According to data from St. According to data from the St. Louis Federal Reserve, employers cut 35,000 temporary workers last month. This was the largest monthly drop since early 2021. These reductions increase the number of cuts between August and December to over 110,000, leading economists to worry that the labor market may be changing.
James Knightley, chief international economist of ING, said Tuesday that “it’s a warning sign for me.” The downturn story may make the jobs market less resilient.
The U.S. added 223,000 jobs in December and the unemployment rate dropped to 3.5%. However, the history of the labor market shows that cuts to temporary workers can often be a sign of weakness. According to data, when the U.S. economy was in recession, it experienced declines in temporary work “preceded those of the overall labor market with 6 to 12 months.”
They explained that flexible labor arrangements offered by temp agencies enable firms to reduce their operations quickly and without having to pay separation pay or let go of their most valuable workers when the economy is in decline.
Economists are also concerned by the rise in temporary worker layoffs, given tech‘s recent weakness. Big Tech’s Amazon Google and Meta have let down more than 50,000 workers since November. also stated Monday by Gene Munster (formerly Loup Ventures), that tech-focused venture capital and investment firm Deepwater Asset Management (formerly Loup Ventures) might reduce their workforces by 15% to 20%.
Wedbush’s tech analyst Dan Ives stated that layoffs will be a “major topic” in this earnings season. He said in a Friday research paper that tech companies are going into “cost-cutting mode” as a way to cope with rising interest rates and slowing economies.
Huw Roberts of Quant Insight’s analytics team stated in Monday’s note that there could be a “spike in layoffs” in other industries due to falling corporate earnings. According to Roberts’ point, 61% of executives indicated that they planned to lay off employees by 2023, according to a December Resumebuilder.com survey. Nearly one third of U.S. businesses also expects to cut their headcount by at minimum 30% this year.
The layoffs are already spreading beyond Big Tech this week. Ford announced Monday that it will cut more than 3000 jobs and the Washington Post, adding to a wave of media layoffs Tuesday with 20 additional employees.
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