Frum Economic Collapse?

Wait and see

The Frum Economy: Are We Facing a Crisis?

This all started when a good friend of mine, SH, sent me a LinkedIn post from a frum financial advisor named Yudi Goldfein, who works at Morgan Stanley. The post reads:

Is the frum economy in a recession?

Anecdotally, it seems so. 🙁

❌ I have quite a few friends out of work now.
❌ Many on commission-based incomes haven't closed a deal in over a year.
❌ Fundraisers have told me getting donations "are like pulling teeth".
❌ Those I know in discretionary/luxury businesses say "Sales are way down from last year."
❌ Community organizations (think Tomchei Shabbos, etc.) describe the current need as "unprecedented."

If today was November 25, 2008, this would all make sense.

However, by many metrics, the U.S. economy is doing just fine:

✔️ Unemployment is (relatively) low.
✔️ GDP has increased at a healthy rate.
✔️ The stock market has made numerous all-time highs recently.
✔️ U.S. consumer spending is still growing.

How do we explain the shocking disparity between the "frum economy" and the U.S. economy ❓❓

I'm sure there are many factors, but here are two:

1️⃣ An outsized number of our community are employed in the real estate sector, which has seen its fair share of challenges. As transaction volume slowed, and cash flows dried up, the effect has trickled down and is now being felt.

2️⃣ Similarly, on the investment side, it's fairly common to rely on family/friends/shul connections when deciding where to invest. Many have shunned the stock market and only invested in highly-leveraged private investments. As many of those are in trouble, these investors have tightened their belts. That's caused a ripple effect on charity, hiring, spending, etc.

Why am I posting this, after so much ink has been spilled on this topic?

I don't know how to fix this. I don't claim to have all the answers. But if we're trying to improve the situation, we need to understand the crux of the matter. We can't chalk it up to "the economy" or "interest rates."

We're suffering from poor choices we made 2 years ago.

This post stuck with me. His observations are insightful, but I think the risk runs much deeper than a short-term economic squeeze. Whatever pain is being felt now is tied to larger, long-term economic trends that will likely leave the frum world in a crunch. The golden age of meat boards, PJs, and conspicuous consumption is behind us, and here’s why:

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Sector Overextension

As Yudi noted, the real estate sector has been a major driver of frum employment. However, the slowdown in transaction volumes, rising interest rates, and shrinking cash flows have exposed the risks of relying so heavily on one industry. The Orthodox Jewish community has long leaned into real estate as a source of income, but the market’s volatility and reliance on debt-financed growth make it a fragile foundation.

Possibly an even larger overextension, one not noted by Yudi, is the Frum communities’ heavy reliance on the healthcare sector. What could be wrong with that you may ask? DOGE. The Department of Government Efficiency. The United States newest government agency aimed at shutting down others. Essentially Donald Trump will allow Elon Musk and Vivek Ramaswamy free reign to look into exactly how the U.S Federal budget is being spent.

Without getting bogged down because there is a mountain of complexity to pull apart here, the United States outspends every other major developed country in the world by double on healthcare and on average U.S citizens receive the same or worse care. Needless to say, there is bloat in our healthcare system and the Federal Government is footing a lot of the bill.

As many of you in the frum community probably already know, a significant amount of frum wealth is generated by businesses in various segments of the health care industry. Whether it’s healthcare administrators, nursing home owners, nursing home operators, hospices, medical supplies, medical billing, medical devices, ABA therapies, or whatever the latest hot government program is open, this is just an industry that our community enjoys working in.

There is now a non-zero risk of these industries becoming much less profitable due to the closure or shrinking of many of the federal programs that support these industries. Elon Musk on twitter has signaled out the exponential growth in healthcare administration as a “major driver of healthcare cost”:

This leads me to believe he understands where the bloat is coming from.

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The growth of Kollel

Another factor exacerbating economic strain is the growing number of young couples dependent on Kollel and/or familial stipends. While the dedication to full-time Torah study is a cornerstone of frum life, the financial burden of sustaining so many non-working adults is becoming untenable.

Though I could not find clear numbers for the United States, in Israel, for example, the number of Kollel students has surged by over 50% since 2012, putting immense pressure on both government and communal resources. This trend is echoed in the United States, where larger families and rising costs of living—especially tuition—mean that many households cannot make ends meet without external support. As the number of dependents grows, the ability of the working population to sustain them diminishes, creating a cycle of financial fragility.

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Ostentatious Consumption

Frum Jewish life in the United States, particularly in affluent communities, but even in communities that were not historically associated with wealth (hint: Lakewood) has become synonymous with a culture of visible wealth. Lavish weddings, very expensive yomim tovim, and designer fashion (usually in mid taste) are the norm in many communities. Because of the highly mimetic properties¹ of our close-knit religious communities, this can create a vortex of sorts, families spending well beyond their means as too not “stand out”. This is obviously not good.

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The Automation of Knowledge Work and the Rise of STEM

This is a more futuristic problem, but based on the agentification of even just the current language models, it seems probable. With the rise of AI automation, knowledge-based jobs—traditionally a mainstay for our community—are increasingly at risk. Fields like law, finance, and accounting, which have been traditional career paths for many frum professionals, are particularly vulnerable to disruption. A family member of mine who has been a real estate lawyer for three decades told me that he is getting work that used to take him weeks, done in days, and work that used to take him days, done in hours.

I don’t see a future where we have more lawyers or accountants. The number of humans in law should rationally shrink to 10% of the workforce that we have now. As for accounting, I have yet to hear from someone knowledgeable in AI automation why there should be any human accountants in the year 2030.

I would say this is a personal opinion of mine, but it is also the opinion shared by a great number of technologists and economists², the near future of work will be won by those proficient in STEM (Science, Technology, Engineering, and Mathematics). Really technical fields that AI still has a hard time with. We are still a while away from building robotics good enough to handle human engineering tasks that require max dexterity. Hard Tech, going out and building things will only get more useful as the games of numbers on a screen is taken over by machines.

If there is one area of education that the Frum schools are uniquely bad at, it is STEM. I can think of many successful frum businessmen but almost none have started companies in “high level” fields. There are very few frum owned Biotech companies, very few frum Tech startups. Though I have always thought this was unfortunate, I think it may become an actual issue in the future as the pressure of automation exponentially raises the level at which humans will have to operate at. That level will probably require deep STEM understanding, something that is sorely missed in our communities.

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1. Go and read Rene Girard

2. Tyler Cowen, Sam Altman, Marc Andreesen, Peter Thiel. Listen to anything from them.