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Are we entering a "white collar" recession?

torbee

HR King
Gold Member
Interesting piece in the WSJ this morning:

Layoffs Hit White-Collar Workers as Amazon, Walmart, Others Cut Jobs​

Recent wave of job cuts marks departure from previous downturns when blue-collar workers were shed first​


Recent rounds of layoffs at large U.S. companies mark a departure from the usual pattern as executives navigate fears of an economic slowdown: This time, white-collar workers have been among the first and hardest hit.

Demand has fallen sharply for professionals in technology, legal, scientific and finance fields, and companies that ramped up staffing during the pandemic, including tech firms, are slowing down hiring or cutting jobs as they close down some projects or scale back others.

Amazon.com Inc. is cutting roughly 3% of its staff, or as many as 10,000 workers, in its retail, devices, human-resources and other divisions, but it is leaving largely untouched its hundreds of thousands of warehouse workers. Facebook parent Meta Platforms Inc. is concentrating layoffs in its recruiting and business teams as it cuts 13% of its workforce, or about 11,000 people. Layoffs at Ford Motor Co., Walmart Inc. and fast-fashion company H&M Hennes & Mauritz AB are also targeting salaried and office staff, rather than production or retail workers.

“There’s a very clear white-collar recession in demand for labor,” said Julia Pollak, chief economist at online job site ZipRecruiter Inc.

Scott Galloway, a New York University marketing professor, on a recent episode of a podcast he co-hosts called the current slowdown a “Patagonia vest recession,” referring to the garment popular among Wall Street and Silicon Valley professionals.

Based on a survey conducted in October, economists put the probability of a recession in the next 12 months at 63%. The Federal Reserve is seeking to lower the risk by raising interest rates enough to cool inflation without inducing higher unemployment and an economic downturn, creating a so-called soft landing.

“I don’t think we’re going to see millions of job losses in any given month,” said Gregory Daco, chief economist at EY-Parthenon, a strategy consulting unit of Ernst & Young LLP. “But we’re likely to see more of a slowdown in the job flow.”

Typically in previous economic downturns, companies in capital-intensive industries—including mining, manufacturing and construction—were among the first to lay off workers, followed by those employing armies of lower-wage staff or in highly cyclical businesses like air travel and hospitality, Ms. Pollak said. As a slowdown deepens and recession looms, companies begin to lay off white-collar professionals.

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Retailer H&M is among the companies that have announced layoffs recently.PHOTO: EDUARDO MUNOZ/REUTERS
Now, the pattern is different. The biggest slowdowns in job postings have been in industries dominated by white-collar workers, according to a ZipRecruiter analysis. Since June, when the Federal Reserve accelerated its interest-rate hikes and market concern about a downturn surged, tech job postings have fallen 36%. Those for business services jobs fell 32%, while science and legal jobs are down about 31%.

By contrast, advertising for travel jobs has edged up in the same period, while food and retail job ads declined by 4% to 5%. “Those industries seem quite far away from any kind of contraction,” Ms. Pollak said.

A white-collar slowdown has yet to show up in the most recent federal employment data, which continued to reflect strong hiring. Job openings remain plentiful, and economists forecast that Friday’s employment report will show a gain of 200,000 jobs in November. That would be the weakest figure in two years, but still strong by historical standards.


On Wednesday, Federal Reserve Chairman Jerome Powell said the overall labor market shows “only tentative signs of rebalancing,” with wage growth higher than what would be expected at 2% inflation, the Fed’s target. Job openings exceed available workers by about 4 million, or about 1.7 job openings for every person looking for work, Mr. Powell said.

Job cuts are up sharply from earlier this year, but through November, the year 2022 has seen fewer job cuts than almost any year since at least 1993, second only to last year, according to recruiting firm Challenger, Gray and Christmas. The tech sector, however, has seen more layoffs through November than any year since 2002.

Many of the companies cutting jobs are in industries that boomed despite, or because of, the pandemic’s upheaval. Food-delivery service DoorDash Inc., which expanded into delivering groceries and alcohol during the pandemic, has announced plans to cut 1,250 workers, or about 7% of its total as deliveries slow and profits remain elusive. Snap Inc., maker of the Snapchat social-media app, is cutting 20% of its workforce. AMC Networks Inc., the cable and streaming channel, said it would cut 20% of its U.S. employees, after streaming sales failed to make up for cable revenue lost to cord-cutting.

“A lot of companies got ahead of their skis,” said Myrna Soto, a longtime technology executive who now serves on boards including Spirit Airlines Inc., bank Popular Inc. and human-resources firm TriNet Group Inc.

“A calibration was needed,” Ms. Soto said. “Covid introduced this incredibly awkward dynamic, where these tech companies continue to balloon in value and demand and they hired at a rate that was just well above a logical consumption rate for productivity and for output.”

One consolation for laid-off professionals, and for the economy: High-skilled employees are more likely to find another job relatively soon, said Betsey Stevenson, a University of Michigan labor economist and former member of the federal Council of Economic Advisers. “They may be absorbed into a lower paying job, but I don’t think they’ll end up being unemployed for long.”

Companies are likely pulling back on white-collar hiring, and favoring white-collar layoffs, because front-line workers have been so hard to come by since the pandemic shutdowns ended, economists and executives say.

“Businesses are clearly hoarding less skilled workers because of the difficulty in filling them now and potentially down the road,” said Ryan Sweet, chief U.S. economist for consulting firm Oxford Economics.
 
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“A calibration was needed,” Ms. Soto said. “Covid introduced this incredibly awkward dynamic, where these tech companies continue to balloon in value and demand and they hired at a rate that was just well above a logical consumption rate for productivity and for output.”
“COVID” didn’t introduce ‘this incredibly awkward dynamic’ of ballooning and distorted valuations that led to entrepreneurial error in mass.

Printing trillions of dollars as a response to COVID did that.
 
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