Ahead of Friday’s closely-watched jobs report, economists polled by Refinitiv say they expect job growth to have slowed in November as just 200,000 new jobs were added.
But while the recent spate of layoffs in the tech sector has dominated news cycles and sparked concerns that a bigger reckoning may be on the horizon, labor economists say those concerns are overdone.
“All these announcements you hear: 10,000 [layoffs] 10,000 here and 10,000 there is basically a very, very small fraction of total employment,” said Daniil Manaenkov, an economic forecaster at the University of Michigan.
Despite a series of deep cuts — particularly at tech companies and other firms that have grown during the pandemic — and fears this is the calm before the storm, the job market as a whole has barely twitched.
“We just haven’t seen these plans materialize to the extent that we expected,” said Julia Pollak, labor economist at ZipRecruiter. “Companies appear to be preparing an escape route, they are working on their disaster preparedness plans, but they are preparing for a downturn that hasn’t happened.”
In November, tech companies announced 52,771 job cuts, according to data from Challenger, Gray & Christmas released Thursday morning. This represents the highest monthly total for the sector since 2000, when the outplacement firm began tracking industry-specific reductions. However, the overall cuts this year are the second-lowest since 1993, when the company began tracking layoff announcements.
Despite these losses, weekly jobless claims were a little bumpy but remain at levels seen in healthy economic times. And employees laid off by big companies seem to find jobs quickly, said Robert Frick, a business economist at Navy Federal Credit Union.
On Thursday, new data from the Labor Department showed that weekly initial jobless claims fell by 16,000 to 225,000 in the week ended November 26, while ongoing claims fell to 1.61 from 1.56 million in the week ended November 19 millions have increased.
“The worrying trend is persistent claims or claims from people who have been unemployed for a long time, which are at their highest level since February,” Frick said on Thursday. “This indicates some cooling in the job market as 1.6 million Americans are now finding it difficult to find a job quickly as the job market begins to cool.”
While interest-rate-sensitive areas of the economy, such as housing, construction and technology are showing some signs of weakness, this is more than offset by the ongoing recovery in the leisure, hospitality and other services jobs market, Pollak said.
Many industries are still understaffed in terms of business activity taking place; and US consumers are still spending because their fiscal finances are still relatively strong by and large and many are fairly insulated from the Fed’s anti-inflation measures, she said. This is especially true for higher-income consumers, many of whom have seen large increases in their net worth from stock market gains and from refinancing and locking in mortgage rates below 4%.
“Everything seems to be moving towards a new normal that’s not quite what it was before the pandemic,” Pollak said. “It’s a much tighter labor market with increased emigration.
The vacancies-to-jobseekers ratio is moving slightly down — and in the right direction for the Federal Reserve, which hopes lower demand for labor will help curb decades-high inflation.
But the labor shortages that have persisted throughout 2021 are unlikely to be fully alleviated anytime soon, Fed Chair Jerome Powell said during a question-and-answer session at an economic forum on Wednesday.
A combination of demographic factors, including lower-than-expected population growth, early retirement, illnesses like long Covid, deaths from Covid and falling net immigration are all affecting the labor pool, Powell said.
Finally, policies to support labor supply could boost overall economic growth; However, these are outside the scope of the Fed and would take some time to implement.
The labor market “is showing only tentative signs of rebalancing and wage growth remains well above levels that would be consistent with 2% inflation over time,” he said. “Despite some promising developments, we still have a long way to go to restore price stability.”
But while slower growth and fewer job vacancies raise hopes that the Fed could achieve a soft landing and lower inflation with minimal economic and human suffering, headwinds and uncertainty remain swirling.
“The Federal Reserve is battling the worst inflation the United States has had in over 40 years, and this is a global problem,” said Giacomo Santangelo, an economist at Monster and senior associate professor of economics at Fordham University. “We have global inflation and if we have a recession, it will be a global recession.”
He added, “And we just have to hope that the hikes that the Federal Reserve made earlier don’t break the job market on Friday or a month after Friday and that we see unemployment rise slowly and not aggressively.”