- Meta and Twitter are among several tech companies that have taken recent steps to lay off workers.
- But widespread layoffs across the US economy aren’t happening yet.
- Even if the jobless rate ticks up as experts predict, it’s not projected to be as high as the last two downturns.
Meta is expected to cut thousands of jobs this week. Last Friday, Twitter laid off approximately half of its entire workforce. They joined the likes of Microsoft, Netflix, Snap, Lyft, Stripe, Peloton, and Shopify, companies that have also announced layoffs in recent months.
As the Federal Reserve raises interest rates to slow the economy and bring down inflation, more layoffs are likely to follow. But there are few signs of widespread layoffs in the short term. And even next year, when the US is expected to enter a recession, the vast majority of Americans are likely to come out unscathed.
“There have been several thousand high-profile layoffs in the tech sector in the past couple of weeks,” Bledi Taska, chief economist at the labor market consulting firm Lightcast, told CNBC. “While this is unfortunate, it is useful to keep in mind that the labor market is significantly larger and has been overall healthy.”
The US unemployment rate rose to 3.7% in October, but it remains near the lowest level in the past 50 years. The number of Americans filing new unemployment claims fell last week. And job openings increased in September to 10.7 million.
While the most recent layoffs, for instance, have yet to be reflected in most up-to-date economic data, the US economy is far from shedding jobs. That’s because many of these layoffs have been concentrated in the tech industry, which only accounts for only a modest part of the American economy.
The upcoming recession is expected to see lower levels of unemployment
While more layoffs are expected to come to the tech industry over the next year, other industries are likely to be impacted also. That’s because the unemployment rate is expected to tick up during the recession that could be on the horizon.
While the coronavirus recession in 2020 primarily harmed service-industry workers, some signs point to a “white-collar recession” this go-round, in which white-collar — or high-income office workers — are exposed to a higher risk of job loss than blue-collar workers. The housing sector, which is particularly sensitive to interest rate hikes, is already being impacted as well.
The Fed is projecting the unemployment rate to climb in 2023 from 3.7% to 4.4%, which would lead to roughly 1.5 million Americans losing their jobs.
It could be even worse. Bank of America is projecting the unemployment rate to reach 5.5% by the end of next year. In September, former Obama economic advisor Jason Furman said the US would need unemployment to reach 6.5% to bring inflation down to desired levels.
But even if the jobless rate does reach 6.5%, that would remain well below the roughly 15% rate in April of 2020, and the near-10% reached during the depths of the Great Recession.
Any uptick in unemployment would be painful for the millions of Americans who would face hardships like lost wages and housing insecurity. If these projections hold, however, the state of joblessness would be much less severe than the last two downturns.
And as long as job openings remain abundant, there will be opportunities for many laid off workers to find jobs elsewhere.