When the Fed Came for Crypto

While the Federal Reserve and the equity markets get the headlines, there are numerous stories lurking underneath the surface. 

One of the most important being tech jobs. Not long ago, conversations and commentaries surrounding the labor market focused on worker shortages across the board. And those do persist in areas of the economy in a meaningful way. 

But tech is beginning to feel the strains of higher interest rates and investors demanding more profitable and sustainable business models. Even Netflix – once a pandemic darling – is laying employees off and tightening the belt. 

The job search data for Boston and San Francisco is somewhat telling on a few fronts. When the job market is “hot” and people are hiring, there tends to be a surge in searches. When the job market and economy are faltering, there is a tendency to “stay put”. The choppiness in the data is telling – particularly the on the technology front. 

The most recent crypto bust is likely to accentuate the issues that were already present. Crypto investments are concentrated among younger generations  as is the employment in those industries. 

And that brings us to the curious notion that its Millennials holding back the labor force participation rate. In reality, that is simply not the case. There might be some truth to the meme of Millennials going back to work following the crypto implosion. But it turns out that cohort was already working at a higher rate than most of the past 15 years. 

It is tempting to make light of the situation in crypto. But there are real people with real savings that were lured into the quagmire. When the savings rate is sitting at 0%, it is more than tempting to jump on anything with a higher stable return. “Stable coin” and “algo” sound really great until the algo breaks down and the stable part is deleted from the coin. 

Which all wraps backs to the elephant in the room – the Fed. The Fed cannot really do anything about oil and food prices. But it can effect the trajectory of the economy through the “wealth effect”.  As it turns out, many Millennials and Gen-Zers are likely  feeling the pain of the Fed. Maybe (Maybe) the Fed is beginning to accomplish its mission. 

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