that it is impossible to figure out. Every company will justify all layoffs as “AI” even if they were planning on cutting in the first place. The real answer? Once 2026 is done and firms have “right sized” we’ll know the real number that AI took. If they are scrambling to rehire important people, you know that the hopes of AI got a bit out of hand in certain sectors.
Can You Really Blame the CEOs? When Block announced a significant headcount reduction, the stock rallied 20%+ and is the only reason it is holding up ytd vs. the vast majority of high beta tech stocks.
New Framework: Layoffs = sign of strength. Sounds funny until it clicks. If your tech is actually advanced and you don’t need 10,000 people (can get same results or better with 8,000) then the layoff is an announcement that you’re *ahead*. This goes directly against the industrial age motto.
You can see this with Microsoft, Amazon and Meta all coming through with their own downsizing/AI related work force reduction.
In addition to that, the vast majority of tech companies likely overspent on all their data centers. They can help justify this by cutting costs and increasing margins to appease investors.
White collar cuts are much harder to see visibly. When 2,000 people show up to a building and suddenly it is 1,800 do you even notice? No not really. It’s not like construction work where you’d see a sudden drop in buildings.
The second problem? No one really knows the real reason for their layoff right now. We won’t see who has advanced AI until at least 2027/2028. No CEO or manager would ever tell someone “we’re losing market share”. It is always “amazing time to join the company” and “we’re really sad we have to do this but the guy above me is saying resources are being moved to department 2 for more revenue and margin opportunities”
As You Can See: Many got the Memo
January JOLTS has openings at 6.9 million and hires at 5.3 million. While it looks fine, the trajectory has been down for about 2-3 years straight. This doesn’t look like consistent expansion. Looks more like a loss of momentum.
Onto the Rest of The Economy
White collar is in the midst of the storm right now. The next move is a decline in discretionary spending. 1) slower to upgrade the home, 2) delay moving, 3) no new car, 4) cut vacations, 5) decline in hired help, 6) more cash vs purchasing assets and 7) directionally going from offense to defense
Around now is essentially the second order effects. Even if someone survived the round of cuts at META/Block/AMZN they are going to spend a bit less since they are worried about the future. They are part of a leaner team and that means the slack at the bottom no longer exists.
Note: Pro-tip for OGs, never say anything bad about anyone you work with. Especially if they are not good. The longer they are there, the more job security you actually have! Most don’t have the ability to conceptualize second order thinking. Besides, nothing to gain from bashing on anyone at work. None of them are your friends anyway
Once services demand declines, bargaining power shifts away from services to customers again.
Think About Negotiating Leverage
Ask who has the power in the situation.
If jobs are hard to get? Owner/operator has more leverage
Can replace more people with code? The platform has the leverage
If things are becoming commoditized? Distribution has more leverage
If money is scarce and hard to come by? Capital allocator has more leverage
If people are willing to do anything to “get by”? Customer has leverage and middle gets squeezed
That is why this K-shape economy feels like it is never ending. We exited a $10,000,000,000,000 money printing economy to inflate assets then entered into an AI economy where white collar jobs are getting slashed/made redundant.
Conceptually, once the average professional has his value flatten out, more leverage moves to operators/owners. Hint hint, you should become an expert on these AI tools to build your own small system and become indispensable to your firm. That simple step is enough to create a gap between you and NPCs
All Comes Back to Emotions: You’re getting a live crash course in emotions. Everything written here will strike a nerve with NPCs. They know it is true. However. They will do absolutely nothing about it!
They can see and feel the ground shifting a bit. Degrees, working hard and doing what you’re told is simply not enough. The problem? They just stop there and avoid improving their skill set. Do you really think a 50 year old who doesn’t even know how to use excel anymore is going to keep up with Claude/AI? Yeah. Exactly.
While others panic, you improve your position.
Boil it Down
Now that you have your list of who has leverage, now you can move to asking a simple question. “What does this create long-term”. If your goal is to make big strides over the next 5-10 years related to wealth, you have to remove all activities that will decline in value.
Here is a simple yes ladder. Does This:
Increase long-term equity
Improve sales/marketing skills
Improve skills related to leading edge tech
Increase visibility
Create a cash flow for you that occurs while you sleep
If it is a yes to any of those? Continue. If it is a no to all of them. Best to move on.
You know where the dividing line is going to be. Copy pasting numbers from a computer to another spreadsheet isn’t a useful skill. Learn things that the older generation won’t process as fast and where demand will be highest. Most are doing the opposite, holding onto tasks they know are going to be automated away.
Summary on Where This is Going
We really don’t care about an “official” recession. Or an “official downturn based on X% decline”. The writing is already on the wall. The government could always just spend another 100 billion to make the GDP number go up anyway.
We know that the hiring market has weakened, more demand for jobs vs. supply and management is being told to focus more on operating margins.
Look at that set up and the answer is clear. Position yourself as the guy who can make the margins go up and consistently find ways to expand margins. The guy who can find holes in the market to protect/gain market share. And. Direct proof of revenue growth/cost reduction. If you’re doing anything close to what is written here, you’re mils ahead in corporate. You’re a billion miles ahead if you have $1,000 of WiFi profits coming in on a monthly basis.
The most efficient and profitable will survive.
Once all these initiatives are rolled out, the behavior of people will change for good. We already saw this post COVID. After behaviors change, it is tough to get them to revert back assuming it was faster, cheaper and more secure.
On that note we hope you have a plan. We’re constantly updating everyone on the market + opportunities that will inevitably come of all this.
Please don’t be the middle aged guy saying “back in my day” or “if only we could return to the past”. Just an admission of not making it in life. No one successful today wants to go back to the eating glass years!
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers and software engineers who moved into affiliate marketing and e-commerce.
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