A Wave of Layoffs To Come?
From the start of 2022 through summer, mortgage rates doubled to 6.5%. By next summer, will unemployment double too?
Today (fall of 2022) unemployment claims are at historic lows. That matches the 3.5% estimate of total U.S. unemployment.
Will we experience another wave of unemployment? By looking at past waves of unemployment I’ll try to put some numbers and dates on what we can expect if we’re hit by a wave of layoffs in the next few months.
Yes, it sounds counter-intuitive, almost laughable to argue there will be layoffs when so many jobs remain open. But what if the connection between various job categories is disconnected; that is, no amount of money will motivate tech firms to hire beginning programmers (say ex-truckers) and no amount of poor service will get programmers to pay more for truck drivers to deliver their goods?
To keep this piece to the point, we’ll just assume there’s something broken about the economy that leads to mass layoffs.
For convenience sake, let’s assume that the next rounds of layoffs begin around December, 2022. That will match us up to a layoff wave that began in December of 2007.
Eyeballing (as I’ll do with most numbers to come), the past three unemployment waves had spikes lasting from 1 1/2 years to 3 1/2 years. Assuming we go through a year-and-a-half of layoffs it will be the summer of 2024 before layoffs begin to decrease.
Yes, pre 2008 there were years of interest rates hikes. A bugbear of mine is that the media likes to tell the story of a Fed creating bubbles and recessions. I believe if anyone thinks about it deeply they’ll realize people run up prices with greed, and drive them down in fear. Banks only follow along.
Though the wave of layoffs might subside in the summer of 2024, most people won’t view the economy as healthy until years later. A new growth period might begin in the summer of 2027; that is, 5 1/2 years from today.
I expect the unemployment rate in most large states/cities to double by 2024. Unlike the pandemic, I believe the hardest hit will be the white-collar segment of the workforce. Many tech companies, with Facebook at the top, are decaying enterprises.
The big question. Was the pandemic a first variant of a recession, the second to be less painful? Or will the large amounts of money injected into the economy during the pandemic lead us to a more painful recession today?
Again, weekly unemployment claims are at historic lows. I believe it will only take 2–3 months to identify the beginning of another surge in layoffs. I look at the data every week. You can follow this data under the “unemployment” section at rate50.com
Update 3/32/23, unemployment data has not showed much change since when I wrote this story.