February 4, 2023

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When will waves of layoffs relax this crazy job market?

When will waves of layoffs relax this crazy job market?

It’s starting now (but a little bit).

by Wolf Richter for Wolf Street.

There have been countless layoff announcements, some by big tech and social media companies, others from perpetually money-losing companies that suddenly have to conserve cash — like a company BuzzFeed earlier this week to lay off 12% of its employees, or today through meal-delivery-penny-stock Blue Apron to lay off 10% of the company’s employees. Most of the announced layoffs were in the hundreds. Some were bigger, like Meta with 11,000; And Twitter, a complete mess of layoffs, resignations, and come back please. But they are still small numbers compared to the total of 153.5 million employees in the United States.

But there is still a file Historically a huge number of jobs. Even as tech and social media companies are laying off some workers, industrial companies, automakers (who are investing heavily to build their own electric vehicle divisions), and others are desperately trying to hire tech workers.

For example, Ford is downsizing its workforce in its legacy divisions, where sales are slumping, but it is hiring technical and engineering talent in its electric vehicle division, where sales are booming, and where it has to start everything from scratch, including designing and building cars, and software. , supply chains, factories, etc. These companies were deprived of tech talent because they couldn’t compete with the rich pay packages and stock options offered by the likes of Twitter or Meta. But now they might be able to attract talent.

Layoff announcements by US companies are global layoffsSome of the layoffs in other countries have hurt. For example, Twitter’s layoff numbers included layoffs in India, where it destroyed its offices. Twitter has also terminated thousands of contractors, many of them in other countries.

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Then there are the H-1B visa holders. Technology and social media companies, and other companies with tech divisions, work heavily with people from other countries in the United States on H-1B visas. The layoffs include them. But these people only have 60 days to find another employer after their current job ends. If they could not, they would be considered “out of status” and in theory would have to leave the United States.

When workers on an H-1B visa are laid off, they do not qualify for unemployment compensation in the United States, and therefore they do not appear on the unemployment insurance claims we will consider.

Once they leave the country, they no longer appear as “unemployed” in the monthly jobs report.

These are among the reasons why we are not seeing a significant increase in weekly claims for unemployment insurance by the Department of Labor.

But the trend changed directionas “continuing claims” (unemployment insurance claims by people who haven’t found a job at least one week after their initial claim) is now rising strongly, although it’s still historically low.

Initial claims for unemployment insurance: 230,000 people filed an initial unemployment insurance claim through state unemployment offices in the week through Saturday, according to the Labor Department today. This was in the same low range as in previous weeks (up slightly from last week, down slightly from the previous week) and in the same low range as before the pandemic:

The long view of initial claims for unemployment insurance shows just how low they are. For the labor market to soften significantly, we would have to see the number of initial jobless claims rise above the 300,000 mark. When recessions hit (purple bars), the number of initial weekly claims was rising through the 350,000 range.

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This shows that most people who are laid off have found a job so quickly or already have a new job waiting in the wings that they don’t need to file for unemployment compensation.

But some people are now having difficulty finding a new job. The number of people still claiming unemployment insurance at least one week after the initial claim — people who haven’t yet found another job — has risen to 1.67 million, according to the Labor Department today.

That’s still historically low, as it was about as low as during the lowest points just before the pandemic, and far lower than anything since the mid-1970s (when there were far fewer workers).

But it does show that the trend has reversed strongly, that some people are having trouble finding a new job, and are staying on unemployment insurance a little longer. This is a sign that the job market is becoming less tight:

This is a brief opinion:

The long view shows the historic low range of the 1.67 million continuing claims. But it also shows that the trend is now on the rise, having reversed course aggressively. During a mild recession in 2001, these continuing claims rose to 3.7 million. During the Great Recession, they jumped to 6.6 million.

We have other indications that the job market is becoming less tight, but it’s still very tight. Weekly Unemployment Insurance Claims is the most recent data we have available. And they depict a job market that’s still amazingly tight, given all the layoff announcements, but is starting to loosen up a bit to where some people who’ve lost their jobs – and they may not be technical workers – have to look a little longer to find a new job and stay on. Unemployment insurance for a little longer.

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To stick to the “soft landing” analogy, the job market hasn’t fallen at all yet, but it is losing some steam.

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