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The good times continue to roll for the job market – there are still nearly two jobs open for every person looking – but a series of recent headlines about wide-ranging layoffs could give energy to “spring 2020 “.
- Netflix announced today that it is laying off 300 employees, or about 3% of its workforce.
- Elon Musk uttered the word “bankruptcy” at an event and freaked everyone out, saying new Tesla factories are “losing billions of dollars.”
- Yesterday, JPMorgan Chase laid off hundreds of staff from its mortgage division, citing rising rates which are dampening demand.
- Last week, real estate giants Redfin and Compass, which have thrived in the pandemic era of low mortgage rates and voracious demand, announced deep cuts.
- The whiplash is also hitting crypto hard: Coinbase abruptly laid off 18% of its staff last week, froze hiring and even canceled job offers.
- Spotify, StitchFix and Carvana are also making cuts.
Seeing all of these household names in the headlines might make you think the economic recovery, defined as it has been by a blistering labor market, might be unraveling.
But labor economists warn it’s too early to know if any of this is a harbinger of broader unrest. After all, unemployment remains near its lowest level in 50 years.
“A pile of press releases from dozens of companies still only represents a tiny, tiny, tiny fraction of the workforce,” labor economist Aaron Sojourner told me recently. “We’ve seen very rapid and consistent job growth…so there’s plenty of reason to expect a deceleration – it’s not yet clear if it’s turning negative.”
Sojourner is in a unique position to find out. In March 2020, he and fellow economist Paul Goldsmith-Pinkham were among the first to accurately predict the first avalanche of nearly 3.5 million layoffs in a single week, nearly three times the estimate offered by Goldman. Sachs.
So far, he sees no evidence of a general pattern suggesting that the labor market is slackening. It’s not a promise that it won’t change, he says, but he remains optimistic.
He would warn bearish watchers to keep in mind that many of our economic problems stem from things going too well. “People are complaining that consumers have too much money, they’re spending too much and driving up prices… Everyone works who wants to work,” he says. “These are very high class issues.”
LOOK AHEAD: Although the layoffs are rather limited to sectors sensitive to interest rate hikes, even the Fed admits that it may not be possible to control inflation without causing losses jobs.
“There is a risk that unemployment will increase,” Fed Chairman Jay Powell said during a hearing before the House Financial Services Committee today.
The central bank lacks “precision tools”, which means we could see job losses more broadly.
Unemployment stood at just 3.6% in May, down from nearly 15% in the spring of 2020. Even at 4% or higher, Powell said, the labor market would “remain very strong.”
Some people might feel a little uncomfortable investing in Big Oil in the Year of Our Lord 2022. Because of the whole, you know, catastrophe that’s warming the planet, polluting the air and is horrible to god the fossil fuel industry is.
Not Warren Buffett. Omaha’s Berkshire Hathaway Oracle just doubled its energy investments, losing about $529 million on 9.6 million shares of Occidental Petroleum last week. If you can overcome the immorality of it all, it’s a pretty solid bet: Occidental Petroleum shares are up 92% this year, while the S&P 500 is down more than 20%. So, yeah… spit, hippies, let’s get rich.
Most people are, understandably, rather grumpy about soaring prices for gas, food, and just about every essential item you can think of.
There is, however, at least one industry dancing on the grave of our sustainable incomes: predatory payday lenders.
Here’s the deal: Payday loans, aka cash advance loans, are the kind of short-term bridge that can feel like a lifeline when you’re living paycheck to paycheck. But they come with criminally high interest rates, often over 500%, depending on your credit and income. And our current economic climate – marked by high inflation and low unemployment – is exactly the kind of environment where these lenders thrive, writes my colleague Nicole Goodkind.
A subprime lender, Enova, recently said on an earnings call that 44% of all loans it made last quarter were to new customers. It’s amazing.
But it’s also easy to see why people get desperate:
- Inflation in the United States is the highest in 40 years.
- Gas is hovering around $5 a gallon, more than 60% more expensive than a year ago.
- Across America, bosses are calling workers back to the office, which means more driving.
- The federal minimum wage, meanwhile, still sits at $7.25 an hour, where it has stood since 2009.
- About two-thirds of Americans live paycheck to paycheck, according to a survey. (This figure jumps to 82% among workers earning less than $50,000.)
- People with subprime credit scores (below 650) find it difficult to get a loan from a regular bank or qualify for credit cards, leaving them with few options when money is tight .
- To hear predatory lenders say it, they provide services to low-income communities by providing loans to people that traditional banks have turned down. High interest rates are necessary because of default risk.
Consumer advocates call BS.
“There are 18 states and the District of Columbia that have banned payday loans and have survived very well without these predatory loan products,” said Nadine Chabrier, senior policy adviser at the Center for Responsible Lending. “There are fair and responsible loan products that have low interest rates and fees that are available for people to use.”
Read Nicole’s full story here.
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