Layoffs and unemployment remain low as the labor market shows other signs of weakness

By | March 8, 2024

Three years ago, the U.S. economy underwent an unprecedented upheaval as millions of workers left low-wage jobs for more promising ones. At the same time, many white-collar workers have cemented themselves in remote, or at least hybrid, positions that gave them more flexibility.

It was called The Great Resignation.

Fast forward to today, the situation looks like a mirror image, economists say. In concrete terms, on average, few employees quit their jobs, although they still do not face the prospect of impending layoffs.

At the same time, hiring has dropped significantly. Some economists call it ‘The Great Stay’.

On Friday, the Bureau of Labor Statistics is expected to report slower but still steady job growth of 198,000 for February, compared to 353,000 in January.

But the solid job growth data, combined with an unemployment rate that, at 3.7%, is generally a sign of a healthy labor market, clashes with other, more worrying trends.

“We see the labor market getting cooler,” said Guy Berger, director of economic research at the Burning Glass Institute, a labor research group. “It’s still not bad, but it’s more like what we saw in the mid-2010s — which wasn’t a terrible job market, but still a worse one than what we saw later that decade or what we had in the post-pandemic period. .”

The labor market is facing an unusual set of cross-currents that make it difficult to predict whether the economy can maintain its strength over the medium term and beyond, said Mark Zandi, chief economist at Moody’s Analytics.

In addition to the decline in hours worked, he noted that in some cases the number of hours worked has been reduced to recession levels. On Thursday, the BLS reported a 3.3% decline in manufacturing hours worked – the largest drop since the historic decline in the second quarter of 2020.

Cuts to temporary jobs have also increased, Zandi says, which can often indicate that cuts to full-time jobs are on the horizon.

“It feels vulnerable,” he said.

At the same time – and despite some high-profile headlines showing thousands of job cuts over the past year – actual layoffs remain below pre-pandemic levels.

Yet there are deteriorating signs here too. Employment agency Challenger, Gray & Christmas on Thursday reported the highest number of layoff announcements in February since the global financial crisis.

“As we move into early 2024, we are witnessing a continued wave of layoffs,” Andrew Challenger, the company’s labor and workplace expert, said in a statement. “Companies are aggressively cutting costs and embracing technological innovations, actions that are significantly changing workforce needs.”

Zandi noted that companies’ profit margins are starting to decline due to higher interest costs, which could put further pressure on their labor costs.

Overall, he said, “the market just feels all over the place.”

Unfortunately, if you’re looking for a job, it seems to take longer to find a new job. BLS data shows that the number of people unemployed for 15 to 26 weeks has increased 53% since hitting a low in March 2022.

“If someone needs to find a new job or find a better job, the options are more limited right now, outside of a few fairly limited sectors,” Berger said.

Among the industries hiring the most are healthcare and social services, which are expanding due to an aging population, and public services, whose offer of lower salaries on average is increasingly seen as competitive given the relative lack of other new opportunities elsewhere in the world. the private sector, Berger said.

Given the still low number of layoffs in the broader economy, Berger is optimistic that The Great Stay can be sustained. An example of a company keeping its workforce stable is Amazon, which has trimmed payrolls from post-pandemic highs but remain significantly above pre-pandemic levels.

“We’re investing, and we’re adding in some areas,” Amazon Chief Financial Officer Brian Olsavsky said on a conference call with reporters following the company’s quarterly results. “But there is a general feeling among most teams that we want to hold the line in terms of headcount, and perhaps go down because we can increase efficiency.”

There remains reason for some optimism. Vacancies remain well above pre-pandemic levels. In a follow-up interview, Andrew Challenger pointed out that the U.S. has seen three straight months of net new job growth, including a 12-month record of 353,000 new jobs in January.

“It’s still a very good job market,” Challenger said. “There are certainly companies that want to retain people; people are staying. But there are also more layoffs. They don’t have to be linked – sometimes it’s just volatility.”

Still, employers in February announced plans to hire just 10,317 workers for a total of 15,693 so far in 2024, the lowest number yet for announced hiring plans since Challenger began tracking them in 2009, the company found.

The broader picture remains unusual, Berger said.

“There are relatively few new people coming in, but relatively few people leaving,” he said. “It’s a strange environment.”

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