Washington (AFP) – Great demand Job growth in the past few months This coincided with high-profile layoff announcements by a number of large companies.
So, how do they both happen at the same time? It is not as contradictory as it may seem. Recent job cuts have been concentrated mainly in a few sectors: technology, finance and media.
Relative to the US workforce of 160 million people, layoffs so far have been minimal compared to continued strong hiring – a monthly average of 248,000 jobs added over the past six months. The unemployment rate remains at just 3.7%, barely above a 50-year low.
It turns out that many of the companies now cutting jobs have done so Over-hiring during the pandemic, when they thought that the trends that were emerging at the time – especially the boom in online shopping – would continue apace. As the economy returned to normal, many of these companies discovered that they no longer needed as many employees and responded by laying off workers.
In January, US companies and other employers added 353,000 jobs – the largest monthly increase in one year. The government also revised its estimate for job gains in November and December by 126,000 jobs. The data provided compelling evidence that most companies, large and small, are confident enough in the economy to continue hiring.
Many of the companies that have announced layoffs are among the most well-known household names: Google, Amazon, eBay, UPSSpotify and Meta, the parent company of Facebook. Not that they were the only ones. Challenger, Gray & Christmas, a leading outsourcing firm, reported this week that companies announced 82,000 layoffs in January, the second-highest number of January layoffs since 2009.
Here are some reasons why these seemingly disparate trends coincide:
Job gains and job cuts occur across industries
In most industries, companies have continued to add workers over the past three months. For example, manufacturers added 56,000 products in November, December and January combined. Restaurants, hotels and entertainment companies gained nearly 60,000 during that period. Health care providers — hospitals, doctors' offices and dentists — added a whopping 300,000.
And it's not all low-paying jobs, either: The sector the government calls professional and business services – a sprawling category that includes accountants, engineers, lawyers and their support staff – has 120,000 more jobs than it did in October. Federal, state and local governments, which regained pre-pandemic employment levels in September, added nearly 120,000 jobs during that period.
By contrast, job cuts were more focused. The Labor Department doesn't track technology jobs specifically, but Friday's jobs report pointed to signs the industry is struggling: The unemployment rate among workers in what the government calls the “information” sector, which includes media and technology workers, jumped to 5.5%. in January from 3.9% a year ago. That's nearly two percentage points above the national unemployment rate.
Laying off workers does not mean the economy is weak
Even more puzzling is why companies would cut staff if the economy was growing and consumers were continuing to spend. Last week, the government estimated that the economy expanded healthily Annual pace of 3.3% in the October-December quarter After strong growth of 4.9% in the previous quarter.
Companies tend to shed jobs for a variety of reasons, sometimes to reflect changes in their business strategy or to maintain or enhance their profit margins. Many high-tech companies that continued hiring in 2022, as the economy accelerated out of the pandemic recession, misjudged the long-term demand for their products and services.
In its survey of job cuts, Challenger, Gray & Christmas said the main reason companies cited last month for layoffs was “restructuring.” A year ago, “economic conditions” Economists in the Renaissance Macro He noted that companies were previously more concerned about the state of the economy.
Todd MacKinnon, CEO of the software company Okta, said in a letter in which he announced that the company will eliminate about 400 jobs it entered in 2023 “with a growth plan based on the demand we saw in the previous year.”
“This has led us to over-employ the macroeconomic reality we live in today,” he wrote.
Layoffs spread out over time
High-profile job cuts typically involve several layoffs that are not implemented immediately. For example, UPS, the delivery and logistics company, announced earlier this week that it would do so 12 thousand jobs will be eliminated this year. But she said that these cuts would take place over a period of months. So they were not included in the January jobs data released Friday because the layoffs have not yet occurred.
It's a really big economy
This does not necessarily mean that government job numbers will get worse over time as UPS and other cuts are implemented. Job cuts are very sad and upsetting for the people who are experiencing them. But layoffs, even those of the magnitude at UPS, don't really move the needle in the massive US economy. Every month, approximately 5 million people leave their jobs or are laid off, Government data showsWhile more than 5 million are appointed.
A wealth of other data confirms that the labor market is generally healthy. The number of people Seeking unemployment benefits, long viewed as a measure of layoffs, remains at a very low level. and non-governmental data, including employment tracking ADP Payroll Providershows that private sector companies continue to add workers.
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