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More than a dozen companies have cut jobs since the beginning of this year.
Google, for example, cut some of its staff (GOOGL) on Monday. And on the same day, Amazon (AMZN) cut jobs in its Buy with Prime division, the latest move in a trend of layoffs across major companies heading into the new year.
But economists don’t see these layoffs as a solid sign that the labor market is headed for a full-blown recession. So far, yes.
“What you see in the news announcing job cuts and what you see in economic indicators are not necessarily the same thing,” said Neil Dutta, head of economic research at Renaissance Macro.
In other words, the headlines about layoffs may just be harsher than the reality.
Case in point: The latest measure of weekly unemployment claims showed the lowest number of claims since September 2022. This consistency in weekly data is seen as important for economists looking for signs of a cooling labor market.
Datta noted that the current job cuts are not “particularly widespread” and that the amount of layoffs appears to be lower than the technical layoffs seen in early 2023.
Thomas Simmons, an economist at Jefferies in the US, said that announcing job cuts and actually implementing them do not necessarily happen at the same time. Depending on the size of the layoff, the data may be delayed or may not appear at all.
Also, given the strength of the economy, Americans may not be in a hurry to apply for benefits, Simons added. A consistently low unemployment rate gives laid-off workers confidence that they can quickly be rehired.
“Encouragingly, the probability of finding a job for the unemployed has remained at pre-pandemic levels, suggesting the labor market remains strong and job opportunities abound,” Goldman Sachs economists said Monday. , written in a customer research note. .
Simons also said that higher-than-average wage growth in recent years could support households that are better off financially than during similar periods in the past when Americans are freed from work. emphasized. “There’s probably a significant number of people in this middle class and upper middle class who are laid off from their jobs and don’t bother filing for unemployment insurance,” Simons told Yahoo Finance. . “It may not be worth it to them.”
“I’m not too worried. Once (layoffs) start to increase, unemployment claims may catch up. Right now, things are a little different,” he added.
In fact, the latest forecasts from Goldman Sachs’ economics team do not expect the US to enter a recession in 2024, but they do expect the economy to grow by at least 2.2% in each of the first two quarters of this year. .
For Renaissance Macro’s Datta, this is the key to why economic indicators never catch up with the headlines. Economic growth will stimulate further job growth, Dutta said.
“If the economy is growing, it’s hard to imagine that it will be that severe in terms of labor market weakness,” Datta said.
The last shoe?
But there are signs of a slowdown in the labor market, worrying some economists.
For example, Brett Ryan, senior economist at Deutsche Bank (which still expects a mild recession in the first half of 2024), said data on layoffs is not yet available, but suggests the labor market is cooling. He said there are other indicators as well.
First, overall employment growth has slowed. According to research by Deutsche Bank, increases in two sectors – leisure, private healthcare and education – accounted for 95% of the increase in private pay over the past six months. The narrow range may predict slower growth going forward as these sectors reach post-pandemic balance.
A slowdown in the economy, coupled with a decline in the employment rate, could mean an economic slowdown, with weekly jobless claims and other measures of layoffs “not coming down yet,” Ryan said.
“Companies are reluctant to lay off employees because they have had some kind of painful experience of having to rehire employees after the pandemic,” Ryan said. “But the question is how long that will last.”
Josh Schafer is a reporter for Yahoo Finance.
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