Job cuts and hiring creates headache for US market

Ken Jacobs on February 21, 2023

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Job cuts – Some companies are having problems filling jobs in the US market, while others are letting individuals go.

Various corporations have lately announced massive job cuts, including:

Amazon
Disney
Meta
Microsoft
Zoom

As a result, there were nearly 103,000 jobs cut in US-based companies in January.

According to a survey by the outplacement firm Challenger, Gray & Christmas, it is the largest job cut since September 2020.

The number of new jobs created by firms in January, however, was 517,000, which is more than nearly three times what economists had projected.

The increase in employment demonstrates how extremely competitive the labor market is, especially in industries like the service sector that were severely harmed by the epidemic.

The Covid legacy

It is more challenging for experts to forecast the future direction of the US economy given the current circumstances.

Experts were taken aback by the robust consumer spending, particularly in view of the continuous inflation and rising interest rates.

According to renowned global strategist David Kelly, the most recent consumer spending is a part of the “legacy of weirdness” left by the Covid epidemic.

The Bureau of Labor Statistics will present the subsequent nonfarm payroll on March 3.

Wages

Researchers and economists caution that a variety of variables might result in greater job cuts in other industries if wages don’t keep up with inflation, including:

Strains on household budgets
High-interest rates
A savings drawdown

According to data recently published by the Bureau of Labor Statistics, wages for people working in the hotel and leisure sectors increased in January.

The compensation increased from the previous year, when it was $19.42, to $20.78.

“There’s a difference between saying the labor market is tight and the labor market is strong,” said Kelly.

Companies still struggle to find and retain the right people.

They encounter challenges because of factors like the need for staff childcare and potential competition from improved working conditions and pay.

Consumer impact

If interest rates increase and inflation remains high, consumer spending may drop, which might lead to further job cuts or lower employment overall.

“When you lose a job, you don’t just lose a job,” said Aneta Marowska, a Jefferies chief economist. “There’s a multiplier effect.”

There may be less money spent on business visits as a result, even if there are concerns with tech companies.

Consumers may be compelled to reconsider their spending on services and other items if job cuts continue.

A reset

Businesses that increased their hiring during the pandemic, when e-commerce and remote work had a greater influence on consumer and corporate spending, have since endured a sizable amount of job cuts.

At the end of 2022, when it had 1.54 million employees—roughly twice as many as it did in 2019—Amazon recorded an 18,000 job cut.

Microsoft shed 10,000 employees, or 5% of its staff, using identical tactics.

The corporation had 221,000 employees by the end of June the year before, a significant rise from the 144,000 before the infection.

According to Michael Gapen, head of US economic research at Bank of America Global Research, the tech sector is evolving from a “grow-at-all-costs” industry.

Airlines

Meanwhile, other companies are hiring more people.

Boeing plans to hire 10,000 new employees in 2023, mostly in engineering and production.

Also, the business cut roughly 2,000 corporate jobs, mostly in finance and HR.

Boeing is growing to improve the company’s capacity to build new aircraft in anticipation of an increase in orders from clients like United and Air India.

Early on in the outbreak, when business dried up, airlines and aerospace companies suffered; however, they are currently making efforts to recover.

The amount of pilots available currently determines how many passengers each airline may carry.

As pandemic restrictions were lifted, there was an upsurge in demand for food and travel.

A shared struggle

To attract and keep employees, businesses of all sizes would need to raise pay.

Industries who saw customer reaction and other company backlash after job cuts are now trying to hire more people.

Walmart is raising its minimum wage to $14 an hour in an effort to attract more employees.

Due to the high turnover rate, The Miner’s Hotel in Butte, Montana increased the hourly compensation for housekeepers by $1.50.

Concessionaires and airports are also hiring additional workers as tourism increases.

Every month, the Phoenix Sky Harbor International Airport hosts employment fairs and offers childcare support to staff.

Austin-Bergstrom International Airport grew by 48% during the same time in 2019.

Moreover, it results in improved incentives like:

$1,000 referral bonuses
Signing incentives
Retention incentives for referred staff

In a similar vein, Austin-Bergstrom International Airport’s airport facilities representatives now earn $20.68 per hour, up from $16.47 in 2022.

Austin has a high cost of living, claims Kevin Russell, the airport’s deputy talent chief.

Russell also saw a spike in employee retention.

However, it has proven difficult to maintain some positions open as staff may be able to find higher-paying positions elsewhere that aren’t available 24/7, such as:

Electricians
Heating-and-air conditioning technicians
Plumbers

Despite how simple it is to acquire new employees, businesses must spend time training new staff before they can scale up.

Pandemic aftermath incurs layoffs with shifting customer demand

Karla Perry on January 30, 2023

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Pandemic: According to CEO Satya Nadella, the pandemic’s start two years ago swung the scales in Microsoft’s favor.

Microsoft prospered through its online services.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Nadella.

The scenario is substantially different from what it was in 2021 as of this year.

Microsoft announced last week that 10,000 workers will be laid off.

The business said that as it battles with economic instability, it is reevaluating its digital spending from the pandemic era.

Microsoft users want to do “more with less,” as per Nadella.

The tech space

Microsoft is not the only business to go through this process; other businesses have also been getting rid of employees.

Alphabet, the parent firm of Google, has disclosed intentions to terminate 6% of its employees (over 12,000 jobs).

Around 50,000 employees have been let go by many massive corporations, including Amazon, Google, Meta, and Microsoft, since October.

The decisions stand in contrast to the pandemic’s early stages, when tech businesses were growing to meet the demands.

Many market players at the time believed the expansion was going to last a very long time.

However, Amazon has more than doubled its employees since roughly September 2019.

They built additional warehouses while employing over 500,000 workers.

Between March 2020 and September of the prior year, the workforce of the massive social media company Meta more than doubled.

Other businesses that have increased their worker numbers are:

Google
Microsoft
Salesforce
Snap
Twitter

In recent weeks, the aforementioned businesses have also announced further layoffs.

Error in judgment

The spread of the pandemic was underestimated by the majority of tech CEOs, especially as individuals returned to their normal lives and offices.

Consumer spending and advertising have decreased recently for a number of reasons, including:

Recessionary fears
Inflation
Increasing interest rates

Some companies, according to Wall Street experts, will have single-digit profit growth in the crucial December quarter.

Apple and Meta are anticipated to experience declines, according to Refinitiv forecasts.

Most recently implemented personnel reductions often only impact a tiny portion of the whole workforce.

Others cut gains over the previous year despite keeping tens of thousands (or perhaps hundreds of thousands) of employees.

However, because of their company’s allegedly endless expansion, it interferes with the lives of employees who are now looking for new employment.

Pandemic growth

The Third Bridge investment firm’s worldwide sector lead, Scott Kessler, gave his thoughts on the state-of-the-art advances and early expansion of the tech industry.

“They went from being on top of the world to having to make some really tough decisions,” said Kessler.

“To see this dramatic reversal of fortunes… it’s not just the magnitude of these moves, but the speed that they’ve played out.”

“You’ve seen companies make the wrong strategic decisions at the wrong times.”

Apple continues to be the only significant technology business without any public layoffs.

According to reports, the company suspended recruiting, with the exception of R&D (research and development).

Apple has barely increased employment by more than 20% over the past four years compared to other corporations.

“They’ve taken a more seemingly thoughtful approach to hiring and overall managing the company,” noted Kessler.

Meanwhile, CEOs have admitted that they made an error by recruiting too many people at the start of the pandemic and failed to anticipate demand that came when the restrictions on the pandemic were lifted.

He issued an email to the staff on Friday, and it was later published on the company website.

“The face that these changes will impact the lives of Googlers weighs heavily on me,” Pichai wrote.

“I take full responsibility for the decisions that led us here.”

Aftermath

The titles and compensation of the major corporate CEOs don’t appear to have changed as a result of the reductions.

Despite all the worries about the economy, Scott Kessler forecasts that the tech industry will likely continue layoffs throughout the approaching earnings season.

Businesses that haven’t yet felt these repercussions may decide to do so in the near future by laying off employees.

Kessler observed:

“I think there is an element of [some companies], saying ‘We might not see this right now but all these other big companies, these companies that we compete with, that we know, that we respect, are taking these kinds of actions, so maybe we should be thinking and acting accordingly.”

Zero-fare plan sweeps the country to divided opinions

Karla Perry on January 24, 2023

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Zero-fare: The state plans to remove bus fares, which is excellent news for residents of Washington, DC.

According to the city’s resolution, Washington will be permitted to join a small number of US cities attempting to eliminate fares from its metro bus and rail systems.

The zero-fare system is now being tested in many cities, including Boston, San Francisco, and Denver.

The first big city to implement the fare-free public transit system in 2019 was Kansas City, Missouri.

The movement

The zero-fare movement calls for eradicating fares on trains, buses, and other forms of public transportation.

The premise is that increasing access to public transportation for all people, regardless of their financial position, will boost usage, relieve traffic, and promote social and economic equality.

Business organizations, environmentalists, and Democratic lawmakers have all backed the zero-fare campaign thus far for the reasons listed below:

There is less climatic change.
Using the rail or bus can help the local economy.
People need public transit every day.

The campaign received more attention amid the pandemic since it demonstrated how crucial public transportation is for essential personnel who are operating on-site.

The bill

Even though the zero-fare movement is becoming more and more popular in places where it conflicts with local budgets or laws, it has faced political opposition.

The Covid-19 pandemic in 2020 came two weeks after the zero-fare bill was first proposed.

The law was sponsored by Charles Allen, a councilman for Washington, DC, who emphasized the significance of the legislation.

“I don’t charge you when you need the fire department, but yet, we’re going to make sure there’s a fire department when you need,” said Allen.

“That’s how you need to think about this.”

According to the DC plan, the $2 bus fare would be removed as soon as July.

The city council voted unanimously to support the law, and now it is up to Mayor Muriel Bowser to sign it, reject it, or take no action.

The zero-fare proposal for Maryland and Virginia without state money was met with opposition from Bowser.

A mayoral veto, however, may be overcome by unanimous agreement.

What it could bring

The zero-fare plan would offer a dozen 24-hour bus service lines in addition to spending $43 million a year to make utilizing the DC Metrobus free for commuters.

Tax increases would compensate for it.

The DC council is currently debating the $10 million subsidy program, that would grant city residents a $100 monthly credit to use on the DC Metrorail.

How to make it happen

Funding and political backing are two crucial components that can help US cities in adopting the zero-fare system, and both are present in Kansas.

According to Richard Jarrold of the Kansas City Area Transportation Authority, tickets cover 12% ($8 million) of the cost of running buses.

According to Morgan Said, the mayor’s chief of staff, Kansas spends $2 to $3 million a year on fare enforcement.

DC fare makes up less than 10% of the district’s transportation expenses.

Since the start of the epidemic, fare-free buses have been operating in Richmond, Virginia, and fare income made up 8% of the agency’s entire budget.

“For some smaller transit agencies that don’t really collect much cash anyway,” said Grant Sparks, a director at the Virginia Department of Rail and Transportation.

“They’re almost spending more to collect the fare than they’re actually receiving in revenue.”

They increased the significance of the economic case.

Charles Allen seeks to advance and broaden a zero-fare public transportation system.

Drawbacks

Despite growing in support, the zero-fare plan still stands out as the exception rather than the rule.

New York city officials decreased the price of each subway ride to $2.75.

The city launched the Fair Fares program in January 2020 to provide qualified low-income people with commuting rebates.

It is challenging to subsidize the city’s transportation system because fees help compensate around 30% of its operating budget.

Meghan Keegan, an MTA spokesperson, stated:

“Until a new plan emerges for funding public transportation in New York that would allow the MTA to be less reliant on fare revenue, there is no way to consider eliminating a vital revenue stream.”

The concept is being adopted broadly in states like Virginia that have had success with zero-fare transportation.

Virginia law imposes limits on the amount that the state must pay to WMATA, the bus company that operates in Virginia, Maryland, and Washington, DC.

Despite its infrequent fare holidays, Denver also intends to keep its prices the same.

Debate

Republican support for the zero-fare scheme is weaker.

In Utah, a state with a Republican majority, a budget plan to eliminate fares for public transportation for a year was vetoed.

The majority leader of the Republican-controlled House, Mike Schultz, said that the system receives adequate funding but cautioned that nothing comes for free.

The nonprofit Transit Center in New York City disagreed with the idea of zero-fare.

The organization claims that a survey indicates that customers would like more frequent and dependable service.

The discussion highlights how unlikely it is that a federal zero-fare policy will soon be implemented.

Reference:

The zero-fare public transit movement is picking up momentum

Minimum wage set for positive change this year

Karla Perry on January 2, 2023

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Minimum wage: News of an increase in the employee minimum wage was announced at the beginning of the new year.

Workers in more than half of the states have been calling for higher pay for years, mainly because the federal minimum wage has stayed at $7.25 per hour since 2009.

Although a few states and cities have set their own rates, several are currently planning to increase the wage in 2023.

The news

This year, minimum wage increases were announced in 26 states.

According to US payroll analysts at Wolters Kluwer Legal & Regulatory, one more state will join the revision in July.

The Economics Policy Institute stated that 23 states, including Washington, DC, would begin implementing the higher compensation on January 1.

As a result, 8 million employees will be affected.

There will be price increases ranging from 23 cents to $1.50.

States implementing the minimum wage increase

Delaware: $10.50 – $11.75
Illinois: $12 – $13
Maryland: $12.50 – $13.25
Massachusetts: $14.25 – $15
Michigan: $9.87 – $10.10
Missouri: $11.15 – $12
Nebraska: $9 – $10.50
New Jersey: $13 – $14.13 (includes inflation adjustment)
New York: $13.20 – $15 (in and around the city), $14.20 (upstate New York)
Rhode Island: $12.25 – $13
Virginia: $11 – $12

States that will implement the increase later this year

Connecticut: $14 – $15 (July 1 implementation)
Florida: $11 – $12 (September)
Nevada: $9.50 – $10.25 (firms with benefits), $10.50 – $11.25 (firms without benefits)
Oregon: $13.50 (July 1 implementation)

Catalysts

The critical decision was made last summer when inflation hit a 40-year high and families struggled to keep up with rising costs.

Sebastian Martinez Hickey, an EPI research assistant, said:

“The fact that there’s high inflation really just underscores how necessary these minimum wage increases are for workers.”

“Even before the pandemic, there was no country in the United States where you could affordably live as a single adult at $15 an hour.”

The pandemic and the following economic recovery made the wealth divide in America glaringly obvious.

Over the past two years, labor movements and efforts by major companies to raise the minimum wage have been triggered by working conditions and poor compensation.

The pandemic also brought on a lasting imbalance between the supply and demand for labor.

Labor

Due to a staffing crisis, employers struggled to attract and retain workers for most of the year, increasing the average annual hourly wage.

Even when workers in competitive industries found their new earnings higher than inflation, most compensation was overtaken by rising prices.

The economics professor at the University of California, Michael Reich, stated:

“The story is different because wages have been increasing at the low-end, much faster than inflation and much faster than in middle- or high-wage jobs.”

“And that means that many workers, even in the $7.25 states, are already getting paid above the minimum wage.”

“Even though the minimum wage might go up by 7% in many states and cities, labor costs aren’t going to go up anywhere as much as they have in the past,” Reich added.

“Because they have already gone up. That also means that prices aren’t going to go up at [places like] restaurants.”

Impact

Campaigns were launched by US President Joe Biden to raise the minimum wage to $15 per hour.

In 2022, he signed an executive order raising the wages of federal workers and contractors to that amount.

However, Congress would need to approve any significant changes to the country.

Although an attempt was made to increase the rate, the law for the 2021 Covid-19 relief did not include it.

Kevin Werner, a research associate at the Income and Benefits Policy Center at the Urban Institute, said:

“As the gap between that and the federal minimum wage increases, it will be interesting to see if that can kind of spur more momentum for more states to increase their wages or try to get more momentum on the federal level.”

According to a September report from the Urban Institute, the $15 per hour pay adjustment would impact 56 million workers.

The study simulated two scenarios in which there were no job losses and two in which there were more job losses due to the new minimum wage.

“Even in our highest job loss scenario, we still found that on average, the average worker was better off, and that poverty declined overall,” said Werner.

“Even though some individual people who lost their jobs may have been worse off, the net effect was still positive.”

Workers

According to Kevin Werner, the bulk of workers affected by a $15 minimum wage are older than 25.

The likelihood of relying on the minimum wage is higher for people of color and those in poverty.

Werner noted that struggling individuals would gain from raising the minimum wage nationally.

The CEO of Business for a Fair Minimum Wage, Holly Sklar, claims that raising the minimum wage can also increase consumer demand.

As a result, the local economy will be able to recover.

“Putting needed raises in minimum wage workers’ pockets [is] really the most efficient way you can boost the economy,” said Sklar.

“Those are the people who have to go right back around and spend it.”

References:

These states are raising their minimum wages in 2023. Chart shows where workers can expect higher pay

New Year’s pay boost: these states are raising their minimum wage

Rent on the rise, but it’s moving at a steady pace

Ken Jacobs on December 26, 2022

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Rent: There has been an upsurge in rent for single-family homes and apartments, but it has been increasing very gradually.

Inflation is straining consumers as landlords’ pricing power has been dwindling.

Growth

Rent growth decreased in November for the tenth consecutive month, increasing by just 3.4% compared to the same month in 2021.

According to Realtor.com, it is the smallest growth in the past 19 months.

The median asking rent in the 50 biggest metro areas decreased, dropping to $1,712.

It is down $22 from October and $69 from its peak in July.

Danielle Halle, the chief economist at Realtor.com, said the following:

“Many Americans’ budgets are being pulled in multiple directions as the holidays approach, bringing a more typical season cooldown to the rental market that we haven’t seen in the last few years.”

“Despite this recent relief, renters will continue to be challenged by affordability in 2023, with rents forecasted to hit more record highs.”

Market

Each market offers a different level of rent relief.

For instance, rents declined for the first time in nearly two years in places like Austin, Texas, and Jacksonville, Florida, while rentals grew by 0.9% annually in the Sun Belt.

The Midwest markets are becoming less accessible as rents rise by around 10% and 9% in Indianapolis and Kansas City, respectively.

Even while the Realtor.com study only considers single-family rents, a separate survey from October painted a similar picture.

According to CoreLogic, the slowest pace of appreciation in more than a year was seen in October 2021, when single-family rent growth slowed to 8.8%.

The rate is still three times higher than it was before the pandemic.

Although rents typically drop in the fall, in 2022, they did so more slowly.

Homes and apartments

Apartment rents climbed more slowly than single-family home rents because fewer apartments were available than single-family homes.

Additionally, there was a higher demand for single-family houses in the suburbs in the early years of the pandemic.

The majority of the renters are still there.

The Sun Belt is still experiencing significant demand in the interim.

For instance, the highest single-family rents were found in Miami, Orlando, and Florida, which increased by 15.5% and 16.1%, respectively, over the previous year.

Construction

Although homebuilders are continuously growing the market for rental homes, multifamily complexes may already be feeling the effects of slower rent increases.

According to the US Census, the number of multifamily building permits dropped by more than estimated (18%) in November compared to October.

Peter Boockvar, the chief investment officer of Bleakley Financial Group, said:

“I have been hearing anecdotal stories of multifamily projects getting canceled because the numbers no longer work with the still elevated cost of construction, the sharp rise in funding rates, and the slowing pace of rent growth.”

The variables point to a more pronounced drop and significant continuous building the following year.

In November, 932 000 multifamily apartments were under construction, according to Robert Dietz, senior economist for the National Association of Home Builders.

Since December 1973, the number was at its peak.

“We are forecasting declines for apartment construction in 2023 due to the large amount of supply in the construction pipeline, as well as tightening commercial real estate finance conditions,” wrote Dietz after the November home construction report.

The Commerce Department’s assessment from November found that single-family home building in the US had fallen to a 2-year low.

Additionally, the study found that the number of permits for new construction fell as mortgage rates continued to rise and cool the housing market.

References:

Rents are now rising at the slowest pace in 19 months

Higher mortgage rates depress US single-family housing starts, building permits

Here For Portland distributes three thousand $50 gift cards

Lilian Swift on December 5, 2022

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Here For Portland is a city-led nonprofit organization that strives to get its residents back on their feet after suffering from the pandemic.

The nonprofit brings people together for a green initiative that improves the city’s environmental quality.

Here For Portland is primarily helping local businesses rebuild, especially after weathering a troubling pandemic that affected the economy.

Donation

Here For Portland gave away three thousand $50 gift certificates at the tree lighting ceremony in Pioneer Square last Friday night.

The gift cards were distributed through a free app called Kuto.

People can also use it at participating businesses in the city.

Abe Proctor, the director of communications for Worksystems, the workforce development board for Multnomah and Washington counties, applauded the app.

“The Kuto app is a local, BIPOC-owned company that helps people make electronic transactions while avoiding the fees that are charged by major financial institutions.”

“Everybody likes $50, right? And we’re giving away three thousand of these, so that’s $150,000,” Proctor added.

The initiative

The campaign is part of Portland Mayor Ted Wheeler’s initiative to support local downtown businesses.

In addition, the goal is to help entrepreneurs recover from the effects of the pandemic.

Additionally, Here For Portland is committed to encouraging Portland residents to shop at local businesses during the holiday season.

The association wishes to emphasize the importance of supporting businesses owned by women and people from disadvantaged communities.

Dozens of people lined up to collect the free gift card on Friday night.

Reception

The residents appreciate the efforts of the nonprofit organization.

“We’ve gotten Kuto gift cards before,” said Caty Jimenez.

“It’s given us a lot of opportunities to find new local businesses that we haven’t heard of before, or maybe we wanted to go to but didn’t have the money ourselves to spend on it.”

Meanwhile, other Portland residents believe Here For Portland’s efforts will help the city recover from its recent challenges and inspire others to shop this holiday season locally.

“It’s a start,” acknowledged Bernard Lewis.

“I think it’s a great way to improvise and to jump over that hurdle, tear down that wall, and get Portland the recognition it really deserves.”

Other notes

Here For Portland also partners with Portland State University for some projects.

The nonprofit helps students find paying jobs at downtown businesses.

Additionally, students who enroll can work a total of 300 hours.

After they complete the hours, the companies they have worked with can choose to hire them on an ongoing basis.

Reference:

Portland nonprofit distributes three thousand $50 gift cards to help local businesses

Lurie Children’s Hospital crush union plans

Lilian Swift on November 30, 2022

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Lurie Children’s Hospital is one of Chicago’s top hospitals, but there has been a dispute between nurses and management.

Lurie’s nurses are clashing with management after receiving messages they say are union-busting.

The news

The leaders of the Ann and Robert H. Lurie Children’s Hospital in Chicago recently told nurses there was no need to form a union.

They sent a letter signed by the hospital’s chief nursing officer and assistant chief nursing officer.

According to the letter, nurses do not need a union speaking on their behalf.

Additionally, the administration is concerned about the impact of a union on work culture.

Management sent the letter earlier this month.

The past few years have been some of the busiest at Lurie Children’s Hospital as the pandemic has wreaked havoc, testing the healthcare system.

Among the other challenges the hospital face were:

Staffing shortage
Higher-than-normal patient-to-nurse ratios
Burnout

Reception

A Lurie nurse spoke to the Chicago Sun-Times and requested to remain unnamed.

The veteran nurse worked at the hospital for nearly two decades, serving the establishment for 16 years.

“You feel as if you’re a bad nurse because you are limited in the time you can spend with each of your patients,” said the nurse.

“Lurie nurses strive to give the best care we can give, and that really hits us at our heart when we feel like we can’t give that.”

The hospital’s response

Meanwhile, Lurie Children’s Hospital spokeswoman Julianne Bardele said the hospital respects the rights of workers to organize.

However, she noted that unionization could significantly affect the work environment at the hospital.

“Like most pediatric healthcare organizations, Lurie Children’s has faced challenges that have made nursing harder,” said Bardele.

“But we remain committed to working directly with our workforce to address concerns and to continue to foster a culture built on mutual respect and shared dedication to providing a healthier future for every child.”

Directors

The managers and directors of Lurie Children’s Hospital ignored the concerns nurses sought to address about staffing and to improve working conditions.

“Every month, we will sit down and go through issues,” said another Lurie nurse of six years.

“I brought up some issues that I was concerned about, and my director was… I wouldn’t say yelling, but she got very short with me.”

According to the nurses, when they received the letter, they felt discouraged and even threatened by management.

They also said they wanted the letter to contain at least some compromises.

Lurie’s veteran nurse elaborated, saying:

“[Some of the phrases used in the letter] really made us feel little because many of us have spoken and continue to speak and have gone those routes and avenues that they talked about in that letter, and then it’s crickets afterward.”

Reference:

Lurie Children’s Hospital nurses at odds with management over potential to unionize

Jobless claims soar high, exceeds expectations

Sarah White on November 28, 2022

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Jobless claims for the week ended November 19 rose by 240,000, a massive increase in jobless claims from the week before.

There was a sharp increase of 17,000 on Wednesday from last week’s revised figure of 222,000, according to the Labor Department.

The numbers

The jobless claims report exceeded economists’ expectations of 225,000.

Meanwhile, current claims hit an eight-month high of 1.55 million in the week ended November 12.

Claims also include people who have applied for unemployment benefits for more than two consecutive weeks.

Due to a tight labor market, unemployment insurance claims remained historically low.

Layoffs

Jobless claims continued to rise even as workers returned after lockdowns ended during the pandemic.

However, things can be subject to change.

Large companies have carried out massive layoffs, especially in the technology industry.

However, the layoffs are not necessarily reflected in last week’s jobless claims.

Eugenio Alemán, the chief economist at Raymond James, says many tech workers are secure with their severance package.

Additionally, Alemán is looking for signs of a broad increase in claims from other industries that are not typically covered by severance packages.

“And that’s still not happening today,” he said.

Claims

Economists at Oxford Economics wrote on Wednesday that weekly jobless claims are volatile and subject to revisions, especially over the holiday season.

“Therefore, we don’t read too much into the larger-than-anticipated drop in claims,” the economists wrote.

Initial weekly claims have averaged fewer than 215,000 this year.

While the 240,000 claims represent a fresh increase, they are still below the 250,000 weekly claims, consistent with the recession, according to Mark Zandi.

Zandi is the chief economist at Moody’s Analytics.

He also said jobless claims were below 300,000, in line with the recession.

“I view the increase in layoffs from the prism of ‘good news is bad news,'” wrote Zandi.

“That is, layoffs are awful for those losing their jobs, but it does mean the job market is cooling off, which is critical to getting inflation back and forestalling more aggressive interest rate hikes by the Federal Reserve.”

Mark Zandi admits he expects more layoffs as big companies in other sectors will start cutting wages in the new year.

Reference:

Latest weekly jobless claims jump to 240,000

Student loans forgiveness policy blocked by Republicans

Sarah White on November 28, 2022

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Student loan debt is a problem many American citizens face, but President Joe Biden recently offered a student loan forgiveness policy.

However, on Wednesday, a group of Republican-led states argued that the policy should be put on hold while related lawsuits play out.

Additionally, they noted that the Biden administration had extended the suspension of student loan repayments.

The argument

Republican states received an appeals court order blocking the implementation of Biden’s student loan forgiveness program.

They said the extension showed the current court order would do no harm.

In a new filing, Republicans wrote:

“The Department [of Education] can point to no emergency or imminent harm because, just yesterday, the agency extended the payment pause on student loans until the summer of 2023.”

Payments pause

Federal student loan payments were due to resume this January after a one-year hiatus from the pandemic.

On Tuesday, however, the Biden administration said the hiatus would be extended to 60 days.

The extension will occur when the pending litigation on the program is resolved.

If the program is not implemented and the dispute is not resolved by June 30, payments will resume after 60 days.

The filing

Wednesday’s filing comes in response to a request by the Biden administration to ask the Supreme Court to lift the suspension of the student loan forgiveness program.

The program would void up to $20,000 in credit for individual borrowers who earned less than $125,000 in 2020 and 2021.

Republican states have also blamed the government’s reliance on the pandemic as an excuse to overshadow Biden’s goal of delivering on his campaign promise to pay off student loan debt.

Biden’s student loan policy was due to go into effect this fall.

However, the United States Court of Appeals for the 8th Circuit blocked it in a lawsuit filed by the following:

Nebraska
Missouri
Arkansas
Iowa
Kansas
South Carolina

Ruling

The Circuit alleges that Miguel Cardona, the Secretary of the Department of Education, had overstepped his authority.

Cardona forgave individual debts during the implementation of the program.

The Circuit also alleged that the department violated administrative law by launching the policy.

Additionally, states alluded to a Texas federal judge’s ruling in a separate case that overturned student loan policies.

The administration, in turn, filed an appeal with the US 5th Circuit Court of Appeals.

According to Wednesday’s filing, the ruling will remain in effect even if the Supreme Court decides to lift the suspension.

Meanwhile, the Biden administration proposes taking the case to the Supreme Court should the 5th Circuit allow the verdict to be overturned.

The student loan program

US Solicitor General Elizabeth Prelogar argued in the Supreme Court petition that the program’s suspension leaves millions of economically vulnerable borrowers in limbo.

Additionally, people don’t know how much they owe.

As a result, they may not be able to make financial decisions without knowing their future repayment obligations.

Prelogar also explains that the program is a legal effort.

It ensures that borrowers affected by a national emergency are not in a worse situation with their student loans.

Reference:

GOP-led states press Supreme Court to keep Biden student debt forgiveness on hold

Amazon plans to cut down company workforce

Ken Jacobs on November 21, 2022

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Amazon is planning a significant workforce restructuring, with thousands set to be laid off.

According to the New York Times, the company plans to lay off more than 10,000 employees in corporate and technology, according to unnamed sources who know the situation.

The layoffs are said to begin as early as this week.

Amazon’s layoffs would include the workforce responsible for Amazon devices and employees from retail and human resources.

The news

The Wall Street Journal published a report on Monday that said Amazon was laying off thousands of workers, with information from an unnamed source.

The news means Amazon is among other tech companies announcing massive layoffs.

Most companies have made a difficult decision given the general economic uncertainty and the sharp drop in demand from tech giants during the pandemic.

At the start of the pandemic, they increased their workforce.

Additionally, Meta announced plans to lay off 11,000 workers last week.

Amazon shares

In early November, Amazon announced it was hitting the brakes on the company’s hiring for a few months.

The company highlighted the economic uncertainty and the number of employees hired in the past few years.

During the pandemic, Amazon’s workforce grew as consumers and consumption habits shifted towards e-commerce.

However, in its latest earnings report, Amazon revealed that its sales forecast for the holiday quarter fell short of analysts’ expectations.

Amazon shares are down more than 40% on a broader market decline this year.

The industry

Amazon’s layoffs are critical for the retail industry, especially as the holiday shopping season approaches.

With recession fears and inflationary pressures lingering, the National Retail Federation predicts a 6% to 8% annual increase in sales for the holiday shopping season.

Last month, Jeff Bezos tweeted about the possibility of a recession, writing:

“The probabilities in this economy tell you to batten down the hatches.”

Bezos told CNN’s Chloe Melas last Saturday that the advice applied to businesses and consumers.

“Take some risks off the table,” he said.

“Just a little bit of risk reduction could make the difference.”

Reference:

New York Times: Amazon plans to lay off thousands of employees