Why Are There So Many Layoffs in A Good Job Market?

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Currently, practically anyone who wants a job can find one, but soon enough, more people will start losing their jobs. Sounds incongruous, doesn’t it?

The economy has more than made up for the 22 million jobs lost due to the pandemic. 3.5% is the same as the pre-pandemic low for unemployment. Since the 1980s, wages are increasing more quickly than before. And just about anyone who seeks employment can do so.

In contrast to expectations, the economy rebounded from the epidemic far more quickly because to trillions of dollars in government stimulus payments to individuals and businesses.

Early in the recovery, Americans made large purchases of things like new automobiles, appliances, computers, and other items. They are now spending more on services like entertainment and tourism.

To meet the demand, businesses must increase employee hiring.

A “tight” labour market is one where there aren’t enough workers to fill all the open positions. Or to put it another way, there is a labour shortage.

Companies are being forced to compete for employees by paying more because of the workforce shortage. Additionally, if wages rise too quickly, they may make inflation worse.

For the first time in nearly a year, there were less than 11 million job opportunities in August. Even though they are still quite low, layoffs increased to their greatest level in 18 months. And the number of new unemployment claims reached a five-week high.

More businesses, including Facebook and General Electric, have reported layoffs or declared hiring curbs. In anticipation of a weakening economy or a full-blown recession, some businesses are being more circumspect about recruiting.

According to economists, the state of the labour market would undoubtedly deteriorate further by year’s end. Additionally, in early 2023, things are predicted to get worse.

Is a high jobless rate inevitable?

No. According to some economists, businesses may decide against making large-scale layoffs as a result of the labour crisis.

The argument is that because it’s so difficult to obtain labour right now, businesses could consider other measures before terminating employees, like lowering hours. Once the economy improves and demand increases again, they will need their employees.

But if the economy collapses, everything is up for grabs.