To The Moon

March 20 marks the 25th anniversary of the dot-com bust. Could it happen again?

It's a timely, if unsettling, question: Could the bottom fall out of the job market just in time for the silver anniversary of the dot-com bust 25 years ago? At first glance, the labor market today is not so different from that labor market a quarter-century ago.

The late 1990s were the halcyon days for the U.S. labor market. A holy trinity - robust wage growth, nearly full employment and a surge in demand for technology - supported a booming labor market at the end of the millennium.

"It's analogous to what's going on in the 1990s," said Preston Mui, a senior economist at Employ America, a research and advocacy organization. The Federal Reserve's benchmark interest rate currently hovers at over 4% - again, he noted, not so different from the rate in 1999.

Thus far, the labor market in 2025 looks stable. The U.S. economy added 151,000 jobs in February compared with 143,000 in January, the Bureau of Labor Statistics said Friday. A consensus forecast reflected on FactSet had shown expected job gains of 160,000 in February.

In 1999, the world was experiencing a surge in spending on research and development and a demand for new technology.

Nearly 25 years after the U.S. embarked on the war on terror in the aftermath of the Sept. 11 attacks, the world faces a new wave of geopolitical turmoil, namely Russia's 2022 invasion of Ukraine, which has put President Donald Trump and European leaders at odds.

Put bluntly by S&P Global: "A world ordered for decades by globalization and geoeconomics has quickly become a world grounded in geopolitical risk. Accumulating shocks such as the Russia-Ukraine conflict have persisted, significantly reorganizing global structures and relationships."

Julius Probst, a labor economist at The Stepstone Group, a digital recruitment platform, fondly recalled the 1990s as an era of near-full employment. It was, he said, the "most spectacular" labor market for workers - and major indicators point to a healthy job market today, too.

"Historically low unemployment is also expected to remain low for the foreseeable future, absent major economic shocks," Probst said. But with a trade war afoot, cuts in the federal workforce, and Trump's pledge to deport millions of undocumented immigrants, will this strength continue?

That might be a hard question to answer.

Don't mention the 'B' word

In 1999, the world was experiencing a surge in spending on research and development and a demand for new technology. Back then, the World Wide Web heralded a new era for developers. Today, artificial intelligence has created a new and exciting chapter for Silicon Valley.

The explosion in personal-computer usem helped to bolster growth across the economy in the 1990s. That, of course, is the hope for AI in 2025. But there is anxiety that the AI boom, while it has fueled the rise in some stocks, won't pan out. After all, "B" also stands for "bubble."

"I don't want to use the 'B' word," Mui added, "but if AI doesn't pan out in the way that investors are expecting, this really presents a lot of threats to the economy in the same way the dot-com bubble presented a threat to the economy in the 2000s."

Mui is not alone. Some observers have been rattling their sabers about the prospect of another boom and bust, in part because of the run of tech stocks over the last decade - and the growth of the "Magnificent Seven" group of stocks that have lined the pockets of tech-heavy investors.

The 25th anniversary of the March 20, 2000 dot-com bust has led some observers to look back with anxiety.

The 25th anniversary of the March 20, 2000 dot-com bust - when investors dumped tech stocks in their droves, leading to the third-biggest point drop in the Nasdaq COMP on record up until that point - has led some people to look back with anxiety and not a small degree of déjà vu.

An announcement earlier this year by the Chinese company DeepSeek that it had developed a ChatGPT competitor at a fraction of the cost sent shockwaves through tech stocks, which some investors took as a warning of overinvestment in AI.

Bridgewater Associates founder Ray Dalio, the billionaire investor, told the Financial Times that the high pricing of AI-related stocks during high-interest-rate risk "could prick the bubble." And when asset bubbles burst, the ripple effects often take jobs with them.

"Where we are in the cycle right now is very similar to where we were between 1998 or 1999," he said. "In other words, there's a major new technology that certainly will change the world and be successful. But some people are confusing that with the investments being successful."

Then, as now, skilled workers have mostly benefited from developments related to new jobs and new kinds of jobs.

A team of researchers from the Harvard Kennedy School likened AI to technologies like steam power and electricity, which disrupted the 20th-century labor market. In a working paper, they said tools like ChatGPT could replace some highly skilled knowledge workers.

AI will be used for generating business plans or translating software code, they said. The tasks it does not end up replacing - analysis, decision-making, and adjudicating between the conflicting perspectives and desires of co-workers - are likely to become highly valuable.

"Employment in low- and middle-paid occupations has declined, while highly paid employment has grown," they added. Employment growth has stalled in low-paid service jobs. The share of employment in STEM jobs has increased by more than 50% since 2010, fueled by computer-related jobs.

Retail-sales employment fell by 25% over the last decade, likely due to technological improvements in online retail, the Harvard researchers said. "The postpandemic labor market is changing very rapidly, and a key question is whether this faster pace of change will persist into the future."

Related: Trump's trade war has rattled investors - uncertainty is a call to action

An optimistic view

There are, however, reasons to be optimistic. "The prime-age labor-force participation is at its highest in two decades," Probst said. "A lot of people are being employed right now. The economy has still been creating 180,000 jobs on a monthly basis over the last 12 months."

In the late 1990s, prime-age labor-force participation was more than 81%. In January, it was also just shy of 81%. Full wage growth was 3% in the late 1990s, compared with just over 4% currently. Unemployment hit 4.1% in February, ticking up from 4% in January, versus 4.1% in 1999.

There's a caveat to that data: Overall labor-force participation has been in gradual decline since the 1990s, mainly due to older workers exiting the workforce and younger workers continuing their education amid a decline in middle-skilled jobs.

Still, the pandemic-era great resignation, when people reassessed their work-life balance, gave up their jobs, worked part-time or freelance, created a tight labor market in the same vein as the labor market of the late 1990s. The jobs market is still tight by historical standards.

In the late 1990s, prime-age labor-force participation was more than 81%. In January, it was also just shy of 81%.

"The number of long-term unemployed individuals remained steady, indicating a labor-market landscape that has reached some equilibrium over the last several months," J.P. Morgan said. Annual growth of 4.1% "still points to a balanced," it said, "rather than overheating, economy."

Inflation seems under control, for now. The headline number was clinging to 3% last month, although it remains a concern for the Federal Reserve. The inflation rate averaged 2.2% in 1999, low enough to allow workers to push for higher salaries without the risk of overheating the economy.

As the Federal Reserve raised its benchmark interest rate to combat inflation in 2022 and 2023, however, the labor market cooled. "We went from a labor market that was excessively tight - as it was in the 1990s - to one where the Fed had to slow it down too much," Probst said.

Mui agreed. "The last major productivity gains in the U.S. economy happened in the 1990s," he said. "We have the opportunity today to recreate some of the dynamics that produced those sustained productivity gains." Despite glimmers of hope, that has not happened.

Job hoppers and job shortages

There are clouds on the horizon: Consumer confidence has declined, not helped by the current administration's trade war, and employers don't hire when they're nervous. Tariffs lead to higher interest rates, and higher interest rates slow growth in the jobs market.

And the sectors that are hiring, particularly white-collar industries, are having trouble filling those roles, said Stephanie Ferguson Melhorn, the senior director of workforce and international labor policy at the U.S. Chamber of Commerce. "We still have a worker shortage in the nation."

She would like to see higher visa caps, investment in child care and short-term Pell Grants so workers can develop new talents. "The baby-boomer generation is nearing retirement in the next five years," she added. "That will put more strain on workers in certain industries."

"We are missing 1.7 million Americans from the workforce compared to February 2020," she said. "We hear every day from our member companies - of every size and industry, across nearly every state - that they're facing unprecedented challenges trying to find enough workers."

The sectors that are hiring, particularly white-collar industries, are having trouble filling those roles.

Other signs that the 2025 job market is malfunctioning: The majority of hires appear to be made up of job hoppers. Job vacancies, in fact, declined to 8 million from their record high of 12 million a couple of years ago. The postpandemic labor-palooza is long over.

The number of 12-month annual total hires peaked close to 80 million a couple of years ago and now stands at roughly 66 million, Preston added. “This relatively stark decline is reflecting much lower hiring needs across all sectors after the vacancy and hiring boom a couple of years ago.”

Yet worker shortages persist, Ferguson Melhorn said, and they’re unevenly distributed across industries and states. “There are great differences in industries. Construction, mining and lodging have great surpluses, while highly skilled industries have significant shortages.”

Unlike in the 1990s, all of these factors impacting the labor market of 2025 do not necessarily add up to another boom and bust. Not yet, at least. “There’s not a lot of stories that lead towards the reacceleration of the labor market,” Preston Mui said.

Much like the Fed, the U.S. labor market continues to tread water — for now.