Why layoffs, the job market will not repeat the history of recession in this economy

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The term “labor hoarding” has been in play recently in economic circles as the job market remains strong despite the Fed’s best efforts to cool it.

The latest jobs report shows the growth of the labor market remains strong, and US payrolls surging by 261,000 in October, although there was a slight uptick in unemployment to 3.7%.

Although the layoffs are making headlines, from Twitter To mottleThe labor market is far from rolling over.

“There have been several thousand high-profile layoffs in the tech sector in the past few weeks. While this is a disaster, it is useful to keep in mind that the labor market is much larger and is all healthy,” Bledi Taska, chief economist at the labor market consultancy and research firm Lightcast, said in an email.

There are 159 million people today employed in the USand in the past month there were 1.3 million layoffs.

“This is quite normal and historically low when it comes to layoffs rate 0.9%,” he said.

Taska notes that even in tech and at private VC-funded companies like Stripe, layoffs aren’t that big. In the Professional and Business Sector (where most tech companies belong) Layoffs down in September and layoffs start to have as well come down in the past few months. “Overall this means that while it is important to follow some high profile tech layoffs, they are not indicative of overall trends in the labor market, or even in the tech sector,” said Taska.

Stock futures edged higher Friday following a strong jobs report

The labor hoarding has become something of an indication of how difficult it is to find workers to fill open positions. Kindergarten is afraid to read too much on the talk of the accumulation of labor yet, and he said that it cannot be denied that the economic basis of labor is in failure.

“You can’t have as many people if the demand goes down,” Taska said. “Yes, it’s a difficult period to find people, but companies want people because they need them to be productive, and if people cost too much, the bottom line will be the most important. want people for people,” he added.

Still, Taska and other labor market experts say the way CEOs and CFOs think about layoffs in a slower economy could be due to change, as demographic trends that will persist beyond a single economic cycle make companies more strategic in planning workforce reductions.

Fill open positions, but maybe less of them

Mark Zandi said the recession could come in the second half of 2023

The latest numbers on open positions show the unpredictability related to the growth rate of the labor market.

Job openings appear to have disappeared, with August’s number exceeding 10 million, down 10% from the more than 11 million reported in July – and a million fewer than expected. That leads to that belief “Hard labor market is over” but in the 10 million-plus open jobs, the labor market is still very healthy. And that was followed by a surprise JOLTS report earlier this week showing an increase in open positions at a time when economists are expecting a lower amount.

While the headlines focus on job cuts and hiring freezes that have been announced, those who are concentrated in the sector with the most sensitivity to the policy of the Federal Reserve, and the Fed continues to raise rates. Although there is guidance at this week’s FOMC meeting it can consider slowing the pace, commentary from Fed Chair Powell was far from clear on future policy to be more dovish. So far, the story of the labor market slowdown is mostly tech, where Hiring was overly aggressive – Microsoft recently announced another round of layoffs and Amazon announced one Hiring company freeze.

Most firms don’t want to “overshoot” people in either direction.

“Firing people is not fun, but you don’t want to hire more people,” Taska said. “Let’s start by revising the outlook on open positions versus where it was three or four months ago. This is not the phase for the ‘first fire’ except in tech, where they are over-hired,” he said.

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Along with labor hoarding, there has been a lot of talk about “quitting quiet.” Some firms can bet that they will be able to avoid layoffs through the return-to-office mandate and some recent data shows. job offers are far down. Employees who do not want to return will leave the organization. Elon Musk exemplifies this CEO mentality earlier this year when he said that workers must go back a minimum of 40 hours a week or quit.

This thinking remains on the margins, but it is a concern within the company. Challenger said that its survey of HR leaders shows that 10% are worried that the C-suite will see the source of this attrition in the head count. According to labor experts, while Elon Kasturi has many good ideas, this is not one of them.

Countless job losses are not the way to go if companies want to risk losing some of their most valuable employees, especially those who can command good positions from companies that still hire remotely. The permanent remote workforce has more than tripled since 2019 to 18% of the labor market.

Any firm considering layoffs should begin by evaluating the most productive workers, and those who are not, and from that evaluation determine who to let go.

“I wouldn’t be surprised if there was some internal discussion around this angle, but employers risk losing their best talent,” says Crofoot. In fact, he adds that this idea is completely at odds with what the entire C-suite has had to learn about the labor market over the past decade.

“I don’t think employers have wiggle room when we are talking about a labor supply that is dwindling. There should be some recognition of the value of employees and not treating them as dispensable.”

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