Why the US job market has defied rising interest rates and expectations of high unemployment
ABC NewsSep 25, 2023
According to a report released Thursday by the career services firm Challenger, Gray & Christmas, US companies laid off more than 47K employees last month, up 58% year-over-year. Over the first nine months of the year, the report said there were roughly 605K layoffs, a 198% jump from last year.
While the worst industry in this respect was the tech sector, which has had 152K layoffs so far this year, up 716% year-over-year, the retail and health sectors were second and third, laying off 71K and 53K, respectively. On a percentage basis, the media industry was right behind tech, showing a 550% increase in layoffs.
Despite fears that the Fed's rate hikes — which were necessary in the face of record inflation — would lead to reduced spending, job cuts, and high unemployment, the actual outcome has been more positive. Inflation has decreased from 9.1% to 3.7%, and unemployment remains below 4%. Furthermore, inflation was driven more by supply disruptions from the pandemic and geopolitical events rather than overheated demand. If current trends persist, the Fed might actually achieve a soft landing.
It's not the Fed but rather the bond market, particularly the 10-year Treasury yield, that has the biggest impact on rising interest rates in everyday life. As the Fed and China have bought up most of the US's $33T debt, Americans should be concerned about when the creditors demand higher interest rates. The US Treasury yield is the most important asset in the world, but Washington continues to spend recklessly while bickering about the less consequential Fed rate.
There's a 41% chance that the US will enter a recession before 2025, according to the Metaculus prediction community.