Waves of layoffs hit the retail, leisure, and hospitality industries at the start of the pandemic. This was for anyone who relied on human interaction.
Now that the pandemic is over, however, it’s the workers in short supply who are most at risk. It’s the higher-paid workers who are often the ones who end up being laid off.
According to Reuters , is one of the brands that recently announced job cuts or hiring freezes.
It is a sign of a “white collar” recession. While tech sector layoffs have dominated headlines, they are not the only one facing job losses. The U.S. Bureau of Labor Statistics’ latest employment report showed significantly slower hiring and outright job drops in a variety of white-collar sectors . Noticeably, the hiring of professionals and business services has slowed in four of the past five months. In November, the sector saw the second-lowest number of jobs created in this phase.
Employment services, administrative support and lending were some of the other sectors that saw significant declines in hiring last month.
The flip side is that demand for workers whose jobs were affected by the pandemic has surged. This is why both food service and retail jobs have seen significant raises, though many are still not enough to keep pace with inflation.
James Knightley, chief international economist of ING, stated that “What we have seen is massive hiring within the tech sector, and big hiring over the past couple years in service-producing industries.” “And now, with the growing risk of recession, some companies may have overexpanded in the vibrant post-pandemic recovery, and they are now facing more uncertainty.”
According to Challenger, Gray & Christmas, a business consulting firm, U.S. employers announced plans to reduce 320,173 jobs this year. This is nearly 6% more than the 302,918 job cuts announced in the first 11 months of 2021.
Challenger data shows that the tech industry is responsible for approximately one quarter of this year’s job losses. About two-thirds (or more) of all tech job cuts were made in November alone.
“The tech sector is special. They overexpanded, and overhired,” stated William Lee, chief economist of the Milken Institute, an independent, nonpartisan think-tank. They believed their ad revenue would last forever. But when they saw that the revenues were being cut in the post-pandemic period, they realized, “My God, there are too many people.”
However, cuts are being made to other white-collar sectors, particularly those in the interest-rate sensitive areas like finance and real estate, Challenger data shows. This is due to the Federal Reserve’s aggressive rate-raising campaign against inflation, which has remained at or near 8% for most of 2022.
According to Challenger data, the financial industry announced 17571 job losses this year. This compares with 8,568 in the same time last year.
According to Andy Challenger (head of media and sales at Challenger), financial firms have made cuts in their investment banking divisions due to slowing dealmaking. Bloomberg reported in November that Citigroup was planning to lay off dozens of employees from its investment banking division. Reuters also reported Morgan Stanley was also considering a new round of layoffs. These announcements are similar to those made by Goldman Sachs and Deutsche Bank in October.
There have been 30,669 job losses in the automotive industry, compared to 10,277 announced through November 2021. Real estate saw 7,919 job cuts this year, as compared to 2,762 in 2021.
Challenger stated that Americans have been spending less on high-end items as interest rates have risen. “We have seen job losses in the mortgage industry and at fintech companies that specialize in mortgages. Then there are the cuts in housing agents who help with finding, buying and selling properties.
Other firms also used the slowing global economy as a signal of imminent cuts. Johnson & Johnson stated in October that it would “right-size its business” amid inflationary pressures, stronger U.S. dollars and other factors.
Joseph Wolk, J&J’s CFO, stated to Reuters that he is looking at ensuring that resources are used on projects, initiatives, and services that add the most value to our business.
Two energy companies, Phillips 66 Energy Corp. and Chesapeake Energy Corp. are also cutting positions, including corporate jobs. Reuters reported that Phillips 66’s cuts would impact “salaried employees as managers and top-level technical service workers at multiple locations,” while Chesapeake’s would affect its geoscientists and geologists
According to Knightley of ING and Challenger, we may still be in the middle of job cuts due to the slowing economy. Challenger data shows that 76,835 U.S.-based employers announced job cuts in November. This is more than twice the 33,843 cuts announced October and four times the number of cuts announced November last year.
Challenger said, “I think we’re kinda at the beginning — we just came out of the two years being one of the lowest periods for layoffs in American History.” “We had such severe labor shortages, and now the Fed is raising rates, it affects all industries.”
According to the Conference Board, 98% of chief executives indicated that they were planning for a recession in America.
Knightley stated that the Fed has indicated that unemployment could reach 4.4 to 4.5%. This would translate to approximately 1.2 million Americans losing their jobs. Knightley stated that this was before they said there would be no recession. We could see more Americans losing their jobs.
Knightley stated that the bursting the tech bubble 20 years ago in an economy similar to ours resulted, roughly, in 2 million Americans losing their jobs.
Knightley stated that “That could be the order in which we’re speaking about in terms of this decline, but with a greater focus on white collar areas rather than manufacturing, where real shortages still exist,”
Are jobs obsolete?
According to the unemployment rate of 2%, workers aged 25-54 with bachelor’s degrees and above, going to college is the best way to keep one’s job. The unemployment rate for workers aged 25-35 with only a little college is still 3.2%.
A different measure of America’s job situation, the overall labor force, reveals a troubling pattern. The size of the US labor force, which includes college graduates over 25 years old, has shrunk for the past three months, after peaking at 63.7million. This amounts to 648,000 worker losses. This is the largest sustained loss since the outbreak of the pandemic.
These workers are not looking for work, if they are unable to find work.
Even worse for those who have only or a college education is the current situation. The pandemic has reduced the labor force by 1.5 million to a total 35.9million. This level was not seen since April 2007.
Jane Oates, president and CEO of WorkingNation, an organization that focuses on the development of work force, said, “I think looking at middle management jobs — that’s how we think they are — there might be a lot stress on these managers.” They might be taking a break to lessen stress.
Experts believe these trends could signal more long-term economic changes than slower economic growth.
Lee, from the Milken Institute, stated that companies are changing their business models. They want to be more profitable in an age when labor is scarce and costly, so they are incorporating more technology.