SMH

08 Jun SMH

Photo by Pixabay on Pexels.

Wow.

So in another, “They are telling you what’s about to happen” moment, LinkedIn published an article asking the question, “What we need is … fewer jobs?” (https://www.linkedin.com/news/story/what-we-need-is-fewer-jobs-5881010/) In the blurb, editor Cate Chapman writes:

“With almost twice as many job openings as there are available workers, many experts argue that what the economy needs is a cooldown in the labor market. Intense competition for employees is driving up wages and powering inflation, because companies pass higher labor costs on to consumers in the form of higher prices, The New York Times reports. The Federal Reserve is now hoping to slow — but not crater — economic demand by raising interest rates, which should in turn reduce job and wage growth and help bring the inflation rate down from its four-decade high. Achieving a jobs and wage cooldown ‘without causing a recession would be a victory — but it might not feel like one to workers,’ says the Times.” (emphasis mine)

Yeah. Methinks this may be less about easing inflation, which has been steadily increasing for months now, and more about the parts I put in bold.

The NYT article that LI references is:

“Why a Not-So-Hot Economy Might Be Good News
As the Federal Reserve tries to rein in inflation without causing a recession, slower job creation and wage growth could be a plus.”
–https://www.nytimes.com/2022/06/02/business/economy/jobs-wages-inflation-powell.html

The opening paragraph reads:

“When it comes to the economy, more is usually better. Bigger job gains, faster wage growth and more consumer spending are all, in normal times, signs of a healthy economy. Growth might not be sufficient to ensure widespread prosperity, but it is necessary — making any loss of momentum a worrying sign that the economy could be losing steam or, worse, headed into a recession.”

Further down, wage growth is discussed:

“Employers have responded to the hot competition for workers exactly the way Econ 101 says they should, by raising pay. Average hourly earnings were up 5.5 percent in April from a year earlier, more than twice the rate they were rising before the pandemic.

Normally, faster wage growth would be good news. Persistently weak pay increases were a bleak hallmark of the long, slow recovery that followed the last recession. But even some economists who bemoaned those sluggish gains at the time say the current rate of wage growth is unsustainable.”

Catching the tone yet? “Well, uh, normally this would all be good, but it ain’t good this time.”

“Some economists, especially on the left, say there is little evidence that wage growth is feeding inflation, let alone that a wage-price spiral is developing. They contend that the recent pay gains reflect a rare moment of worker power in the labor market, and that the Fed would be wrong to snuff it out.”

Yet I have no doubt they will snuff it out just the same. Are they not telling you ahead of time that that is precisely where things are headed?

“In a speech in Germany this week, Christopher J. Waller, a Fed governor, argued that as demand slows, employers are likely to start posting fewer jobs before they turn to layoffs. That could result in slower wage growth — since with fewer employers trying to hire, there will be less competition for workers — without a big increase in unemployment.”

Perhaps but does that seem to match what’s happened thus far? We see new layoff announcements every day. Some days on LI, the side panel is littered with layoff announcements. But yeah, sure, they’ll just simply post fewer jobs rather than laying off. 😒

“The Fed’s efforts to cool off the economy are already bearing fruit, Mr. Konczal said. Mortgage rates have risen sharply, and there are signs that the housing market is slowing as a result. The stock market has lost almost 15 percent of its value since the beginning of the year. That loss of wealth is likely to lead at least some consumers to pull back on their spending, which will lead to a pullback in hiring. Job openings fell in April, though they remained high, and wage growth has eased.” (emphasis mine)

How does a recession or a bear market impact the job market from your perspective?

Great question – and it’s one that needs to be addressed. All of these concepts are intertwined. A recession tells us that there’s an overall decline in activity inside the economy and this includes labor. To put it simply: if people are feeling financially pinched and they start to cut back, they’re usually buying fewer goods and services. That in turn leads companies to not need as many employees, which leads to layoffs and/or hiring freezes. Unemployment then goes up. The really scary thing there is that unemployment historically tends to go up quickly but is slow to abate.
-My interview with The Belmont Star, https://belmontstar.com/a-bear-market-jobs-what-you-need-to-know/

The final paragraph of the NYT article reads:

“But the thing about such a ‘soft landing,’ as Fed officials call it, is that it is still a landing. Wage growth will be slower. Job opportunities will be fewer. Workers will have less leverage to demand flexible schedules or other perks. For the Fed, achieving that outcome without causing a recession would be a victory — but it might not feel like one to workers.”

And that is the summary, right there. Fewer wage increases. Fewer job opportunities. Less leverage for the workers. Bye-bye flexible schedule. But that’s just the sacrifice we must all make to avoid a recession, kids. 👎🏻

If only someone had tried to warn you about this… https://causeyconsultingllc.com/2022/05/31/shady-people-who-want-your-money/

I understand I may sound like a Job Market Doomsday Prepper and that’s OK. I’m trying to wave this banner as best I can to help you to NOT be caught off-guard.

A few important points:

• Please do not get “normalcy bias” and assume The Great Resignation and WFH will last forever.

While I don’t advocate for paranoia and acting like Chicken Little, I also don’t advocate for burying your head in the sand. Michael Maharrey published an interesting op-ed about this topic earlier this month. (You can find it here: https://schiffgold.com/commentaries/is-normalcy-bias-blinding-us-to-the-looming-economic-storm/) Assuming the current status quo will simply always be can land you in financial hot water:

“Average people are worried about the economy. Consumer confidence has been falling. People undoubtedly feel the squeeze of inflation. But despite their general discontent, most people don’t seem to think a severe economic downturn is imminent — despite many warning signs.

Why not?

Peter Schiff has been warning that a recession is in all likelihood already here. In a recent interview on NTD News, he emphasized that the economic downturn will be much deeper than anybody expects.

‘I don’t think it’s going to be a mild recession. I think this recession is going to be worse than the Great Recession that started following the 2008 financial crisis.'”

Further down:

“In retrospect, the signs of a housing crash were pretty obvious in 2006 and early 2007. It was apparent that there were serious problems in early ’08. But almost nobody in the mainstream saw the financial crisis and Great Recession coming. Like today, there were only a few voices in the wilderness sounding a warning.

Why is it that so few people are prepared for economic crashes when the warning signs are so obvious?

There are certainly many factors, but one likely reason people don’t can’t see the train hurtling down the tracks is a psychological phenomenon known as ‘normalcy bias.’

In a nutshell, normalcy bias is a form of denial based on the assumption that everything will continue as normal.”

Now, you can assume The Fed will come up with a magical solution or that if the job market takes a big hit, you and your family will not see an impact and things will work out. Or:

• I would recommend this Orlando Miner video as required viewing.

IMHO, everyone should check this out:

Again, it’s not to make you paranoid and to bring in a spirit of fear. It’s giving you a set of important questions to consider for the future, which could get dicey. I hope I am wrong. I hope we don’t see a recession or a major market contraction of some kind, but how realistic does that seem to you now? Jamie Dimon is out here openly saying, “A hurricane is coming.” (https://www.cnbc.com/2022/06/01/jamie-dimon-says-brace-yourself-for-an-economic-hurricane-caused-by-the-fed-and-ukraine-war.html) His description is telling: “It’s a hurricane. Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this.” In his own way, he’s confirming what was said in Michael Maharrey’s op-ed: don’t get too comfortable and have normalcy bias.

• Have a game plan.

In the video, Orlando asks if you could afford a new house in the event of a layoff. Do you know you could survive? If we have food shortages, another lockdown, $10/gallon gas, high unemployment, etc., what is your strategy? I understand these questions can be terribly depressing to contemplate, but what’s the alternative? If we have a mild poop storm and then things resolve, great. If we don’t, you’ll feel better about your own stability if you know you can make it through a more significant hurricane.

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