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"Job Market Shock Threatens To Trigger One
Million Layoffs Or More As Distruptions Soar"
by Epic Economist
"A labor market shock is looming. Cracks are appearing everywhere in the U.S. labor market. Companies are now looking to curb hiring, and many started announcing mass lay-offs last week amid falling profit margins as the U.S. economy begins to march towards a historic recession. With economic conditions deteriorating at a stunning pace, inflation still hot, and the housing standing on its last leg, the last pillar holding up the U.S. economy – the labor market – has just hit a brick wall, and experts say it’s all downhill from here. Americans should brace for a new wave of lay-offs this summer that could wipe out over one million jobs, and result in significantly lower wages as businesses struggle to stay afloat in face of slower growth.
Remarkable shifts are occurring in the U.S. labor market. Last week, the number of Americans filing new claims for unemployment benefits unexpectedly rose, hitting a four-month-high and signaling a major drop in demand for workers amid tightening financial conditions. Jobless claims increased by 21,000 to 218,000, and according to the Bureau of Labor Statistics, the number of people receiving benefits increased to 1.3 million while the number of employees who quit their jobs in April also hit a new record, rising above 4.5 million.
On Thursday, earnings reports were finally released and showed corporate profits falling across the board in the first quarter. Now, economists are warning that the historic profit margin crunch and declining share prices are about to force more and more companies to pause hiring and start laying off workers.
Commenting on the impending surge in layoffs, Piper Sandler's chief economist Nancy Lazar says that "rightsizing means that lots more layoffs are coming" and adds that "many companies overhired and overpaid during the health crisis." Lazar also highlighted that "the stay-at-home bubble was a bubble, and not a "new paradigm" of goods consumption" which means that a right-sizing cycle is going to accelerate, with weaker growth in jobs and wages.
Piper Sandler economists warned in a recent note that this summer is going to be a turbulent one for American workers. “We could see a million layoffs or more, as many goods sectors that benefited from the [health crisis] now realize they added too much capacity,” they wrote, underlining that “Low-income workers are now most at risk of layoffs, with remaining job holders to see much slower wage growth.”
At least 107 tech companies have laid off employees since the start of the year, according to Layoffs.fyi, which tracks job cuts across the sector. Economists are afraid that the job cuts seen in the tech sector soon ripple through other sectors. In a new report, Bank of America alerted that the demise of some big companies is likely to trigger a chain reaction and result in a sharp increase in hiring freezes, job cuts, and wage stagnation.
In other words, our leaders will have to decide what’s worse: recession and bear market or runaway inflation as millions of Americans start to see their wages "revert back to normal" if they are lucky, while many other millions are about to lose their jobs.
And soon, the U.S. population will have to confront the terrible fate of seeing their purchasing power slashed right in the middle of another historic economic recession while unemployment rises once again. If you do have a job, you should hold on to it while you can because we surely have a very bumpy road ahead of us. And it is safe to say that nobody will come to rescue us from this gigantic mess."
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