UGH: Layoffs Highest in 15 Years

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Did the Federal Reserve know something about the American economy the rest of us didn’t when they dropped interest rates by half a percent?

Stupid question. Of course, they did. It’s their job to parse the numbers, and now we know why they did what amounted to an emergency rate cut: the economy sucks.

ECONOMY: Layoffs jump in August while hiring in 2024 is at a historic low, Challenger report shows. https://t.co/3iF5Wu959Y

— @amuse (@amuse) September 20, 2024

Unlike many people I wasn’t convinced that Jerome Powell led the charge to reduce interest rates in order to save Kamala Harris’ failing campaign to win the presidency. That’s not because Powell doesn’t want Harris to win (I can’t mind read), but because a rate cut in mid-September is pretty late to have much effect on the election.

The more obvious explanation is that the economy is in deep trouble, and the latest jobs survey by outplacement firm Challenger, Gray & Christmas shows a pace of layoffs that should make your jaw drop.

Layoffs soared in August, hitting their highest total for the month in 15 years, while year-to-date hiring reached a historic low, outplacement firm Challenger, Gray & Christmas reported Thursday.

Announced job cuts totaled 75,891 for the month, lurching 193% higher than July. Though the total was just 1% higher than the same month in 2023, it was the highest number for August going back to 2009, as the economy was still escaping the worst of the global financial crisis.

On the hiring front, companies said they were adding just 6,101 new workers, up by nearly 2,500 since July, but down more than 21% from August 2023. The year-to-date hiring announcements of nearly 80,000 is the lowest total in history going back to 2005.

“August’s surge in job cuts reflects growing economic uncertainty and shifting market dynamics,” said Andrew Challenger, the firm’s senior vice president. “Companies are facing a variety of pressures, from rising operational costs to concerns about a potential economic slowdown, leading them to make tough decisions about workforce management.”

The report comes with concerns rising that the labor market is weakening even though the U.S. economy has seen growth of 1.4 million in nonfarm payrolls this year. Payrolls processing firm ADP reported Wednesday that private companies added just 99,000 workers in August, the smallest gain since January 2021.

Ouch. Double ouch. That’ll hurt.

Obviously, the Federal Reserve responds to political concerns, but the Fed has been in a bind due to their dual mandate of keeping inflation low and keeping employment high. If they had cut interest rates earlier, inflation would have crept up, hurting the Democrats; if they kept interest rates high, they would have forced unemployment up, hurting the Democrats.

They chose the latter because inflation has a more durable negative impact in the long term, and to be honest, one of the reasons that high interest rates reduce inflation is that they drive the economy close to a recession or into one. The whole point is to slow economic growth.

This is one of the reasons why excessive government spending causes inflation; by driving up the money supply, the economy “overheats” (I hate that term because economic growth that comes through the market and not stimulation is a good thing); high interest rates cool down the economy and pop bubbles that waste resources that could be better used elsewhere.

The huge increase in layoffs is horrible news for Kamala Harris; no amount of stimulation in mid-September will undo the damage that all those layoffs have done.

No worries, though. Kamala has Oprah and her pals on her side, and Democrats so rarely get the endorsement of celebrities so this should provide a big boost.

Besides, childless cat ladies getting lit on their boxed Chardonnay are unlikely to be hurt by a layoff anyway, and that is Kamala Harris’ core base of voters.