Bloomberg News reports that the labor market in the United States is stronger today than many thought would be possible. However, cracks are showing up, implying that this will not sustain.
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In the last few weeks, companies have announced tens of thousands of job cuts and plan to halt recruitment. The bulk of it has come from real estate, cryptocurrency, and technology firms that have laid off as many as 37,000 workers since May, according to TrueUp, a tech-job listing website. Brokerages and banks, including JPMorgan Chase & Co., are narrowing the headcount as the housing market is cooling off.
The combination of slow consumer demand, 40-year high inflation, and hike in interest rates by the Federal Reserve is also making inroads into the other sectors. The second-largest producer of aluminum, Century Aluminum Co., stated that it has plans to lay off 600 workers.
There is economic data that suggests that more are yet to come. Over time manufacturing hours have dropped for three straight months, which is perhaps the longest downward streak since 2015. The jobless claims related to the four-week average, less volatile than the weekly figures, surged to the highest level since January as more and more people filed for the benefits. There is a cooling of growth of wages across the country.
The table below indicates the job cuts from the different companies in June 2022.
The hike in interest rate by the Fed is programmed to slow down demand. This applies to demand workers as well. According to a forecast by the central bank, the unemployment rate can increase to 4.1% by 2024. This figure appears to be optimistic in comparison to the Wall Street estimates. Nomura Holdings Inc, for instance, sees the rate swelling to 5.9% by the end of 2024. And that could be a level of June 2021.
At present, for now, the labor market continues to remain tight. The jobless rate at 3.6% in May is low historically, and there was a healthy rise in the payrolls by 39,000 the same month. When inflation is excluded, wage growth is high historically. While the new job postings have dropped in recent weeks, they remain 54% higher than before the pandemic, as per the job website data from Indeed. However, the traditional indicators are still lagging.
