The biggest tech company layoffs around the world since 2020
It’s been a tough year for the tech industry, with nearly 100,000 layoffs so far this year.
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The August jobs report, due out Friday, is shaping up as among the most significant in years, with the outcome likely to either allay, or stoke, recession fears following feeble payroll gains the prior month.
The tally also could determine whether the Federal Reserve this month will cut its key interest rate by a quarter percentage point, as expected, now that inflation is approaching the central bank’s 2% goal. Alternatively, officials could reduce the rate by half a point if they believe the economy and labor market are wobbling and they need to make a dramatic move to head off a downturn.
And the jobs numbers could have an outsize impact on a volatile stock market.
“It’s going to be the most closely watched employment report in some time,” economist Michael Reid of RBC Capital Markets said.
What is the job report prediction for the US?
Economists generally expect a rebound from a rough July report, according to a Bloomberg survey, with employers adding 165,000 jobs and the unemployment rate ticking down to 4.2%.
The July jobs figures were uniformly ugly but most forecasters say they overstated an expected slowdown in job growth following a post-pandemic surge. Employers added just 114,000 jobs, well below the 175,000 projected, and the unemployment rate jumped from 4.1% to 4.3%, highest since October 2021.
Why is the job market down in 2024?
Yet analysts say the unusually weak showing can be traced to several one-off factors.
Hurricane Beryl slammed into Texas in early July. Although the Labor Department downplayed the storm’s impact on employment, the number of people not at work due to bad weather rose from 59,000 in June to 436,000 in July, well above the prepandemic average of 33,000, Bank of America wrote in a note to clients. Besides Beryl’s impact in Texas, the storm spawned dozens of tornadoes in Louisiana, Arkansas, Kentucky and New York, Reid noted.
Also, auto plants typically shut down in the summer to upgrade their equipment for new models, temporarily laying off workers who get called back within weeks. While the Labor Department seasonally adjusts the employment totals to account for such effects, the layoffs appeared to occur later than usual this year, possibly throwing off the seasonal adjustments, Reid said.
Another factor that could have dampened July payrolls is a software outage that prevented about a third of U.S. auto dealers from ordering new cars and likely reduced their staffing levels, Reid said.
All told, the number of people on temporary layoff spiked by a whopping 249,000 in July, a rise Morgan Stanley says accounted for most of the leap in the unemployment rate.
Morgan Stanley expects a rebound of 25,000 jobs in Texas following the storm, 8,000 from the callback of the auto workers and 25,000 from an excessive job growth slowdown in professional and business services and the information industry, which computers, telecommunications and movie production, in July. The research firm forecasts total job gains of 185,000.
What does the jobs report mean?
On the other hand, a second straight shaky jobs report likely would fuel the narrative that the Fed has allowed interest rates to stay too high for too long – its key rate is at a 23-year high of 5.25% to 5.5% – raising the odds of a recession.
But how weak is too weak?
Job growth has been slowing as catch-up effects following the COVID crisis fade and the Fed’s high interest rates to fight inflation take a growing toll on business hiring and investment. Fed officials have wanted the labor market to slow to ensure inflation continues to come down.
Job gains have averaged 170,000 a month since April, down from 227,000 the first four months of the year and 251,000 in 2023. Moody’s Analytics expects average growth to slow to 100,000 by early 2025 and 50,000 by later that year. And job openings fell to 7.7 million in July, according to a separate report this week, the lowest since January 2021 and a signal of a further cooldown ahead.
Why is the US unemployment rate rising?
Meanwhile, the unemployment rate has climbed by half a percentage point the past year, based on a three month average, triggering a rule that says the U.S. is likely in recession. Yet economists say this time is different because the rise in unemployment has been caused by a surge of immigrants into the labor force, many of whom are still job hunting, rather than massive layoffs.
Still, a continuing increase in unemployment means it’s become harder for jobless people to find positions, Reid said. That likely means they’ll reduce their spending, hurting the economy.
How much will the Fed cut interest rates?
Jason Ware, chief economist and chief investment officer at Albion Financial Group, doesn’t expect the Fed to lower its key interest rate by more than a quarter point unless August job gains fall below 100,000 and the unemployment rate rises further.
Reid thinks a half-point rate cut becomes likely if the jobless rate rises to 4.4%. But he said the Fed will be hesitant to lower the rate by that much if unemployment dips while job gains hover at 100,000 or above. That’s especially the case when the Fed could be accused of chopping rates too close to a presidential election to favor the incumbent party by juicing the economy.
What’s happening with the stock market?
After the disappointing July jobs numbers came out last month, markets sold off on recession fears but more than bounced back after encouraging economic reports, especially on retail sales. But after data this week revealed that manufacturing activity contracted for a fifth straight month in August, markets tumbled again.
A jobs report that meets expectations likely would assuage recession concerns, Ware said. But another weak showing – for example, with job gains of 130,000 or so – could renew worries and spook investors again, Ware added.
How do markets react to rate cuts?
Generally, markets love rate cuts, in part because they jolt the economy and encourage investors to shift money from lower-yielding bonds to stocks. And they hate rate hikes. During the Fed’s aggressive rate increases in 2022 and 2023, strong jobs reports normally seen as good news instead were viewed as bad news because they could have foreshadowed rising inflation, boosting the chances of further rate hikes.
But Ware said a poor jobs report Friday that signals a possible recession would outweigh any positive impact on the market from the prospect of a larger rate cut.
“Bad news is bad news again,” Ware says.
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Publish date : 2024-09-04 22:13:00
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