Despite Hot Jobs Report, Fed Has To Heed Workers’ Fear Of Layoffs

The unemployment rate in November remained super low — unchanged from 3.7% in October 2022. The jobs report is hot in another respect. Earnings are much higher than expected — some predicted a much lower rate of increase, instead of the 0.6% month-over-month wage.

This report doesn’t bode well for a Federal Reserve reaction. We can expect the Fed to put the brakes on the economy in an attempt to suppress worker wages. But, Fed, take note: In Friday’s report, Temporary help services — the only leading employment indicator — is way down.

And I am not so sure worker power is strong enough to boost wages over productivity and thus push up prices. The fear of layoffs affects worker confidence and requests for wage increases.

Fed Should Heed Worker Fear

The fear of layoffs shows up in other numbers.

The quits rate (reported in Tuesday’s Job Openings and Labor Turnover Survey or JOLTS) and the job leaver share (reported in November’s employment report) can tell us a lot about how workers are feeling about the economy.

The quits rate* in October edged down slightly to 2.6% but remains high above the average 2% over the last 20 years. And, no surprise, in professional and business services, the quits rate is higher at 2.9%.

And, in another indication of worker fear, in November’s report the job-leaver share of the unemployed dropped to 13.9% from 14.6% in October 2022 and 15.9% in September 2022. I don’t have the recent numbers by sector, but overall it shows fear creeping in.

Consistent with job leavers slowing down, the job loser share is creeping up from a lowish number of 44.9% in July 2022 to 46.5% for October 2022.

Tech Layoffs

A handful of us have been fretting about the huge layoffs in the tech sector as a sign of things to come. It is rare for an ongoing company to fire half of its workforce. Elon Musk seems to be using layoff threats as a discipline device — announcing drastic changes in working conditions in his famous edict to work in the office 40 hours a week (and 40 more from home). Companies typically in trouble cut labor gradually — they stop hiring, cut back on hours and slow down wage increases, not slash and burn.

According to Laura Wamsley at NPR, “more than 35,000 tech workers across 72 companies have been laid off this month [November], adding to a total of 120,000 tech jobs lost this year, according to the organization that tracks tech employment — layoffs.fyi.” Twitter laid off 3,500 but Meta and Amazon
AMZN
together laid off 21,000 workers.

The retort to our worry is that other employers are desperate for workers and they are absorbing the cast-offs from Meta, Amazon, and Twitter. And those optimists are supported by the November numbers. Whatever loud layoffs there have been in tech, they are not showing up in the numbers.

In October 2022, 2,447,900 people worked in the computer systems design and related services sector. But in November 2022, the number was up 8,100 to 2,458,600.

But I will keep an eye out for it. Worker fear seems likely to be greatest in the information and professional services sectors because layoffs are nasty and the quits rates have fallen the steepest in those two industries.