What’s occurring
According to statistics, there has been a steady unemployment rate of 3.5% in the job market, but there has been an increase in the number of layoffs.
The Significance of This
Should the Federal Reserve persist in increasing interest rates in order to decelerate the economy, there is a possibility of a recession, which could result in more businesses downsizing or closing down.
What’s Upcoming
Understanding the current forces shaping the job market can assist in determining your future career and financial decisions.
In a recent live television interview, a news anchor directly questioned the possibility of a recession despite the current low unemployment rate.
With my quick reflexes, I responded with, “That’s an excellent inquiry,” and diverted the conversation towards the current state of inflation. (I am quite skilled at this.)
Several key indicators point towards a possible recession in the economy, such as high inflation, a decrease in consumer confidence, a volatile stock market, increasing interest rates, and a competitive housing market for both buyers and renters. Despite this, the most recent monthly employment report shows conflicting numbers, with the unemployment rate dropping slightly to 3.5%, which is the lowest it has been since before the pandemic. However, there has been a noticeable increase in layoffs and many Americans believe that a recession is already underway.
The inquiry from the news presenter left me confused for several days. It highlights the current perplexing state of the US economy, which even I, with over twenty years of experience in reporting on personal finance, find challenging to understand.
In my pursuit for answers, I discovered information regarding concerns about a recession, increases in interest rates, job cuts, and other employment-related inquiries.
There seems to be an increase in reports of layoffs and companies halting hiring. Has the unemployment rate remained low?
The topic of layoffs is currently receiving a lot of attention. The job cuts are mainly focused on the technology, mortgage, and housing sectors, which have been greatly affected by a decrease in consumer spending or an increase in interest rates. Several large corporations such as Wayfair, Apple, and Walmart have recently made announcements regarding reductions and downsizing.
Despite the wide range of job opportunities, there is currently almost twice as many job openings as there are jobless individuals. As of June, there were 10.7 million available positions, indicating a widespread growth in employment opportunities. The recorded number of job layoffs has remained consistent, with approximately 1.3 million to 1.4 million occurring each month since the start of 2022.
It is possible that this situation may shift in the future, as there are indications that the employment sector is beginning to slow down. In fact, there has been an increase in applications for unemployment benefits, with the numbers reaching their peak for this year.
According to Liz Young, head of investment strategy for SoFi, the unemployment rate may take a longer time to align with other delayed data points that are currently being observed. She explains that the labor market is typically one of the final factors to exhibit significant strain.
According to Young, numerous major companies have experienced significant financial gains during the pandemic, giving them a greater cushion compared to previous economic cycles to handle potential increases in inflation or a decline in consumer spending. Moreover, these companies are likely to explore alternative methods of cost reduction, such as decreasing marketing expenses and implementing hiring freezes, before resorting to employee layoffs. “Their initial approach will be to decrease costs wherever possible before resorting to workforce downsizing,” she explained.
What is the impact of interest rate increases on the employment sector?
The increase in interest rates by the Federal Reserve, which has occurred multiple times since the beginning of the year, results in a rise in borrowing costs for all, including businesses that depend on credit funding for expansion. This increase in debt expenses may lead businesses to make the decision of reducing operating expenses, such as cutting staff, in order to manage the added burden of higher interest.
To sum up, when interest rates are higher, it can create financial difficulties for entrepreneurs, potentially resulting in staff reductions and increased unemployment rates.
My job prospects are being evaluated after taking a break from the workforce due to the pandemic.
The current job market is favorable for job seekers, with industries such as leisure and hospitality, professional and business services, and healthcare experiencing high levels of employment growth in July according to the latest report from the Bureau of Labor Statistics.
During the pandemic, it is common for women to have taken a break from their careers. Employers should be understanding of employment gaps dating back to 2020. In fact, in 2020, a larger number of women lost their jobs compared to men. According to research by The National Women’s Law Center, 2.1 million women left the workforce between January and December of 2020, with nearly half of them being Black or Latina.
Despite facing challenges such as family obligations and work-life balance, a recent paper shows that women have made a significant comeback. According to Lauren Bauer’s study for the Brookings Institution, women aged 25 to 44, many of whom have a college education, have returned to their pre-pandemic levels of labor participation.
According to Bauer, women have shown resilience in the face of challenges in the past few years, refusing to let it alter the course of their lives. Despite the difficulties they have faced, they have taken a proactive approach to staying on track for themselves and their children, a response that was unexpected.
Is it appropriate to request a salary increase during these unpredictable times?
The balance of power between employers and employees may be influenced by the financial status of the company, however, with the current abundance of job opportunities and fewer job-seekers, workers may have slightly more leverage.
According to Jesse Rothstein, a professor of public policy and economics at the University of California, Berkeley, it is my estimation that wages are currently gaining momentum and that workers still retain a considerable amount of bargaining power.
According to a recent survey conducted by Momentive, around 50% of employees reported being given a salary increase within the past year. However, this increase has not been sufficient to combat the effects of inflation.
My perspective is that instead of being concerned about the uncertain state of the economy, it would be more beneficial to assess the financial stability of your company to determine if a salary increase is feasible this year. If your company has put a halt on hiring or has reduced expenses, it may not be the best time to request a raise. However, if your employer has had a successful year in 2022 so far (you can check the earnings reports if the company is public or seek advice from a finance or accounting colleague), this could be a favorable moment to ask for a salary raise.
Find out more: Should You Consider Requesting a Salary Increase at This Time?
In the event that I am laid off, what is the estimated time frame for finding a new job?
According to the Bureau of Labor Statistics, the average duration of collecting unemployment insurance in June was 22 weeks. This implies that some individuals were successful in securing new employment within approximately four and a half months. However, this metric is not entirely accurate as some job seekers lose their benefits before finding a new job. Experts suggest that the official employment figures may not accurately reflect the number of long-term unemployed workers.
What steps can I take to get ready for a potential layoff?
Direct your attention towards the choices that are under your influence. This includes discussing with your employer in the present about how you can contribute to increase value, productivity, and potentially revenue during these challenging times. Take care of your own financial situation by saving and paying off debts with high interest rates. Reevaluate your objectives and strive to establish stability in both favorable and unfavorable circumstances.
Is it possible for a recession to occur when the job market is in a relatively good state?
According to the National Bureau of Economic Research, the official declaration of a recession considers not only the state of the job market but also other economic indicators like retail sales, industrial production, and personal income growth. In the past, the most severe recessions have been characterized by extensive job cuts and cyclical unemployment, which refers to a decline in demand for hiring.
Despite this, determining the timing and course of the recession should not be the main focus of one’s time. According to Rothstein, “This seems to be mostly a matter of semantics.”
Unfortunately, this is the statement I regret not making during my TV appearance. However, I improved on my second attempt.
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