🎙️ Power Shift

Doing anything fun for Labor Day? It’s been a record summer for travel, and this weekend will be no exception. TSA predicts the busiest Labor Day travel weekend on record.

In markets on Friday, the S&P 500 just posted its fourth consecutive positive month. And the Fed’s preferred inflation measure—which strips out volatile food and energy items—rose at a mild pace. Household spending also rose, further supporting the argument that policymakers will start cutting interest rates in September.

Also: Happy 94th Birthday, Warren Buffett!

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Bosses find ways to pay workers less

• OpenAI could be valued at $100 billion

This, and more, in just 5 minutes to read.

Charts of the Day

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In The News

💵 Wages for Many Jobs Are Now Falling

The worker pay power shift is here in a cooling hiring market. Pay for new white-collar hires shrank last year, and now blue-collar worker wages are declining, too, according to ZipRecruiter. 

In some cases, jobs are being advertised with salaries tens of thousands of dollars less than they were a year ago. For companies that have kept wages the same, some managers are moving the openings to less expensive cities or offering them as contractor roles. 

Cheaper pay: Over the past two years, pay cuts have been made to higher-end jobs paying around $200,000. Even tough-to-fill hourly jobs are being advertised as lower pay. 

• As one job seeker put it: “A lot of companies are thinking they can get away with paying a cheaper salary because they know us job seekers are desperate.” He has lowered his pay expectations by at least $20,000.

Constant battle: Sectors hit hard include retail, agriculture, transportation, warehousing, food, and manufacturing. The biggest dip came in retail, where average wages have fallen 55.9%. Agriculture has seen a 24.5% drop. Manufacturing? 17.3%, the latest evidence that the job market has transformed from one in favor of job seekers to one more in the manager’s control.

• One McDonald’s franchisee who owns 56 restaurants said he’s eliminated signing bonuses (mostly offered during the pandemic) and now usually offers hourly wages at $12 an hour, down from $13 and $14. The reason? Labor expenses have exceeded his food costs, which had never happened in 24 years.

• “I want everybody to do well in America, but there’s cost pressures,” he told The Wall Street Journal. “It’s just a constant battle.”

In control: White-collar job seekers have said they’ve noticed salaries that used to be in the $80,000 and $100,000 range now rarely above $60,000. Some companies would rather pay less for a less experienced worker to save on costs. Other firms have looked to hire workers in Mexico and other countries to save money. 

• A few hiring professionals said they haven’t seen this extent of lower pay since 2009.
  

• “Most people we interview are seeing lower salaries,” said the CEO of a tech recruiting firm. “Hiring managers know they are more in control now.”

Why it matters:

After years of robust job growth and record-low levels of unemployment, the job market looks much more normal. 

Some employers may view this as a correction to what they perceived as inflated salaries during the tight labor market of recent years. Others see the trend as an attempt to bring compensation more in line with pre-pandemic levels or company expectations. 

• New-hire salaries for finance jobs have fallen 9.2%. For insurance, new-hire salaries are down 1.6%.

Implications: In the longer term, lower salaries could impact employee loyalty or job satisfaction, driving more turnover once the job market improves. It’s likely a matter of time before the natural ebb-and-flow swings back in favor of workers. 

• “People will take a job now because it pays them and they’re scared, but that’s not going to last forever,” one hiring manager said. 

Read more

More Headlines

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🏢 How one company transformed the apartment rental market

📉 Dollar General stock tanks 32% after outlook cut

💡 Warren Buffett on the fragility of reputation

⛽ Why gas prices are so much cheaper than last summer

💸 OpenAI Funding Round Could Value It Over $100 Billion

OpenAI is in talks for a new funding round at over $100 billion, a 16% jump from its last known valuation. 

Yes, the backing could come from Thrive Capital, but also from the three most valuable companies: Apple, Nvidia, and Microsoft. Each tech giant has become increasingly dependent on the startup and its revolutionary technology. 

The numbers to know: At $100 billion, OpenAI will have a valuation higher than the GDPs of 110 nations. The valuation would make it the most valuable American, VC-backed firm not named SpaceX, which is reportedly a $210 billion company. 

• OpenAI’s annual revenue is said to be about $3.4 billion.
  

• OpenAI’s ChatGPT has hundreds of millions of monthly users.
  

• The new funding would be OpenAI’s biggest capital infusion since Microsoft invested roughly $10 billion in January 2023.  

Why it matters:

The AI arms race continues to take shape. November marks two years since ChatGPT went live. Since then, Google, Amazon, Meta, and Apple have all launched their own AI products and models or integrated them into their apps. 

The Wall Street Journal reports that “raising prodigious amounts of capital is critical for Altman’s goal to create artificial general intelligence, which his company defines as autonomous systems that can outperform humans at most economically viable tasks.”

The three largest companies are hungry to get a slice (or, in Microsoft’s case, a bigger slice) of OpenAI, which speaks to the startup’s importance in the AI revolution. Microsoft has long been an investor in OpenAI, while Apple is adding ChatGPT to its new AI features, aka Apple Intelligence. 

This week, Nvidia — whose chips are critical to ChatGPT — said revenue more than doubled to $30 billion and predicted further growth in the current quarter. 

Final thoughts: OpenAI will reportedly use the new financing to add computing power and fund other operating expenses. 

• It’s widely known that groundbreaking AI progress like OpenAI requires enormous amounts of data to be processed in warehouses of supercomputers, all with expensive chips.
  

• As WSJ noted this week, “OpenAI spent more than $100 million to build GPT-4, its most powerful AI model to date. It is currently working on its next model, which is expected to cost more…Backers are betting AI will upend the way people and companies work and create. For now, though, AI is a speculative business that isn’t generating nearly as much revenue as investors and tech companies are putting into it.”

Read more

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