Layoffs Aren't Denting Labor Demand

"All those tech layoffs didn't do much to dent the job market. The recent roiling of banks might not either.

U.S. job growth has remained remarkably strong, despite the Federal Reserve's sharply increasing interest rates over the past year, the crumbling of housing, and several rounds of headline-grabbing layoffs from companies such as Google parent Alphabet, Meta Platforms and Amazon.com. With businesses ranging from hospitals to hotels struggling to get to adequate staffing levels, the number of people losing jobs has paled in comparison to those who have been getting them.

Not that the number of people getting laid off across the economy has been high.

On Thursday, the Labor Department reported there were a seasonally adjusted 198,000 new unemployment claims filed in the week ended Saturday, up a bit from the previous week's 191,000, but still a very low figure. In 2019 -- a year characterized by job-market strength -- claims averaged about 220,000.

It can take time for people to file for unemployment after losing their jobs, but in the time since trouble at Silicon Valley Bank first sent convulsions through the stock market on March 9, there has been no notable pickup in job losses.

Moreover, demand from employers aiming to hire doesn't appear to have slackened.

An index of overall U.S. job openings from job-listing site Indeed was, as of last Friday, actually a bit above where it was before Silicon Valley Bank's troubles hit. Though down from the highs it reached in late 2021, it is still one-third higher than before the pandemic.

By a similar token, a survey of chief financial officers conducted by Duke University's Fuqua School of Business and the Federal Reserve banks of Atlanta and Richmond in late February through early March, 17% of respondents counted labor quality and availability as their most pressing concern -- more than any other factor, including inflation, monetary policy and the health of the economy. An additional 4.8% put labor costs as their main concern.

"A lot of firms never were able to hire as many as they wanted in the first place," says Duke economist John Graham, who is the survey's academic director. "Even if the economy flattens, they are still trying to fill up those empty slots."

The degree to which the banking sectors' troubles might eventually reduce demand for workers is, of course, uncertain. Even if the danger of more deposit runs has been contained, regional and community banks will likely be more careful with their lending for some time, as well as experiencing more regulatory scrutiny.

That said, Goldman Sachs economists point out that lending standards had already tightened due to recession concerns even before Silicon Valley collapsed, so any further tightening might only represent an incremental change in credit conditions. They further point out that because there are so many unfilled job openings, even if there are fewer expansions financed by small-bank lending, many people will find employment nonetheless.

Banking troubles might lower the temperature on the job market, making it easier for companies with openings to hire workers, and taking some pressure off wage growth. But they won't freeze it." [1]

 

So, if you are preparing to emigrate to the West, go boldly - there will be work. If you are preparing to negotiate for better working conditions, now is the right time.

 

1. Layoffs Aren't Denting Labor Demand
Lahart, Justin.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 31 Mar 2023: B.12.