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Layoffs looming, some economists say

From rising inflation to a scorching labor market and negative gross domestic product in between, economists are divided on the health of the US economy.

“There’s been a lot of talk recently about the fact that we’re in a recession. We have two quarters of declining GDP, which often happens with recession. … But we have incredibly strong job growth. We have an unemployment rate that’s a 50-year low,” Claudia Sahm, founder of Sahm Consulting and former Federal Reserve Board economist, told CNBC.

A major concern for Americans: are there any layoffs on the horizon?

“There’s going to be more layoffs. So you have to be wary of that,” Mark Zandi, chief economist at Moody’s Analytics, told CNBC.

More and more business leaders are anticipating a recession, according to a Stifel survey.

Major companies are already announcing layoffs, including Best Buy, Ford Motor, HBO Max, Peloton, Shopify, Walmart and Wayfair.

Meanwhile, a PwC survey shows that 50% of companies plan to cut their workforce over the next six to 12 months.

This comes at a time when the labor market could hardly look stronger. In July 2022, there were 11.2 million job openings, revealing a shortage of workers for available positions.

“I think it’s really important to look at the number of job postings,” Julia Pollak, chief economist at ZipRecruiter, told CNBC. “The question is how low will they drop, how low will they drop, if they get back to 7 million [job openings]the level before the pandemic.”

Without forgetting that the labor market is facing the “Great Resignation”. In July, 6.4 million people got new jobs, while another 4.2 million left their jobs.

“The Federal Reserve is raising interest rates at this point in an effort to slow the labor market, and that will mean more layoffs,” Zandi said.

Federal Reserve Chairman Jerome Powell said it will be a challenge “to return to a stable price environment without sacrificing the economic gains of the past two years” during a question-and-answer session at the Cato Institute, a organization based in Washington, DC. think tank earlier this month.

Watch the video above for more on how the United States defines a recessionary period in the economy, what common economic indicators reveal, and what may happen next in the labor market.


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