Lowest Job Cuts Since June 2000

The labor market is tightening quickly. Do not fall into the trap of thinking we are too early in the business cycle to have worker shortages. Wage inflation will be a problem as early as this summer. Many industries are already having problems finding workers. They might not be used to raising wages as much as they will have to. This environment is the polar opposite as 1 year ago when the labor market had plenty of excess workers. Companies that treated their workers fairly last spring will be rewarded by high employee retention. It’s not hard to remember how you were treated 1 year prior.

Source: Challenger, Gray, & Christmas

The April Challenger job cuts report supports this scenario. As you can see from the chart below, job cuts actually fell 96.6% from last April. This is one of the most remarkable turnarounds in economic history. From the 2nd half of March to the 1st half of April, many economists were predicting a depression. Not only did we avoid a depression, we also avoided a long recession. This potentially was the quickest recession ever if economists decide to say it ended once economic activity started to rebound. Of course, data has been weak up until recently, but it has mostly been getting better since last spring.

Job cuts fell from 30,603 to 22,913 which was the lowest monthly total since June 2000. There is a labor shortage. Cutting jobs is reserved for businesses going bust. Cuts are less than half the that of February. The most cuts were in services which experienced 5,382 of them. Any restaurants cutting jobs are making a big mistake unless they are about to go bust. The restaurant industry is experiencing a reversal of fortunes.

The weakest part of this report was hiring announcements. They fell from 97,767 to 76,345 which is the lowest reading since last June. Lowe’s announced it would hire 50,000 workers this spring and summer. Luckily, job creation is not correlated with hiring announcements. The labor market created hundreds of thousands of jobs in April.

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