Employers cut 35,000 temporary jobs last month. Economists say this could be a preview of the future: ‘For me, this is a real warning sign’

Employers cut 35,000 temporary workers last month, marking the biggest monthly decline since early 2021, according to data from the St. Louis Federal Reserve. The cuts brought the total number of layoffs from August to December to more than 110,000, leading many economists to fear that the labor market is worsening.

“For me, this is a real warning sign,” James Knightley, chief international economist at ING, told Wall Street Journal Tuesday. “The job market may not be affected by the recession story.”

Meanwhile the US economy has increased 223,000 jobs and the unemployment rate fell to just 3.5% in December, history has shown that a cut in the number of temporary workers is often a sign of weakness in the labor market. When the U.S. economy experienced recessions in 1990–91, 2001, and 2007–09, the decline in temporary employment “preceded that in the overall labor market by 6 to 12 months,” according to on DATA from Federal Reserve researchers.

“When the economy contracts, the flexible work arrangements provided by temp agencies allow companies to scale back their operations quickly and without the added expense of separation pay or having to let go of their best workers,” they explained.

The rise in temporary layoffs is another worrisome sign for economists considering recent weakness in once-thriving industries such as technology. Big Tech Amazon, GoogleMeta, and Microsoft there release more than 50,000 workers have been unionized since November. And Gene Munster, managing partner at tech-focused investment and venture capital firm Deepwater Asset Management (formerly Loup Ventures), said on Monday that tech companies could cut another 15% to 20% of their workforce.

Layoffs will be a “big theme” this earnings season, Wedbush technology analyst Dan Ives said in a research note Friday, arguing that tech companies are entering “mode to cut costs” to help cope with higher interest rates and a slowing economy.

Huw Roberts, head of analytics at market research firm Quant Insight, said in a note on Monday that there could be an “increase in layoffs” outside of technology in the coming months also due to declining earnings. of the corporation. At his point, about 61% of executives say they plan to lay off employees in 2023 in a December Resume-builder.com surveyand nearly one in three US companies expect to reduce their headcount by at least 30% this year.

The layoffs are starting to spread outside of Big Tech this week as well, with Ford saying on Monday that it plans to cut more than 3,000 jobs and the Washington Post addition of a wave of media layoffs Tuesday by cutting 20 more employees.

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