The Rise and Fall of the Labor Market: Expedia’s Perspective on a Hard Time for Job Openings, Pay Cuts, and Work Force Hiring

But there are signs that the red-hot labor market may be coming off its boiling point. Major employers such as Walmart and Amazon have announced slowdowns in hiring; others, such as FedEx, have frozen hiring altogether. In July, Americans stopped their jobs at the lowest rate in a year and a half, a sign that the period of rapid job switch may be nearing its end. Wage growth, which soared last year when companies were competing for workers, has slowed, particularly in industries where the job market was particularly hot last year.

Second, despite the slowing of the economy and the growing fears of recession, layoffs are still historically low. Initial claims for unemployment insurance, an indicator highly correlated with layoffs, were 219,000 for the week ended October 1 – higher than the week prior, but still one of the lowest readings in recent decades. After years of increasingly traumatic labor shortages, many employers are reluctant to significantly reduce the number of workers even as their businesses are slowing. That’s because companies are worried that they will have trouble recruiting new workers when they start expanding again.

“Not that I wish ill on any people out there from a layoff perspective or whatever else, but I think there could be an opportunity for us to ramp some of that hiring over the coming months,” Eric Hart, then the chief financial officer at Expedia, told investors on the company’s earnings call in August.

The Fed’s Wage Problem: Why the U.S. hasn’t Solved the Inflationary Phenomenon

Stagflation is a bad thing because it means the risk of wages going down too much quickly is too great. Stagflation – a portmanteau of stagnation and inflation – is when economic activity slows while prices continue rising.

Officials at the Federal Reserve have been keeping a close eye on hiring and wages as they proceed with a series of rate increases meant to combat inflation. The job data shows that for now, they are doing their job without tipping the economy over to a deep recession that would throw millions out of work.

The Fed has tightened its monetary policies the most since the financial crisis, driving up mortgage rates above 9% for the first time in 20 years, and slowing business growth, yet the labor market hasn’t changed much.

The US economy is expected to have added 200,000 jobs last month, down from 263,000 in September but well above the pre-pandemic average. The unemployment rate is expected to edge up to 3.6%, still close to half a century low.

Things are not slowing down as fast as they were prior to the pandemic. That is part of the reason for the elevated inflation.

This tight labor market – and the rapid wage growth it has spurred – is causing inflation to become more entrenched. The Consumer Price Index was up 8.3% year-over-year in August. That is lower than the June high of 9%, but still painfully high. To address it, the Federal Reserve is likely to drive the economy into a recession in 2023, crushing continued job growth.

Wages pose a particular conundrum for the Fed. We are asked to shop a little less, but not a lot less. It’s not a magic formula for how much wages need to go down to make a difference.

BOTTOM LINE: If Friday’s headline number comes in above 250K, Wall Street may read that as a sign the Fed is going to have to keep raising interest rates, adding to already-significant strain across financial markets.

It’s hard to overstate just how delicate the situation is. Kristalina Georgieva, the Managing Director of the International Monetary Fund, described the world as being in a time of historic shocks after a torrent of economic shocks over the last few years.

That’s why the Fed’s decisions are being so closely scrutinized. When the Fed raises rates as aggressively as it has in the past several months, it creates painful ripple effects around the globe, pushing the US dollar’s value up and forcing other central banks to raise their own rates as well. The UN warned that the world’s largest economies could be headed into a recession.

Nightcap jobs report: The prosecution of Musk’s nightcap deal despite the unveiling of a new low-cost electric pickup and an $E-$ pickup

Ford is, once again, raising prices on its first electric pickup, the F-150 Lightning. The company said the entry-level model would be priced at around $52,000, up from $40,000 when it went into production this spring.

(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. “From today, any price increase is prohibited. Prohibited!” The president is quoted.

According to CNN, lawyers for the two companies have agreed to keep Musk away from the courtroom in the case. The deposition was going to take place today but Musk threw a curve ball earlier in the week, offering to buy the company under the original terms in exchange for scrapping the litigation. The two sides are still haggling over various conditions.

Source: https://www.cnn.com/2022/10/06/business/nightcap-jobs-report/index.html

The Amazon Firefighter’s Choice: The Effects of McCarthy’s Transition on Peloton and Other Human-Aided Robots

(Axios) Boston Dynamics, the company behind those viral videos of its creepily agile four-legged robots, is pledging not to weaponize their products and encouraging others in the industry to do the same. According to a letter Axios reviewed, the company suggests it’s worried that customers don’t, like, believe them when they say they’re not building an army that’ll destroy humanity. They said they were not doing that. Oh yeah, peep!

After letting go of another 500 people, Peloton will be left with around 3,800 employees — less than half the number of employees it had at its 2021 peak. The company said that Barry McCarthy has made a lot of changes to restore the brand. And if it fails, McCarthy told The Wall Street Journal, Peloton likely isn’t viable as a stand-alone company. He’s giving it another six months.

CNN Business. Amazon suspended roughly 50 workers at its only unionized warehouse Tuesday after they organized a work stoppage following a fire at the facility. A fire broke out on Monday and workers at JFK8 said that parts of the building smelled of smoke and it was difficult to breathe. Some 100 workers walked off the job.

The Federal Reserve Is Glad to See an Implication of COVID-19 for Work and Employment: An Economic Perspective from the Small-Scale Labor Market

“I think this is good news for the Federal Reserve,” said Nela Richardson, chief economist at the payroll processing firm ADP. “You are seeing some softening in early-stage demand [for workers] but still continuation in hiring.”

It’s hard to hire someone this month and three months later let them go. Tim said that people were being a lot more cautious, so they conducted the survey.

Manufacturing represents a small slice of the overall workforce, however. And a similar ISM survey of service-sector businesses found no slowdown in hiring.

In restaurants, retailers and professional services, job gains were reported last month by ADP, a payroll company for 25 million workers.

Lisa Cook, governor of the Fed, said she was optimistic that more workers will return to work if the health impact of COVID-19 continues to diminish. “But there is a risk that labor supply remains below its pre-pandemic trend.”

“The more people who come back to the labor market, the more likely we’ll see some loosening in hiring conditions and a continuation of these steady gains,” said Richardson.

A large amount of new and returning workers joined or rejoined the labor force in August. Inflation watchdogs at the Fed will be on the lookout to see if that trend continued in September.

Shortages of both workers and critical supplies have made it hard for businesses to keep pace with strong demand for goods and services. Prices have gone up. The Fed initially thought those bottlenecks would ease on their own. There are some encouraging signs, like a drop in lumber and used car prices. Prices in August were up 8.3% from a year ago.

Cook and her colleagues on the governing board made it clear that interest rates will be elevated until there is convincing evidence that prices are leveling off.

“Inflation is too high, it must come down, and we will keep at it until the job is done,” Cook said Thursday, in her first public speech as a central bank policymaker.

Why has the US Employment Market remained Strong during the Pandemic? An Economic Analysis by Gad Levanon, The Conference Board’s Labor Market Institute

Editor’s Note: Gad Levanon is the chief economist at the Burning Glass Institute. He was the head of The Conference Board’s Labor Market Institute. The opinions he gives in this commentary are his own.

Why has the growth in employment remained strong? First, the US economy is holding on better than many expected. The Atlanta Fed’s GDPNow estimate for real GDP growth in the third quarter of 2022 is 2.3%, suggesting that while the economy is now growing much more slowly than it did last year, we are still not in a recession. When the demand for goods and services increases, so does the demand for workers who make them.

It is the same for industries that are growing and others that are experiencing high growth as they adjust to higher demand. The demand for data processing and hosting services is higher today than it has ever been. And it’s likely that these represent structural changes to buying patterns that will keep demand high.

Next year, however, will look very different. The industries that were hit hardest by the Pandemic will have reached some level of employment. With demand saturated, those industries may revert to slower hiring. But this alone is unlikely to push job growth into negative territory. What will do that is monetary policy.

There are two ways to rein in the labor market: Either reduce demand for workers or increase the labor supply. It is not easy to increase labor supply. Increasing immigration, driving people into the labor force or growing investment in workforce training are only some of the types of legislative action needed to do that. This may not be found in today’s political environment.

The Fed has wanted companies to cut back on recruitment when the interest rates rise. So far, we’ve seen only limited evidence of such a trend.

Pollak said there was hope the reopening of schools would be a great chance for some people who left the labor force during the epidemic to return to work. “We may not see some of the people who left come back.”

The Recovery of the Local Economy from the September September Publish-Discontinuity Rate Pandemic and the Decline in the Labor Market

The unemployment rate fell in September to its lowest level in half a century because people stopped looking for jobs.

“That appears to be a certainty for the upcoming meeting in early November. He said that the magnitude of future rate hikes would be clearer as we get closer to the policymaking meetings of the year.

The Fed meets November 1-2 to discuss monetary policy and is widely expected to raise its benchmark interest rate by three-quarters of a percentage point for an unprecedented fourth time in a row.

However, that pace is unsustainable, said Dean Baker, senior economist at the Center for Economic and Policy Research. If monthly job gains drop to 200,000 or more, it would make sense for the Fed to use it.

The pandemic forced restaurants to incorporate online ordering, pick-up and delivery on a greater scale, and customers became more comfortable in using those services, he said. He said that hotels haven’t recovered, but neither has business travel, because of the rise of competitors likeAirbnb and also the fact that there is less demand for hotel stays.

Private sector employment returned to pre-pandemic levels in February, but public sector employment has not returned to where it was in February 2020.

The recovery is more complex because the labor market begins to feel the effects of the Fed’s rate hikes, Pollak said.

While net job losses in important support industries such as local education, child care, and trucking may be troubling, it is not anticipated during a period of high interest rates.

“Those and a few other sectors have large ripple effects,” Weaver said, noting ongoing supply chain concerns and the ability for people to have reliable education and child care services so that they can return to the workforce. That can affect the parents in terms of their future economic and work prospects.

“We’re not sensing that a recession is imminent,” said Dionne Nelson, Laurel Street’s chief executive officer and founder. “We’re still very busy. We are still hiring. Our markets are still very active.”

Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. The strong showing made many investors unhappy because they saw signs that the fight against inflation might become tougher and take longer.

“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed,” said Carl Tannenbaum, chief economist at Northern Trust.

The pandemic left a lasting mark on the U.S. economy. More people are working in warehouses today than in February 2020, and fewer in restaurants. Some parents are forced to work at least part time or not at all because of the lack of child care. “Long Covid” is also clearly keeping some people out of work, although researchers have come up with different estimates of how many.

Getting there has been bumpy. Employers had more jobs to fill than applicants they were able to fill, when businesses reopened last year. The good news for workers was that they were able to switch jobs and negotiate for higher pay. It helped feed inflation, as businesses raised their prices to cover higher labor costs.

But the job market is hardly nose-diving. Even though the total of 263,000 jobs added in September was the lowest in more than a year, it was still a healthy gain. Layoffs remain extremely low; fewer people are getting jobs, but we haven’t seen any meaningful increase in the number of people losing them.

The logic behind Powell’s attention on job openings is simple. They are a direct measure of demand, since employers typically don’t try to hire when no one is buying their products. They have a clear link to wage growth because companies have to pay more to compete for workers when there is lots of hiring.

People who are worried about the economy aren’t likely to quit if they see it as a sign of confidence. And since people typically don’t jump employers without a bump in pay, job-switching contributes to wage growth. People who switched jobs in October saw their pay rise more quickly than people who remained, according to data released by the payroll-processing giant.

The Pain of a Real Estate Bubble: How the Fed & the Urban Continuum have Managed to Solve the Pain of Inflation

The central bank has a dual mandate: maximize employment and ensure price stability. Ideally, the Fed would like everyone to keep their jobs while damping demand just enough to take the heat off consumer prices, which have been hovering at 40-year-highs and currently sit at 8.2%. Most economists say the likelihood of that so-called soft landing is now remote — although Powell still considers it possible.

Analysts across the board say there is a high chance of a recession. But the Fed is wagering that the pain of a recession (and the job losses that would accompany it) is preferable, in the long term, to the pain of runaway prices.

Unfortunately for Democrats trying to hold on to power next week, the pain of inflation appears to be outweighing any positive sentiment about job security. Three quarters of likely voters think that the country is in a recession, according to a new CNN poll.

Cut to 2020 and that narrative got flipped on its head. They couldn’t afford the homes in the suburbs because they didn’t want them. The furor was driven by people in their 30s who were flush with money after years of slogging away at whatever jobs were left for them in the aftermath of the Great Recession.

It didn’t hurt that Baby Boomer parents of large investment portfolios were happy to pass on gains from the stock boom to their kids.

Those who were able to close on a home in the midst of a housing boom in 2020 should be extremely lucky.

Over the past decade, the share of first-time buyers has ranged from 30% to 40%. In 2009, at the beginning of the Great Recession, it was 50%.

Jessica Lautz said they need to save while paying for rent, student debt and other expenses. “And this year were facing increasing home prices while mortgage rates are also climbing.”

Home prices have gone up even as mortgage rates went up, with the median going up to $413,800 in June. (Imagine your starter home clocking in at 400 grand!)

“The policies that regulate land use and housing production make it extremely difficult to add more homes in desirable locations,” writes Jenny Schuetz, an urban economist at the Brookings Institution.

Rather than rebuilding within existing neighborhoods, housing supply has expanded through “sprawling single-family subdivisions at the urban fringe.” It is putting more people and homes in areas that are prone to wildfire.

As affordability reaches crisis levels, now is a good time for federal and local governments to rethink the way we frame the American Dream. If those who will benefit are better represented in elected office, that will happen. As Schuetz argues, the upper-middle class Boomers in power now are, understandably, reluctant to change the system that got them where they are.

The Bank of England Increased the Rate of Interest, and the European Central Bank to the Same Expansion on a Twist in the Last Three Months

Hot on the heels of the Fed’s fourth-straight 0.75 percentage point rate hike, the Bank of England followed suit Thursday, raising its own key interest rate by the same amount — its biggest hike in 33 years. The European central bank did the same thing last week.

The way central bankers talk about rate moves is referred to asBasis points. One-tenth of a percentage point is the basis point.

In normal times, that’s the kind of news worth celebrating. It suggests that the economy is overheating and could be cause for concern in the years to come. The Fed hike was the fourth in a row and the latest in a series of moves that would have been unimaginable just a few months ago.

The report offered a final glimpse of the economy before the midterm elections next week, and it will almost certainly make its way into both parties’ closing pitches to voters.