Home Career Employers worry about shortages. This also applies to work.

Employers worry about shortages. This also applies to work.

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Accumulation of workers?

The latest Jobs and Labor Force Survey showed that U.S. employers delayed layoffs in June, while job vacancies fell. The labor market has been a relative source of strength through 2022, even as economic growth has slowed. Still, such a downturn suggests layoffs are in order, given how companies are scrambling to cut costs in such an environment. Some economists say a concept known as “labour hoarding” is keeping layoffs low.

A cursory glance at the recent state of the labor market may explain why this is happening. Employers have been trying to fill vacancies for months. The booming demand for goods and services is leading to a need for more workers, and many companies are struggling to keep up. With this situation fresh in their minds, some employers believe that it is worth it to retain workers despite the transportation costs.

Layoffs are expensive

It should also be noted that firing employees is not cheap. When employees quit, employers are often forced to continue paying them wages or benefits for weeks and sometimes months. In the same vein, hiring talent is expensive. This includes costs associated with hiring and training new employees.

Companies are also trying to predict future economic conditions while doing their best to navigate what is happening now. If firms do not expect the economic slowdown to last for an extended period of time, a smart strategy may be to “stockpile” workers now rather than lay off employees during what will turn out to be a brief downturn.

Indicators and history

According to the June JOLTS report, job vacancies remain elevated by historical standards. Similarly, July nonfarm payrolls showed the economy added 528,000 jobs last month, easily beating economists’ expectations. This would seem to mean that businesses are short of workers, as opposed to “labour hoarding”.

Taken together, this may suggest that the tightening of monetary policy by the Federal Reserve will not hurt the labor market. Rates are rising, which could reduce demand for products as well as for labor, but the difficulty of hiring during the shortage in 2020 and 2021 could reverse this trend.

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