The economy has been on a bit of a rollercoaster thus far in 2022. As inflation began rising in 2021 and ramped significantly higher in 2022, the Federal Reserve began to aggressively tighten interest rates. This combination of factors, among others, led to a “technical recession” in the first two quarters of 2022, in which the economy contracted by 1.6% and 0.6%, respectively. However, gross domestic product turned positive again in the third quarter of 2022, rising by 2.9% and muddying the waters about where exactly the economy stands. Against this backdrop, a number of well-known companies have announced sizable layoffs, perhaps signaling the end of a time when employees seemed to have more bargaining power. As year-end arrives and the calendar moves into 2023, the question remains, should you risk moving jobs now? Here’s a look at current market realities and expert opinions on the job market in general.
What Major Layoffs Were Announced in 2022?
There were a surprising number of major layoffs announced in 2022, particularly in the tech industry. Some of the biggest headline layoffs included the following:
- Peloton layoffs: 20% of workforce laid off (February 2022), additional 12% of workforce laid off (October 2022)
- DocuSign layoffs: 9% of workforce laid off (September 2022)
- Zillow layoffs: 5% of workforce laid off (October 2022)
- Amazon layoffs: 1% of workforce laid off (November 2022)
- Meta layoffs: 13% of workforce laid off (November 2022)
- Twitter layoffs: 50% of workforce laid off (November 2022)
While this is a long roster of well-known companies that are laying people off, in many cases they are company-specific only. Peloton, DocuSign, Zillow and Meta have all reported well-known, company-specific issues, and the Twitter layoffs are a result of Elon Musk recently taking over the company. The large layoffs at Amazon still only amount to about 1% of their workforce, so they are not quite as scary as the number may first suggest. Whether this is just the tip of the iceberg regarding more widespread layoffs, however, remains an unknown.
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How Is the Labor Market Doing Overall?
Even though the headlines regarding these major layoffs can be daunting, overall, the labor market remains tight. Overall unemployment rates, for example, remain at about 3.7%, which is quite low historically and has been more or less falling steadily since it spiked up during the peak of the 2020 coronavirus pandemic. What is true, however, is that many analysts see that rate ticking higher over the coming year. Bank of America, for example, predicts an unemployment rate of 5.5% by the end of 2023, which is almost a couple of percentage points higher. However, that still remains well below the double-digit rates seen during the coronavirus shutdown and the Great Recession.
In a nutshell, this means that by and large, workers shouldn’t be overly concerned about a major labor drawdown in 2023. Although the unemployment rate will likely tick up, mass layoffs are unlikely. Workers may no longer have the type of leverage when it comes to bargaining for perks or higher pay that they did in 2021 and early 2022, but qualified candidates should still be able to find work if they change jobs in the near future.
Which Industries May Be Riskier Than Others for Workers?
Even if the overall labor market holds up relatively well, workers in certain industries may be more susceptible to job loss (or the inability to find a new job) than others. Based on current economic trends and projections for 2023, here are some of the industries that may be riskier for workers than others:
Housing is at one of its most unaffordable levels in history, and demand has dried up as mortgage rates have run sky-high. Experts predict that a drop in home prices — and housing demand in general — is likely to continue to gain momentum, making it a harder time to be working in construction.
The roles of middle managers always expand during economic booms, and they just as predictably shrink during recessions. If the economy does indeed slow — or tip into a full-blown recession — in 2023, middle management jobs are likely to get trimmed.
Certain Service Industries
The vaguely-named “other services” industry, which includes professions as diverse as hairdressers and automotive technicians, has already been shrinking at a faster rate than nearly all others. This is just a natural occurrence in a slowing economy, as consumer spending patterns shift toward core, essential purchases only.
What’s the Current Status of Inflation and Fed Rate Hikes?
The Fed doesn’t raise interest rates to strangle the economy. In fact, the goal of Fed rate hikes is to engineer a so-called “soft landing,” in which economic growth is constrained — but not eliminated — as inflation and rates fall back to Earth. Whether or not the Fed will succeed in its mission is something that no one can accurately predict at this time, but there are some signs that things are moving in the right direction.
After peaking at 9.1% in June 2022, inflation has now fallen to the 7.7% range, and it seems likely to continue to drop. Fed Chairman Jerome Powell indicated on Nov. 30 that the Fed is likely to slow the pace of rate hikes, after an unprecedented series of 0.75% increases throughout 2022. As inflation falls and the Fed slowly takes its foot off the accelerator, it’s entirely possible that the economy endures with a mild recession or avoids one altogether. Either of these scenarios is good news for those looking to move jobs in 2023.
The Bottom Line
Predicting the future of the labor market is as inherently risky as guessing the path of interest rates or the day-to-day prices of the stock market. However, macroeconomic trends suggest that while the economy may not be booming, any slowdown is likely to be mild. The Fed seems closer to the end of its rate-hike cycle than the beginning, inflation is beginning to fall and unemployment rates remain low for the time being. However, all of these factors need to be monitored regularly to get up-to-the-minute clues about where the economy is headed. If you’re thinking of changing jobs, the time still looks good for now, but potentially weakening economic conditions in 2023 may make that more difficult, particularly for workers in certain industries.
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