Layoffs mount as job market gets murky
November jobs report likely to show hiring cooled again last month
Jobs report is very difficult to forecast: Chris Low
FHN Financial chief economist takes a closer look at consumer confidence falling for the second straight month on 'Making Money.'
A growing number of businesses are laying off workers en masse as they brace for a potential recession triggered by high inflation and rising interest rates.
Despite still-solid job growth and record-high wages in many industries, dozens of businesses are battening down the hatches as they warn of an increasingly grim economic outlook.
Amazon, Apple, Meta, Lyft and Twitter are among the companies either implementing hiring freezes or letting workers go as the Federal Reserve moves to raise interest rates at the fastest pace in decades in order to combat inflation. Economists widely expect the Fed to trigger a recession with higher interest rates, which could force consumers and ultimately businesses to pull back on spending.
Still, despite the plethora of job cuts at notable companies, this has not yet translated into a demonstrably weaker labor picture, according to Brendan Murphy, the head of global fixed income at North America Insight Investment. That could change in coming months as companies continue to pull back amid higher interest rates.
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People seeking employment attend the 25th annual Central Florida Employment Council Job Fair at the Central Florida Fairgrounds. (Paul Hennessy/SOPA Images/LightRocket via Getty Images / Getty Images)
"The pace of layoffs has accelerated in November as companies adjust to a weaker macro environment amid weaker advertisement revenue, higher interest rates and inflation as well as possible overhiring during the pandemic," Murphy said. "A weaker labor picture is a natural outcome of the Federal Reserve’s policies to tighten financial conditions to tackle the inflation problem."
The Labor Department on Friday morning is releasing its closely watched November jobs report, which is projected to show that payrolls increased by 190,000 last month and that the unemployment rate held steady at 3.7%, according to a median estimate by Refinitiv economists.
That would mark a drop from the 261,000 recorded in August and would be the weakest monthly job growth since December 2020.
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While monthly jobs data is always important, the Federal Reserve is closely watching this particular report for signs that the labor market is starting to slow down from its torrid pace as policymakers try to wrestle inflation, which is still running near a 40-year high, back to 2%.
For months, the labor market has remained one of the few bright spots in the economy, with the economy adding more than 2 million jobs over the first half of the year.
But there are growing signs that the labor market is starting to weaken. Companies announced 76,835 job cuts in November, led by the technology sector, according to a recent analysis from Challenger, Gray & Christmas. That is 417% higher than the same time one year ago.
Federal Reserve Chair Jerome Powell speaks during a news conference on interest rates, the economy and monetary policy actions at the Federal Reserve Building in Washington, D.C., June 15, 2022. (Olivier Douliery/AFP via Getty Images / Getty Images)
"While the overall labor market remains resilient, it is likely we see further deterioration in the coming months," Murphy said.
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Fed Chair Jerome Powell conceded during a press conference in September that higher rates could "give rise to increases in unemployment."
"We think we need to have softer labor market conditions," Powell said at the time. "And if we want to set ourselves up, really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn't."