Investor concerns that the Fed may take more steps to slow hiring caused Wall Street to decline on Friday, but there are increasing indications that labor market instability is imminent.
A strong labor market that has long defied predictions is now displaying more overt indications of faltering.
Job listings by businesses have dropped significantly. Layoffs are increasing. Furthermore, according to fresh statistics made public on Friday, employment growth in the United States has reached its worst pace in almost two years.
For the Federal Reserve, which has been attempting to chill the economy in order to lower pervasive, stubborn inflation, this is all a very positive development. However, fresh international unrest that threatens to revive energy price increases in the coming weeks might make the Fed’s job more difficult, resulting in a longer period of layoffs that could eventually turn into a recession.
OPEC and its partners reduce oil output, drawing a scathing response from the White House.
According to Giacomo Santangelo, an economist at the employment website Monster, “Things are slowing down, but this is only the beginning of the decline.” The concern is that we will strike the earth and continue to descend when we are still 30,000 feet in the air.
Investors were concerned that the higher labor data will prompt the Fed to continue quickly hiking interest rates, which sent markets plummeting on Friday. The S&P 500 had lost almost 2.8 percent by late afternoon, while the Dow Jones industrial average had lost more than 2 percent. The tech-focused Nasdaq fell by 3.8%.
For the 21st month in a row, the number of jobs in the US increased in September, while the unemployment rate remained historically low. Unexpectedly, the unemployment rate declined to 3.5 percent in September from 3.7 percent a month earlier, although part of the reason for this decline is that more Americans have ceased seeking for work or leaving the labor market.
However, a number of large corporations are slowing down recruiting and, in some cases, laying off employees. Cleveland’s St. Vincent Charity Medical Center announced last week that it will let 978 staff go. The oldest suit manufacturer in the nation, Hardwick Clothes, is closing a facility in Cleveland, Tennessee, which will result in the loss of 129 employees. And on its fourth round of job cutbacks this year, Peloton, the manufacturer of home gym equipment and industry darling, is letting go of 500 employees, or 12 percent of its workforce.
According to the most recent jobs data from the Labor Department, public schools shed 21,700 employees last month, while the trucking sector lost 11,000 jobs and the insurance sector lost 9,000. Additionally, thousands of jobs in retail, legal services, and advertising were lost. Overall, American businesses created 263,000 new jobs in September, which is much less than the 420,000 jobs per month average for the whole year.
After months of a healthy labor market expansion, job growth slows in September but remains strong.
As businesses in various industries scaled down their ambitions, there were over 10% fewer job postings overall in the United States in August. For instance, Meta, the parent company of Facebook, has frozen employment. According to a document seen by The Washington Post, the internet giant is delaying new job offers, finding applicants, authorizing internal transfers, and even confirming graduations from its Bootcamp training program.
We’re experiencing an economic slowdown akin to a recession, which is having a significant effect on tech giants who have been expanding rapidly, according to Wedbush Securities analyst Dan Ives. Now that considerable cost cuts are anticipated to occur throughout Silicon Valley over the next three to six months, some difficult decisions must be made.
According to a second Labor Department data issued earlier this week, overall layoffs are also starting to increase, rising to 1.46 million in August from 1.4 million the previous month.
Due to a sharp decline in sales, Jolan Banyasz of Humboldt County, California, recently let go of two long-time employees from her clothes store. Sales dropped by 60% in September compared to the prior year, and according to her, there are few indications that demand will soon increase again. She now only has one part-time worker.
Owner of Sweet Grass Boutique Banyasz stated, “There has been a continuous reduction, therefore I’m absolutely not hiring.” “The expense of operating a firm is significantly rising, which makes me concerned about the future.”
The Ohio hospital that is cutting off more than 90% of its workers, St. Vincent Charity Medical Center, is also undergoing an overhaul due to financial issues and changing customer demand. According to executives, they battled to control expenses during the epidemic and are switching to primary and urgent care clinics in place of traditional inpatient treatment. Out of around 1,100 workers, just 100 will be retained.
The hospital stated in a news release that “seismic transformations in health care over the previous ten years have produced a tough environment.” The covid-19 epidemic has exacerbated the rise in telemedicine use, the decline in inpatient volume, and the demand for outpatient treatment, all of which have increased financial strain on the hospital.
In addition to layoffs, many company owners said they are postponing or reducing hiring plans until they are more sure in the way the economy is headed.
The recent rise in market volatility, decades-high inflation, and oil shocks have increased concerns about a worldwide recession. The greatest OPEC cut since the beginning of the crisis, a coalition of oil-producing nations led by Saudi Arabia and Russia earlier this week decided to reduce oil output by 2 million barrels per day.
Energy costs are predicted to increase as a result of the decision, albeit not quite to the levels observed in early June because of preventative measures currently in place.
According to Quincy Krosby, chief global strategist for LPL Financial, “an average cut with 2 million barrels a day should push gasoline prices up, but not at a pace that would send prices back to… $5 a gallon.”
The central bank’s own prediction for economic growth this year was cut downward earlier this month, before to the OPEC action, to 0.2 percent, which is about as near to a downturn as the country can get without really entering one.
Generally speaking, businesses are heavily geared up for the prospect of a slump, according to Julia Pollak, chief economist at ZipRecruiter. They are emphasizing recruiting that is necessary rather than hiring that is desirable. However, a lot of businesses are still hiring because they have to.
Even when businesses are recruiting, they are limiting pay increases and other compensation increases. Although at a slower rate of 0.3 percent to $32.46 per hour, average hourly wages increased in September, showing that companies have been able to recruit workers without further raising compensation.
According to Guy Berger, lead economist at LinkedIn, “the boiling-hot labor market is letting up a little amount of steam, but the water is still scorching.” “While I’ve grown less bullish about that likelihood, the actual goal for the Fed is that this continues – that employment growth remains high but underlying inflation comes down.”
He pointed out that it takes time for increased interest rates to spread across the economy, which highlights the Fed’s difficulty. There are worries that the central bank may have unduly tightened borrowing conditions by the time the economic suffering manifests itself in the job market, creating the conditions for a recession.
According to Joe LaVorgna, chief economist at SMBC Nikko Securities America and a former economic adviser to the Trump White House, there has been a sudden rise in the unemployment rate in the United States before to each recession during the past 75 years.
He also stated that he anticipates a recession this year and added that when the unemployment rate increases, it does so abruptly and swiftly. “The Fed should not find solace in the unusually tight labor market we now have.”
At her Loganberry Books store in Cleveland, Harriett Logan employs twelve people. Logan said that even while she would like to hire more, she is cautious to do so in case the economy worsens.
Encouraged by the rapidly increasing book sales earlier this year, she placed more Christmas book orders than normal. But she said that now that walk-in traffic is declining, she is regretting her choice. She added that spending more money on inventory reduces the amount of money she has available to hire new workers.
She said that she’s already employed three rounds of new employees this year and stated, “I need more people, but I’m not sure if things are going to sell quickly enough to justify employing someone else. And, to be really honest, I’m just sick of conducting interviews.