FHN Financial’s chief economist takes a closer look at the decline in consumer confidence for the second straight month in “Making Money.”
A growing number of companies are massively laying off workers as they prepare for a possible recession triggered by high inflation and rising interest rates.
Despite still solid job growth and record wages across many industries, dozens of companies are battening down the hatches as they warn of an increasingly bleak economic outlook.
Amazon, Apple, Meta, Lyft and Twitter are among the companies implementing hiring freezes or letting workers go as they go. Federal Reserve measures to raise interest rates at the fastest rate in decades to fight inflation. Economists widely expect the Fed to trigger a recession with higher interest rates, which could force consumers and ultimately businesses to cut spending.
Yet despite the plethora of job cuts at notable companies, it has yet to translate into a demonstrably weaker workforce picture, according to Brendan Murphy, head of global fixed income at North. AmericaInsight Investment. That could change in the coming months as companies continue to pull back amid higher interest rates.
DEMOCRATS SLAM ‘DANGEROUS’ FEDERATION RATE HIKES, WARNING OF WIDESPREAD JOB LOSS
Job seekers attend the 25th Annual Central Florida Employment Council Career Fair at the Central Florida Fairgrounds. (Paul Hennessy/SOPA Images/LightRocket via Getty Images/Getty Images)
“The pace of layoffs accelerated in November as companies adjust to a weaker macroeconomic environment amid lower advertising revenue, higher interest rates and inflation as well as a possible overhiring during the pandemic,” Murphy said. “A weaker labor image is a natural result of Federal Reserve policies aimed at tightening financial conditions to tackle the inflation problem.”
On Friday morning, the Department of Labor releases its closely watched November report employment reportwhich should show payrolls rose by 190,000 last month and the jobless rate holding steady at 3.7%, according to a median estimate from economists at Refinitiv.
That would mark a drop from the 261,000 recorded in August and be the weakest monthly job growth since December 2020.
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Although monthly employment data are always important, Federal Reserve is watching this particular report closely for signs that the labor market is starting to slow from its blistering pace as policymakers try to tackle inflation, which is still near a 40-year high, to return to 2%.
For months, the job market remained one of the few bright spots in the economy, with the economy adding more than 2 million jobs in the first half of the year.
But there are growing signs that the labor market is beginning to weaken. Companies announced 76,835 job cuts in November, led by the tech sector, according to recent analysis by Challenger, Gray & Christmas. This is 417% more than the same period a year ago.
Federal Reserve Chairman Jerome Powell speaks during a news conference on interest rates, the economy, and monetary policy actions at the Federal Reserve Building in Washington, DC on June 15, 2022. (Olivier Douliery/AFP via Getty Images/Getty Images)
“While the overall labor market remains resilient, we are likely to see further deterioration in the months ahead,” Murphy said.
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Fed Chairman Jerome Powell conceded at a press conference in September that higher rates could “lead to higher unemployment”.
“We think we need to have more flexible conditions in the labor market,” Powell said at the time. “And if we’re going to set ourselves up, really pave the way for another period of a very strong labor market, we have to put inflation behind us. I wish there was a painless way to do that. . There are not any.”
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