Average layoffs in finance and insurance almost doubled from a year ago from September to November, according to Labor Department data released last week (Photo: Mint)
Manufacturing and entertainment may bear the brunt of opposing patterns
As white-collar layoffs rise, blue-collar resilience faces test in 2023
By Sarah Chaney Cambon | Updated Jan 08, 2023 05:30 am EST
Manufacturing and entertainment may bear the brunt of opposing patterns
Layoffs have started increasing in white-collar companies. The question now hanging over the economy in 2023 is whether this trend spreads to blue-collar industries as interest rates cut.
Average layoffs in finance and insurance from September to November nearly doubled from a year earlier, according to Labor Department data released last week. Job cuts among real-estate lessors, brokers and agents increased by more than 20% and those in the tech-heavy information sector by nearly 14% during the same period.
The layoff rate in these white-collar industries is still historically low, at 1% of total employment in November, compared to 0.9% in February 2020, according to the Labor Department. Their recent rise, however, stands in stark contrast to industries where manual labor is high. Be trendy and pay less. Manufacturing, leisure and hospitality and retail all laid fewer workers on average in the three months to November than a year earlier.
Job growth slowed to a still-strong 223,000 in December, a two-year low, and could fall further this year thanks to higher interest rates engineered by the Federal Reserve to reduce inflation.
Still, many blue-collar workers may be doing better than in past recessions. Even though demand for goods and services is softening, it is too high for many employers to consider layoffs. If demand softens, industries such as leisure and hospitality may be hesitant to fire front-line workers they struggled to hire and retain during the pandemic's rebound, some economists argue. Is.
Adjusted for inflation, consumer spending on durable goods has cooled over the past year but is still running 26% above pre-pandemic levels. Andrew Flowers, principal labor economist at recruiting software firm Appcast, said that's helping manufacturing hiring despite higher interest rates.
"I expect eventually the construction labor market will probably start to bend but not break. The manufacturing labor market will start to bend but not break," Mr. Flower said. "We actually have a better economy than many people think."
Carl Tannenbaum, chief economist at Northern Trust, expressed skepticism that white-collar layoffs would quickly spread to blue-collar industries. Travel, leisure and entertainment firms "have fought mightily to rebuild their headcount levels and now, having come to a close, I think they are reluctant to lay people off," he said.
If the economy goes into recession and layoffs remain concentrated in white-collar sectors, it would mark a departure from previous recessions.
An analysis of Labor Department data shows that blue-collar workers—including those in hospitality, manufacturing, construction and retail—spent less than their white-collar counterparts during the 1990-91, 2001, 2007-09 and 2020 recessions. experienced more job losses than Due to the shutdown caused by the pandemic in early 2020, blue-collar employers cut payrolls at twice the pace than white-collar ones.
ADP chief economist Nella Richardson said low-wage workers have been hit hardest during the pandemic. "Companies in tech and finance leaned into the pandemic economy and hired aggressively," Ms. Richardson said.
Ms. Richardson said the current economic situation is unlike any that many tech companies have faced. Many weren't there 40 years ago, which means they haven't seen inflation this high, she said.
Glassdoor chief economist Aaron Terrazas said that when interest rates rise, companies are less likely to invest in a new product or idea.
“Many business ideas that seemed practical in a low-interest rate world suddenly don't seem profitable,” Mr. Terrazas said.
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