4 Ways Amazon’s and Other Recent Layoffs Could Affect the Economy — and Your Wallet
Written by
Rebekah Evans
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Just in time for the holidays, many U.S. employers have doled out pink slips. This recent move left thousands of Americans jobless and could have a ripple effect on the economy as a whole.
Some of the cuts included 14,000 corporate jobs at Amazon, 48,000 operational and — mostly — management positions at UPS and around 1,800 corporate jobs at Target — just to name a few, according to the Associated Press. Even if you weren’t personally impacted, your wallet still might take a hit.
GOBankingRates spoke with two financial experts to find out what could happen to the economy due to these recent layoffs. Keep reading to learn what might be in store.
Decreased Consumer Confidence
“Layoffs first affect consumer confidence in the labor market,” said Kristy Jiayi Xu, MBA, certified financial planner (CFP), certified exit planning advisor (CEPA), founder and financial advisor at Global Wealth Harbor, LLC.
She said people tend to delay major purchases when they fear their job could be on the line. This is especially true for those that require financing — such as homes and cars — as a loan that involves monthly payments could be hard to maintain with a loss of income.
Matt Gagnon, chartered financial analyst (CFA), investment advisor at Financial Empowerment LLC, said this can also create an indirect “headline effect,” where people read about layoffs and become less optimistic about the economy.
“As humans we are emotional beings highly susceptible to influence,” he said. “Reading or seeing a news story about job losses — even if our own jobs are safe — may cause us to imagine being laid off and the associated impacts.”
(Potential) Interest Rate Cuts
When people don’t feel secure in their jobs, they tend to become more sensitive to interest rates, Xu said. Therefore, a widespread lack of consumer confidence could lead to lower interest rates.
“For example, lower rates can reduce monthly mortgage payments and ease financial pressure, which in turn can increase likelihood for the Federal Reserve to consider cutting interest rates to support spending and borrowing,” she said.
Major Economic Slowdown
Unless they have substantial savings, people tend to have less money to spend after losing their job, Gagnon said. Therefore, they typically cut back on discretionary spending like entertainment, travel, dining out, shopping and dry cleaning.
This may lead to a ripple effect that can create a whole new set of issues.
“A sustained decline in consumption reduces overall demand, leading to lower sales and profitability for businesses,” Xu said. “To protect margins, companies may cut costs or delay investments, reinforcing the broader economic slowdown that began with weaker consumer confidence.”
More Layoffs
If business become less profitable, they may be forced to reduce staff, Gagnon said.
“Think about the businesses you buy from every day or every week,” he said. “If they didn’t have your business and that of people like you, they might have to downsize.”
Keep this in mind — especially if your job is secure — when deciding which business to patronize, as your money is likely needed at some companies more than others.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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