As the economy slows, more American businesses are laying off employees and halting recruiting, a sign that the Federal Reserve’s initiatives to fight inflation are having an impact on the labor market.
According to the outplacement company Challenger, Gray & Christmas, the number of layoff announcements increased in September. According to the company, there were roughly 30,000 job layoffs last month, up 46% from August, while the number of enterprises advertising recruiting intentions dropped to its lowest point in more than ten years.
“The labor market is starting to show some fractures. Downsizing activities are starting to take place as hiring slows down “According to a statement from Andrew Challenger, senior vice president of Challenger, Gray & Christmas.
A sluggish labor market is also indicated by government statistics. The Labor Department said on Thursday that the number of jobless claims for the week ending October 1 increased by 29,000, to 219,000. For the week ending September 24, there were 15,000 more Americans receiving unemployment benefits overall, bringing the total to about 1.4 million.
We won’t put too much stock in one week’s worth of claims data, but if an increasing trend holds, it would be consistent with other recent evidence that the job market may be loosening up a little, according to Oxford Economics researchers.
Applications for unemployment benefits often reflect layoffs, which have been historically low ever since the coronavirus pandemic’s first purging of more than 20 million jobs in the spring of 2020. However, the recruiting process has slowed significantly in the technology industry, with scores of businesses reporting layoffs or hiring freezes. For the first time in the history of the firm, Meta announced last week that it intended to decrease personnel.
Layoffs have been announced by Twitter, Peloton, Snap, Twilio, Snap Fitness, Netflix, and Twilio. Amazon is said to have stopped recruiting for corporate positions in its retail segment, while Google parent Alphabet has shut down its Stadia video game streaming service.
According to federal data released earlier this week, there were significantly fewer open positions in the United States in August than in July. More than 1 million fewer available positions indicate that businesses are delaying hiring as they prepare for the coming economic uncertainties.
The Federal Reserve is carefully examining the statistics on job vacancies for any indications that the demand for labor is slowing down. Historically high inflation has been attributed to a variety of factors, including a large number of available positions, according to Fed Chair Jerome Powell, who has also indicated that the unemployment rate would likely increase as part of the Fed’s efforts to lower inflation.
From being close to zero at the beginning of this year, the U.S. central bank has increased its benchmark interest rate to a range of 3% to 3.25%. The sudden rate increases have raised other borrowing costs and driven mortgage rates to their highest levels in 15 years. The Fed anticipates that the increased interest rate will reduce borrowing and expenditure while also bringing inflation closer to its 2% objective.
The Fed anticipates that as part of this endeavor, the unemployment rate would rise to around 4.4% by the following year, which translates to 1.2 million job losses.
The government is anticipated to release September hiring statistics on Friday. According to Wall Street experts, there were 250,000 new jobs created last month. Wall Street experts predict that the Fed may raise rates even more quickly if the numbers come in much higher.
The government announced last week that the U.S. economy contracted for the second consecutive quarter, although this has not yet had much of an impact on the labor market.