Can you believe the incredible surge in job growth we’ve experienced over the past few months? It’s truly phenomenal! Although, I have to admit, the recent high-profile layoff plans announced by a few large companies have left me feeling a bit perplexed. But don’t worry, there’s no real contradiction here. The recent layoffs are mainly concentrated in just a few sectors – technology, finance, and media. So, while it’s unfortunate for those affected, the overall job market is still thriving!
Did you know that despite all the layoffs that have been happening lately, the US labour force has been consistently hiring at a vigorous rate? Over the past six months, an average of 248,000 jobs have been added each month, with the unemployment rate remaining at just 3.7 per cent – barely above a 50-year low.
But why are all these companies laying off employees, especially when the economy is growing and consumers are spending? It turns out that many of these companies had over-hired during the pandemic, thinking that the trends that emerged then would continue. As the economy has normalised, they have discovered that they no longer need so many employees and have responded with layoffs.
You may have heard that some of the biggest household names like Google, Amazon, eBay, UPS, Spotify, and Facebook’s parent Meta have announced layoffs. However, job gains and job cuts are happening in different industries. In most industries, businesses have kept adding workers over the past three months, such as manufacturers, restaurants, hotels, entertainment companies, and health care providers.
The technology industry has been struggling, with the unemployment rate for workers in the “information” sector jumping from 3.9% to 5.5% in January. However, layoffs can happen for various reasons and don’t necessarily reflect a weak economy. Some high-tech companies misjudged the demand for their products and services, leading to layoffs.
So, while layoffs are deeply distressing and disruptive for people who suffer them, they don’t really move the needle in the vast US economy. Each month, roughly five million people leave their jobs or are laid off, government data shows, while more than five million are hired. Overall, the job market is fundamentally healthy, with the number of people seeking unemployment benefits remaining at a very low level.
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