As the economy cools, more U.S. corporations are slashing employment and freezing hiring, a sign that the Federal Reserve’s attempts to curb inflation are impacting the labor market.
According to the outplacement company Challenger, Gray & Christmas, layoff announcements increased in September. In September, roughly 30,000 jobs were eliminated, a 46% increase from August, while the number of employers advertising hiring plans plummeted to its lowest level in more than a decade, according to the firm.
“The labor market is beginning to exhibit signs of stress. Hiring has slowed, and layoffs are beginning to occur “The senior vice president of Challenger, Gray & Christmas, Andrew Challenger, stated in a statement.
Government statistics also indicate a sluggish job market. The number of people filing for unemployment during the week ending October 1 increased by 29,000 to 219,000, the Labor Department reported on Thursday. For the week ending September 24, the overall number of Americans receiving unemployment aid increased by 15,000 to roughly 1.4 million.
Economists at Oxford Economics stated in a research note, “We won’t read too much into one week’s claims data, but if an upward trend sustains, it would be consistent with other recent signs pointing to some relaxation of labor market conditions.”
Since the first elimination of more than 20 million jobs at the onset of the coronavirus pandemic in the spring of 2020, the number of applications for unemployment assistance has remained historically low. Nevertheless, the IT industry has experienced a hiring slowdown, with scores of firms reporting layoffs or hiring freezes. Last week, Meta announced that it would lay off employees for the first time in the company’s history.
Netflix, Peloton, Snap, Twilio, Taboola, and Twitter have all announced layoffs, while Google’s parent company, Alphabet, has shut down its video-game streaming service, Stadia, and Amazon’s retail division has apparently suspended corporate hiring.
03:00 Meta declares a hiring freeze, foreshadowing a tech slowdown.
The number of available employment in the United States decreased significantly in August compared to July, the government said earlier this week. The decline of more than one million job openings indicates that firms are delaying hiring in anticipation of future economic turmoil.
The Federal Reserve constantly monitors data on job vacancies for indications of a decline in labor demand. Fed Chair Jerome Powell has often identified the high number of available jobs as a contributor to historically high inflation and has hinted that the unemployment rate will likely increase as part of the Fed’s effort to combat inflation.
From near zero at the beginning of the year, the U.S. central bank has increased its benchmark interest rate to a range of 3% to 3.25 %. The fast rate increases have driven mortgage rates to 15-year highs and increased the cost of other forms of borrowing. The Federal Reserve anticipates that increasing interest rates will reduce borrowing and spending and bring inflation closer to its 2% target.
As part of this endeavor, the Fed anticipates that the unemployment rate will rise to approximately 4.4% by next year, resulting in the loss of 1.2 million jobs.
On Friday, the government is anticipated to release September hiring statistics. Analysts on Wall Street anticipate that 250,000 new jobs were created last month. According to Wall Street analysts, if the numbers are far higher than expected, the Federal Reserve could raise rates even more rapidly.
The government revealed last week that the U.S. economy contracted for the second consecutive quarter, but so far this has had little effect on the labor market.
The Associated Press provided reporting support.