Amidst Economy Uncertainty, Companies Start Layoffs

As rumors of a looming recession make their way down the grapevine, companies and workers both are growing nervous. It is, however, still just a rumor. The truth is most economists don’t know what’s going to happen either. About 45% of economists say we’ll enter a recession within a year, while the rest say we won’t.

The cause of this divide? The historical indicators of a recession used by the National Bureau of Economic Research — such as GDP, real income, and the job market, amongst others — are at odds. U.S. GDP declined by 1.6% year-on-year in the first quarter and by 0.9% in the second, usually indicative of a recession. Inflation was also rampant, hitting 9.1% in June, though it has since slowed thanks to the Federal Reserve’s interest rate hikes — the heights in 28 years.

However, the job market has yet to show serious signs of slowing down. In July, job growth excelled expectations, fully recovering the 22 million jobs lost during the pandemic. The unemployment rate rose in August from 3.5% to 3.7%, amidst the ongoing Great Resignation, but 315,000 jobs were added. This is because new jobseekers joined the market and the labor force participation rate — the share of people in the labor force relative to the U.S. population — grew by a staggering 0.3% to 62.4%. These people are counted as unemployed by the government but are proof of a bustling job market. Also, according to Pew Research, 60% of people who quit from April to March this year saw an increase in their real earnings.

So it’s unclear exactly where the economy is heading. We live in a period of multiple shocks – from Covid-19 and energy prices to political delocalization – which make predictions extremely difficult, said Alexander Nutzenadel, professor of social and economic history at the Humboldt University of Berlin. The aftershocks and midst of such events have left odd scars on our economy, ones hard to know their effects on our futures.

Already, though, many companies have been preemptively laying off hundreds of employees. Ford announced they plan to lay off 3,000 employees, and Bed Bath & Beyond is cutting 20% of its workforce. Activity like this, halting hiring and laying off huge swaths of employees, could ultimately begin to slow the job market and raise the risk of a real recession. After all, much of economics is a self-fulfilling proficiency.

Published by WOW (Work Onward) By Hannah Drake