google.com, pub-8576553347890281, DIRECT, f08c47fec0942fa0
top of page

Are you sure?

KPMG announced this week they will be laying off ~4% of their workforce, roughly 700 associates primarily within their Deals Advisory and Strategy Consulting groups.


Disney, PayPal, eBay, Morgan Stanley, Goldman Sachs, Yahoo, Vox Media, all announced layoffs this month. These are not just the hyper growth tech stocks cutting jobs anymore. It's become a trend across all segments of the economy.


I want to stop and pose a question to the HR business partners and CEOs making these calls.


Are you sure?


We just witnessed over the last several years how difficult it is to obtain quality talent. The Great Resignation opened many employers eyes to the challenges and costs associated with hiring.


After fighting to get staffing at appropriate levels for the past 2 years, many of these firms are pivoting to dropping these people that were so costly to get.


The decision to cut jobs at this volume indicates that the C-Suite believes we are in the contraction phase of an economic cycle. Laying workers off is a move to help cut costs when a firm is anticipating a slowdown in their growth.


But what if we are not entering a slowdown in the economy?

The current state of the job market:


The most recent January jobs report shocked every wall street analyst and economist alike.


We were expecting to see a slowdown in new jobs in January (+187,000), especially given the number of layoffs in the headlines. Instead, we saw a jaw-dropping +517,000 new jobs added to the economy.


This sent unemployment to a 53 year low dating back to 1969, at 3.4%.



Additionally, this increase in jobs has not come at a cost of higher wages, a great sign for the fight with inflation.


If we continue to see this type of strength in the labor market, without wages continuing to rise, this will make a significant economic contraction unlikely. Let's get into inflation next.


The current state of inflation:


Inflation has been the most important metric to gauge the direction of the US economy for the last several months, largely because of the impact it has on the Federal Reserve's decision to raise interest rates.


When inflation reached a record high 9.1% in July of last year, the concern over the speed and intensity of the rate hikes by the Fed to combat inflation created panic in the economy. But we have not seen the trauma that many thought would come from these drastic moves.


Instead, we have seen the inflation rate drop in 6 consecutive monthly CPI reports:


If we continue to see inflation drop, while the consumer remains employed, with wages stabilizing, this would create what many would call a "Soft Landing".


Now, there is still work to be done when it comes to inflation. 6.4% inflation is still uncomfortably high, and the Fed will likely need to raise rates at lease one more time in the coming meetings before they mentioned taking their foot off the gas.


But we are trending in the right direction.


US GDP is growing:


Another cause for concern of a recession came from the two consecutive quarters of negative GDP growth in 2022.


By definition, this would indicate that the US entered a recession. However, we did not see the labor market impacted whatsoever. And since then, the US has printed two consecutive POSITIVE quarters of GDP growth, with the latest quarter posting a +2.9% increase.

If we are seeing consistent positive quarters of GDP growth, that does not directly say we are heading into a recession or economic contraction. In fact, it shows that the overall economy still has a strong demand, and is relatively healthy.


In Summary:


+517,000 new jobs added to the economy last month.

An unemployment rate at 3.4%, a 53-year low.

A 6-month consecutive falling inflation rate, coupled with stabilized wage growth.

2 consecutive quarters of GDP growth, most recently +2.9% in Q4 of '22.


With all of that said - I must again ask each and every CEO, HRBP, and Executive laying off their talented employees:


Are you sure?


*

*

*

For more content on the job market, economy, and business news, subscribe to the blog at thebonkerbeat.com and follow me on LinkedIn for daily content on your feed HERE: Gordy Bonker II





0 comments

Recent Posts

See All

Comments


Post: Blog2_Post
bottom of page