Recent surveys have shown that companies are now more cautious about spending after big pay increases over the past year, fearing that further big pay increases will eat into profits. Economists expect the U.S. average hourly wage rate, due next Friday, to fall to an annualized 5.2% in May, down from 5.5% in April.
This may be good news for the Fed. Powell has said that a tighter job market may be one of the root causes of inflation problems; however, peaking U.S. wage growth has also been accompanied by job cuts, mass layoffs, and hiring freezes. According to data from Revelio Labs, a U.S. workforce intelligence analytics firm, total job postings have fallen from their highs with the biggest change on record.
As Gad Levanon, chief economist at Burning Glass Institute specializing in labor market research, explained, the U.S. is transitioning from a pandemic-driven job market to a traditionally tighter one due to low unemployment; during the pandemic, many Americans have Not actively looking for work due to concerns about the virus and related issues.
Judging by Piper Sandler’s compilation of all recent corporate layoff announcements, the fiery job market appears to be heading for a “winter”, as its chief economist Nancy Lazar commented on the recent wave of layoffs:
Post-pandemic company scaling (expansion) means more layoffs are coming, with many companies overhiring and overpaying during the pandemic. This means that the layoff cycle will come, and employment and wage growth will weaken.
An earlier article on Wall Street News has sorted out the wave of layoffs that swept through, from many technology startups, to some previously popular technology companies including Netflix and Meta, are laying off or freezing recruitment. The labor market may see a million layoffs as sectors that need to benefit from the pandemic will now realize they have added too much capacity.
The group of low-income workers who have enjoyed extremely high wage increases during the pandemic are now the most likely to be laid off, and those who remain are expected to see much slower wage growth.
While the layoffs and the effects of slowing wage growth are dire for the U.S. economy as a whole, they are even worse for the poorest quintile of the U.S. population, which, according to Morgan Stanley’s calculations, now has “excessive amounts of money”. cash” is less than it was before the financial crisis. In other words, the poorest 20% of the population is now poorer than it was before Biden’s massive stimulus, and more will be dragged down the “abyss” over time.
Jonas Prising, CEO of human resources firm ManpowerGroup, said:
Wages have risen to levels that ’employers cannot afford’. Businesses will think that my consumers and customers will not accept that I pass on these costs further, so we need to start reducing them.
While there are concerns about the wage inflation spiral, there are also growing concerns about whether the U.S. economy is heading for the stagflation of the 1980s, when the U.S. brought inflation back at the expense of recession and unemployment rose within months. To double digits, the dollar depreciated sharply in the foreign exchange market.
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