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    Even a Soft Landing for the Economy May Be Uneven

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    Small businesses and lower-income families could feel pinched in the months ahead whether or not a recession is avoided this year.One of the defining economic stories of the past year was the complex debate over whether the U.S. economy was going into a recession or merely descending, with some altitude sickness, from a peak in growth after pandemic lows.This year, those questions and contentions are likely to continue. The Federal Reserve has been steeply increasing borrowing costs for consumers and businesses in a bid to curb spending and slow down inflation, with the effects still making their way through the veins of commercial activity and household budgeting. So most banks and large credit agencies expect a recession in 2023.At the same time, a budding crop of economists and major market investors see a firm chance that the economy will avoid a recession, or scrape by with a brief stall in growth, as cooled consumer spending and the easing of pandemic-era disruptions help inflation gingerly trend toward more tolerable levels — a hopeful outcome widely called a soft landing.“The possibility of getting a soft landing is greater than the market believes,” said Jason Draho, an economist and the head of Americas asset allocation for UBS Global Wealth Management. “Inflation has now come down faster than some recently expected, and the labor market has held up better than expected.”What seems most likely is that even if a soft landing is achieved, it will be smoother for some households and businesses and rockier for others.In late 2020 and early 2021, talk of a “K-shaped recovery” took root, inspired by the early pandemic economy’s split between secure remote workers — whose savings, house prices and portfolios surged — and the millions more navigating hazardous or tenuous in-person jobs or depending on a large-yet-porous unemployment aid system.Jerome H. Powell, the Fed chair, said: “I wish there were a completely painless way to restore price stability. There isn’t. And this is the best we can do.”Haiyun Jiang/The New York TimesIn 2023, if there’s a soft landing, it could be K-shaped, too. The downside is likely to be felt most by cash-starved small businesses and by workers no longer buoyed by the savings and labor bargaining power they built up during the pandemic.In any case, more turbulence lies ahead as fairly low unemployment, high inflation and shaky growth continue to queasily coexist.Generally healthy corporate balance sheets and consumer credit could be bulwarks against the forces of volatile prices, global instability and the withdrawal of emergency-era federal aid. Chief executives of companies that cater to financially sound middle-class and affluent households remain confident in their outlook. Al Kelly, the chief executive of Visa, the credit card company, said recently that “we are seeing nothing but stability.”The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.Switching Jobs: A hallmark of the pandemic era has been the surge in employee turnover. The wave of job-switching may be taking a toll on productivity.Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.But the Fed’s projections indicate that 1.6 million people could lose jobs by late this year — and that the unemployment rate will rise at a magnitude that in recent history has always been accompanied by a recession.“There will be some softening in labor market conditions,” Jerome H. Powell, the Fed chair, said at his most recent news conference, explaining the rationale for the central bank’s recent persistence in raising rates. “And I wish there were a completely painless way to restore price stability. There isn’t. And this is the best we can do.”Will the bottom 50 percent backslide?Over the past two years, researchers have frequently noted that, on average, lower-wage workers have reaped the greatest pay gains, with bumps in compensation that often outpaced inflation, especially for those who switched jobs. But those gains are relative and were often upticks from low baselines.Consumer spending accounts for roughly 70 percent of economic activity.Jim Wilson/The New York TimesAccording to the Realtime Inequality tracker, created by economists at the University of California, Berkeley, inflation-adjusted disposable income for the bottom 50 percent of working-age adults grew 4.2 percent from January 2019 to September 2022. Among the top 50 percent, income lagged behind inflation. But that comparison leaves out the context that the average income for the bottom 50 percent in 2022 was $25,500 — roughly a $13 hourly pay rate.“As we look ahead, I think it is entirely possible that the households and the people we usually worry about at the bottom of the income distribution are going to run into some kind of combination of job loss and softer wage gains, right as whatever savings they had from the pandemic gets depleted,” said Karen Dynan, a former chief economist at the Treasury Department and a professor at Harvard University. “And it’s going to be tough on them.”Consumer spending accounts for roughly 70 percent of economic activity. The widespread resilience of overall consumption in the past year despite high inflation and sour business sentiment was largely attributed to the savings that households of all kinds accumulated during the pandemic: a $2.3 trillion gumbo of government aid, reduced spending on in-person services, windfalls from mortgage refinancing and cashed-out stock gains.What’s left of those stockpiles is concentrated among wealthier households.After spiking during the pandemic, the overall rate of saving among Americans has quickly plunged amid inflation.The personal saving rate — a monthly measure of the percentage of after-tax income that households save overall — has dropped precipitously in recent months. 

    Note: The personal saving rate is also referred to as “personal saving as a percentage of disposable personal income.” Personal saving is defined as overall income minus spending and taxes paid.Source: U.S. Bureau of Economic AnalysisBy The New York TimesMost major U.S. banks have reported that checking balances are above prepandemic levels across all income groups. Yet the cost of living is higher than it was in 2019 throughout the country. And depleted savings among the bottom third of earners could continue to ebb while rent and everyday prices still rise, albeit more slowly.Most key economic measures are reported in “real” terms, subtracting inflation from changes in individual income (real wage growth) and total output (real gross domestic product, or G.D.P.). If government calculations of inflation continue to abate as quickly as markets expect, inflation-adjusted numbers could become more positive, making the decelerating economy sound healthier.That wonky dynamic could form a deep tension between resilient-looking official data and the sentiment of consumers who may again find themselves with little financial cushion.Does small business risk falling behind?Another potential factor for a K-shaped landing could be the growing pressure on small businesses, which have less wiggle room than bigger companies in managing costs. Small employers are also more likely to be affected by the tightening of credit as lenders become far pickier and pricier than just a year ago.In a December survey of 3,252 small-business owners by Alignable, a Boston-based small business network with seven million members, 38 percent said they had only one month or less of cash reserves, up 12 percentage points from a year earlier. Many landlords who were lenient about payments at the height of the pandemic have stiffened, asking for back rent in addition to raising current rents.Many landlords who were lenient about payments at the height of the pandemic have stiffened, asking for back rent in addition to raising current rents.Gabby Jones for The New York TimesUnlike many large-scale employers that have locked in cheap long-term funding by selling corporate bonds, small businesses tend to fund their operations and payrolls with a mix of cash on hand, business credit cards and loans from commercial banks. Higher interest rates have made the latter two funding sources far more expensive — spelling trouble for companies that may need a fresh line of credit in the coming months. And incoming cash flows depend on sales remaining strong, a deep uncertainty for most.A Bank of America survey of small-business owners in November found that “more than half of respondents expect a recession in 2023 and plan to reduce spending accordingly.” For a number of entrepreneurs, decisions to maintain profitability may lead to reductions in staff.Some businesses wrestling with labor shortages, increased costs and a tapering off in customers have already decided to close.Susan Dayton, a co-owner of Hamilton Street Cafe in Albany, N.Y., closed her business in the fall once she felt the rising costs of key ingredients and staff turnover were no longer sustainable.She said the labor shortage for small shops like hers could not be solved by simply offering more pay. “What I have found is that offering people more money just means you’re paying more for the same people,” Ms. Dayton said.That tension among profitability, staffing and customer growth will be especially stark for smaller businesses. But it exists in corporate America, too. Some industry analysts say company earnings, which ripped higher for two years, could weaken but not plunge, with input costs leveling off, while businesses manage to keep prices elevated even if sales slow.That could limit the bulk of layoffs to less-valued workers during corporate downsizing and to certain sectors that are sensitive to interest rates, like real estate or tech — creating another potential route for a soft, if unequal, landing.The biggest challenge to overcome is that the income of one person or business is the spending of another. Those who feel that inflation can be tamed without a collapse in the labor market hope that spending slows just enough to cool off price increases, but not so much that it leads employers to lay off workers — who could pull back further on spending, setting off a vicious circle.Those who feel that inflation can be tamed without a collapse in the labor market hope that spending slows just enough to cool off price increases.Jim Wilson/The New York TimesWhat are the chances of a soft landing?If the strained U.S. economy is going to unwind rather than unravel, it will need multiple double-edged realities to be favorably resolved.For instance, many retail industry analysts think the holiday season may have been the last hurrah for the pandemic-era burst in purchases of goods. Some consumers may be sated from recent spending, while others become more selective in their purchases, balking at higher prices.That could sharply reduce companies’ “pricing power” and slow inflation associated with goods. Service-oriented businesses may be somewhat affected, too. But the same phenomenon could lead to layoffs, as slowdowns in demand reduce staffing needs.In the coming months, the U.S. economy will be influenced in part by geopolitics in Europe and the coronavirus in China. Volatile shifts in what some researchers call “systemically significant prices,” like those for gas, utilities and food, could materialize. People preparing for a downturn by cutting back on investments or spending could, in turn, create one. And it is not clear how far the Fed will go in raising interest rates.Then again, those risk factors could end up relatively benign.“It’s 50-50, but I have to take a side, right? So I take the side of no recession,” said Mark Zandi, the chief economist at Moody’s Analytics. “I can make the case on either side of this pretty easily, but I think with a little bit of luck and some tough policymaking, we can make our way through.” More

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    U.S. Job Growth Remains Strong, Defying Fed’s Rate Strategy

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    Employers added 263,000 workers in November, even as some industries showed signs of a slowdown. Wage growth exceeded expectations.America’s jobs engine kept churning in November, the Labor Department reported Friday, a show of continued demand for workers despite the Federal Reserve’s push to curb inflation, largely by tamping down hiring.Employers added 263,000 jobs, even as a wave of layoffs in the tech industry made headlines. That was only a slight drop from the revised figure of 284,000 for October.The unemployment rate was unchanged at 3.7 percent, while wages were 5.1 percent higher than a year earlier, a bigger rise than expected.Those signs of strength perpetuate a strange duality: While a strong labor market may benefit workers in the short term, it could strengthen the Fed’s resolve to raise rates even further, which would increase the likelihood of a recession in 2023.“It upsets some of the narrative going into the report, which was that things are slowing down,” said Neil Dutta, head of U.S. economics at Renaissance Macro. “The reason that this matters for everyone is that the Fed still sees the labor market as the mechanism by which they can solve the inflation problem.”Despite steady employment growth, the impact of higher interest rates is already evident. Hiring in goods-producing sectors like manufacturing and residential construction — which are more sensitive to rising borrowing costs — has slowed substantially, and the number of hours worked fell, mainly because of those industries. But robust hiring in health care and hospitality, where wages have also grown most rapidly, powered continued gains.Wages continue to increase, though still not at the pace of inflationYear-over-year percentage change in earnings vs. inflation More

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    Why Are Middle-Aged Men Missing From the Labor Market?

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    Men ages 35 to 44 are staging a lackluster rebound from pandemic job loss, despite a strong economy.For the past five months Paul Rizzo, 38, has been delivering food and groceries through the DoorDash app. But he spent the first half of 2022 earning no paycheck at all — reflecting a surprising trend among middle-aged men.After learning last Christmas that his job as an analyst at a hospital company was being automated, Mr. Rizzo chose to stay at home to care for his two young sons. His wife wanted to go back to work, and he was discouraged in his own career after more than a decade of corporate tumult and repeated disappointment. He thought he might be able to earn enough income on his investments to pull it off financially.Mr. Rizzo’s decision to step away from employment during his prime working years hints at one of the biggest surprises in today’s job market: Hundreds of thousands of men in their late 30s and early 40s stopped working during the pandemic and have lingered on the labor market’s sidelines since. While Mr. Rizzo has recently returned to earning money, many men his age seem to be staying out of the work force altogether. They are an anomaly, as employment rates have rebounded more fully for women of the same age and for both younger and older men.About 87 percent of men ages 35 to 44 were working as of October, down from 88.3 percent before the pandemic struck in 2020. The stubborn decline has spanned racial groups, but it has been most heavily concentrated among men who — like Mr. Rizzo — do not have a four-year college degree. The pullback comes despite the fact that wages are rising and job openings are plentiful, including in fields like truck driving and construction, where college degrees are not required and men tend to dominate.Economists have not determined any single factor that is keeping men from returning to work. Instead, they attribute the trend to a cocktail of changing social norms around parenthood and marriage, shifting opportunities, and lingering scars of the 2008 to 2009 downturn — which cost many people in that age group jobs just as they were starting their careers.“Now, all of a sudden, you’re kind of getting your life together, and if you’re in the wrong industry …” Mr. Rizzo said, trailing off as he discussed his recent labor market experience. “I wasn’t the only one who dropped out. I can tell you that.”How male employment shifted during the pandemicMen ages 35-44 are working at a notably lower rate than before the pandemic.

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    Change in male employment rate since Feb. 2020 by age group
    Note: Three-month rolling average of seasonally adjusted dataSource: Bureau of Labor StatisticsBy The New York TimesHow female employment shifted during the pandemicWomen’s employment has rebounded across age groups.

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    Change in female employment rate since Feb. 2020 by age group
    Note: Three-month rolling average of seasonally adjusted dataSource: Bureau of Labor StatisticsBy The New York TimesMen have been withdrawing from the labor force for decades. In the years following World War II, more than 97 percent of men in their prime working years — defined by economists as ages 25 to 54 — were working or actively looking for work, according to federal data. But starting in the 1960s, that share began to fall, mirroring the decline in domestic manufacturing jobs.What is new is that a small demographic slice — men who were early in their careers during the 2008 recession — seems to be most heavily affected.“I think there’s a lot of very discouraged people out there,” said Jane Oates, a former Labor Department official who now heads WorkingNation, a nonprofit focused on work force development. Men lost jobs in astonishing numbers during the 2008 financial crisis as the construction and home-building industries contracted. It took years to regain that ground — for men who were then in their 20s and early 30s and just getting started in their careers, employment rates never fully recovered. Economists came up with a range of explanations for the men’s slow return to the labor force. After the war on crime of the 1980s and 1990s, more men had criminal records that made it difficult to land jobs. The rise of opioid addiction had sidelined others. Video games had improved in quality, so staying home might have become more attractive. And the decline of nuclear family units may have diminished the traditional male role as economic provider.Now, recent history appears to be repeating itself — but for one specific age group. The question is why 35- to 44-year-old men seem to be staying out of work more than other demographics.Patricia Blumenauer, vice president of data and operations at Philadelphia Works, a work force development agency, said she had observed a dip in the number of men in that age range coming in for services. A disproportionately high share of those who do come in leave without taking a job.Ms. Blumenauer said that age range is a group “that we’re not seeing show up.” She thinks some men who lost their blue-collar jobs early in the pandemic may be looking for something with flexibility and higher pay. “The ability to work from home three days a week, or have a four-day weekend — things that other jobs have figured out — aren’t possible for those types of occupations.”When men don’t find those flexible jobs or can’t compete for them, they might choose to make ends meet by staying with relatives or doing under-the-table work, Ms. Blumenauer said.The pandemic has probably also slowed America’s already-weak family formation, giving single or childless men less of an incentive to settle into steady jobs, said the economist Ariel Binder. On the flip side, disruptions to schooling and child care meant that some men who already had families may have stopped doing paid work to take on more household tasks.“So on the one hand you get these men who are just not expecting to have a stable romantic relationship for most of their lives and are setting their time use accordingly,” Dr. Binder said. “Then there are men who are participating in these family structures, but doing so in nontraditional ways.”Like labor force experts, government data suggest that a combination of forces are at play.A growing number of men do seem to be taking on more child care duties, time use and other survey data suggests. But a shift toward being stay-at-home dads is unlikely to be the full story: Employment trends look the same for men in the age group who report having young kids living with them and those who don’t.What clearly does matter is education. The employment decline is more heavily concentrated among people who have not graduated from college and who live in metropolitan areas or suburbs, based on detailed government survey data.An education gap among menMen without a four-year college degree have returned to work more slowly than others in the same age group.

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    Change in employment rate for people ages 35-44
    Note: Three-month rolling average of seasonally adjusted data.Source: Current Population Survey via IPUMSBy The New York TimesSome economists speculate that the disproportionate decline could be because the age group has been buffeted by repeated crises, making their labor market footing fragile. They lost work early in their careers in 2008, faced a slow recovery after and found their jobs at risk again amid 2020 layoffs and an ongoing shift toward automation.“This group has been hit by automation, by globalization,” said David Dorn, a Swiss economist who studies labor markets.That fragility theory makes sense to Mr. Rizzo.He had seen the Navy as his ticket out of poverty in Louisiana and had expected to have a career in the service until he broke his back during basic training. He retired from the military after a few years. Then he pivoted, earning a two-year degree in Georgia and beginning a bachelor’s degree at Arizona State University — with dreams of one day working to cure cancer.Then the Great Recession hit. Mr. Rizzo had been working nights in a laboratory to afford rent and tuition, but the job ended abruptly in 2009. Phoenix was ground zero for the financial implosion’s fallout.Frantic job applications yielded nothing, and Mr. Rizzo had to drop out of school. Worse, he found himself staring down imminent homelessness. His tax refund saved him by allowing him and his wife to move back to Louisiana, where jobs were more plentiful. But after they divorced, he hit a low point.“I had nothing to show for my life after my 20s,” he explained.Mr. Rizzo spent the next decade rebuilding. He worked his way through various corporate positions where he taught himself skills in Excel and Microsoft SharePoint, married again, had two sons and bought a house.Yet he was regularly at risk of losing work to downsizing or technology — including late last year. The company he worked for wanted him to move into a new role, perhaps as a traveling salesperson, when his desk job disappeared. But his sons have special needs and that was not an option.He quit in January. He watched the kids, posted on his investment-related YouTube channel and watched Netflix. He thought he might be able to live on military payments and dividend income, becoming part of the “Financial Independence, Retire Early,” or FIRE, trend. But then the Federal Reserve raised interest rates and markets gyrated.“I got FIRE, all right,” he said. “My whole portfolio got set on fire.”Mr. Rizzo, who began working for DoorDash in July, making a delivery in Kenner.Emily Kask for The New York TimesMr. Rizzo turned to DoorDash, earning his first paycheck on July 4. While he is technically back in the labor market, gig work like his isn’t well measured in jobs data. If many men are taking a similar path but do not work every week, they might be overlooked in surveys, which ask if someone worked for pay in the previous week to determine whether they were employed.Mr. Rizzo is waiting to see what happens to his DoorDash income in an economic pullback before he rules out corporate work forever. Already, other dashers are complaining that business is slowing as people have spent down pandemic savings.The veteran counts himself fortunate. He knows men in his generation who have struggled to find any footing in the labor market.“It feels like it’s the after-affects of 2008 and 2009,” he said. “Everyone had to restart their lives from scratch.” More

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    Job Openings Ease, but Layoffs Are Little Changed

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    Government data for October shows the labor market is still strong, though cooling slightly.Employers continued to pull back in October on the number of jobs they were looking to fill, the latest sign that the labor market is strong but gradually cooling.About 10.3 million positions were open on the last day of October, the Labor Department said Wednesday, down from 10.7 million the previous month. Vacant positions in October effectively equaled the level in August, seasonally adjusted.Reductions in job openings occurred in a broad range of industries including manufacturing, construction, professional and businesses services, and state and local government. Still, openings in every major industry remained above prepandemic levels, underscoring the persistent strength in the labor market despite higher borrowing costs.The Federal Reserve is trying to constrain hiring in its efforts to tame inflation, concerned that a hot job market is forcing employers to raise wages, contributing to soaring prices.Other measures in the report — the Job Openings and Labor Turnover Survey, or JOLTS — affirm the labor market’s resilience. There were roughly 1.7 posted jobs for every unemployed worker, still extraordinarily high by historical standards.In recent weeks, a number of technology companies have announced sweeping layoffs. Elon Musk, Twitter’s new owner, slashed the company’s work force in half in early November. Meta, the parent company of Facebook and Instagram, shed 11,000 people, or about 13 percent of its workers.Even as the job cuts in the technology industry have dominated the headlines, however, layoffs across the entire economy in October were largely unchanged at 1.4 million, low by historical standards, suggesting that employers remain hesitant to part with workers after the pandemic-era hiring frenzy.The number of workers voluntarily quitting their jobs — an indicator of how confident workers are that they will be able to find better employment opportunities — ticked down but only slightly.Although the report overall pointed to continued elevated demand for workers, there were undeniable signs that the labor market is weakening.After a surprise jump in September, job openings resumed their march lower. There were four million quits in October, continuing the downward trend from the “Great Resignation” peak last year. The rate of people quitting their jobs — the number of people voluntarily leaving their jobs divided by total employment — was the lowest it had been since May 2021, at 2.6 percent.“Today’s JOLTS report shows that the job market is gradually slowing,” said Daniel Zhao, an economist at the career site Glassdoor. “And that’s in line with what we have been seeing in other data as well.”A more up-to-date readout of the economy will come on Friday, when the Labor Department releases data on monthly job growth and unemployment in November. Employers added 261,000 jobs in October. More

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    Tech’s Talent Wars Have Come Back to Bite It

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    Hiring the best, the brightest and the highest number of employees was a badge of honor at tech companies. Not anymore as layoffs surge.When Stripe, a payments start-up valued at $74 billion, laid off more than 1,000 employees this month, its co-founders blamed themselves. “We overhired for the world we’re in,” they wrote. “We were much too optimistic.”After Elon Musk, Twitter’s new owner, slashed the company’s staffing in half last week, Jack Dorsey, a founder and former chief executive of the social media service, claimed responsibility. “I grew the company size too quickly,” he wrote on Twitter.And on Wednesday, when Meta, the parent company of Facebook and Instagram, shed 11,000 people, or about 13 percent of its work force, Mark Zuckerberg, the chief executive, blamed overzealous expansion. “I made the decision to significantly increase our investments,” he wrote in a letter to employees. “Unfortunately, this did not play out the way I expected.”The chorus of conceding by tech executives that they hired too many people is ricocheting across Silicon Valley as the industry rushes to make cuts, blaming a worsening economy.But at least part of the surge in layoffs was self-inflicted. When the companies enjoyed soaring profits and a belief that the pandemic-fueled boom times would keep going, they aggressively expanded by hoarding the most fought-over and expensive resource in the software business: talent.Silicon Valley tech companies have long seen hiring as more than just filling openings. The industry’s fierce talent wars showed that companies like Google and Meta were gaining the best and brightest. Ballooning staffs and a long reign atop lists of the most-desired jobs for college graduates were emblems of growth, deep pockets and prestige. And to employees, the work became something larger — it was an identity.The Austin, Texas, campus of Google, a veteran of the tech industry’s hiring wars.Brandon Thibodeaux for The New York TimesThis mentality became ingrained at the largest tech companies, which offer numerous perks on lavish corporate campuses that rival universities. It was echoed by smaller start-ups, which dangle a chance at life-changing wealth in the form of stock options.Now these practices are giving the tech industry indigestion.“When times are flush, you get excesses, and excesses lead to overhiring and optimism,” said Josh Wolfe, an investor at Lux Capital. “For the past 10 years, the abundance of cash led to an abundance of hiring.”More than 100,000 tech workers have lost their jobs this year, according to Layoffs.fyi, a site that tracks layoffs. The cuts range from well-known publicly traded companies like Meta, Salesforce, Booking.com and Lyft to highly valued private start-ups such as the Gopuff delivery service and the Chime and Brex financial platforms.More on Big TechMeta Layoffs: The parent of Facebook said it was laying off more than 11,000 people, or about 13 percent of its work force, in what amounted to the company’s most significant job cuts.Seeking Alternatives: Since Elon Musk bought Twitter, some of its users have sought out other social media platforms. Here is a closer look at Mastodon, one of the most popular alternatives.An Empire in Danger: U.S. lawmakers’ objections to an obscure Chinese semiconductor company and tough Covid-19 restrictions are hurting Apple’s ability to make new iPhones in China.Big Tech’s Slowdown: Amid inflation and rising interest rates, Silicon Valley’s most powerful companies are signaling that tough days may be ahead. Some have already announced hiring freezes and job cuts.Many of the job losses have taken place in tech’s most experimental areas. Astra, a rocket company, cut 16 percent of its staff this week after tripling its head count last year. In the cryptocurrency industry, which has suffered a meltdown this year, high-value companies including Crypto.com, Blockchain.com, OpenSea and Dapper Labs have cut hundreds of workers in recent months.Tech leaders were too slow to react to signs of an economic slowdown that emerged this spring, after many of the companies had already been on hiring sprees for several years, tech analysts said.Meta, whose valuation soared past $1 trillion, doubled its staff to 87,314 people over the past three years. Robinhood, the stock trading app, expanded its work force nearly sixfold in 2020 and 2021.“They’ve charged ahead with these plans that are no longer based on reality,” said Caitlyn Metteer, director of recruiting at Lever, a provider of recruiting software.For many, it’s a moment of shock. “Are we in a bubble” panics in the tech industry over the last decade have always been short-lived, followed by a rapid return to even frothier good times. Even those who predicted that pandemic behaviors enabled by the likes of Zoom, Peloton, Netflix and Shopify would ebb now say they underestimated the extent.Many believe this downturn will last longer because of the macroeconomic factors that created it. For the past decade, low interest rates pushed investors into riskier assets that offered higher returns. Those investors valued fast growth over profits and rewarded companies that took big risks.Jack Dorsey wrote on Twitter, which he helped start, that he had expanded the company too quickly.Marco Bello/Agence France-Presse — Getty ImagesIn recent years, tech companies responded to the flood of cash from investors and a rapidly growing business by pouring money into expansion via sales and marketing, hiring, acquisitions and experimental projects. The excess capital encouraged companies to staff up, adding fuel to the war for talent.“The pressure is to just spend the money quick enough so you can grow fast enough to justify the kinds of investments V.C.s want to make,” said Eric Rachlin, an entrepreneur who co-founded Body Labs, an artificial intelligence software company that Amazon bought.Expanding head count was also a way for managers to advance their careers. “Getting more people on the team is easier than telling everyone to just work super hard,” Mr. Rachlin said.That led the tech industry to gain a reputation for corporate bloat. Rumors often circulated of highly compensated workers who clocked just a few hours of work a day or juggled multiple remote jobs at once, alongside elaborate office perks like free laundry, massages and renowned cafeteria chefs. This spring, Meta scaled back its perks, including laundry service.In the past, tech workers could quickly change jobs or land on their feet if they were cut because of the plethora of open positions, but “I don’t think we know yet if everyone in this wave of layoffs will be able to do that,” Mr. Rachlin said.Some people see a chance to help those entering a difficult job market for the first time. Stephen Courson recently left a career in sales and strategy at Gartner, the research and consulting firm, and Salesforce to create financial content. He initially planned to focus on time management, but after many of his friends went through painful layoffs he began working on a course that helps people prepare for job interviews. It’s a skill that many of today’s job hunters never had to hone in flush times.“This isn’t going to get better quickly,” he said.Amid the drumbeat of layoff announcements, investors see an opportunity. They are quick to point out that well-known successes of the last decade — companies like Airbnb, Uber, Dropbox — were created in the aftermath of the Great Recession.This week, Day One Ventures, a venture capital firm, announced Funded Not Fired, a program that aims to invest $100,000 into 20 new start-ups where at least one founder was laid off from a tech company. Within 24 hours, hundreds of people had applied, said Masha Bucher, founder of the firm.“Some of the people are saying, ‘This is a sign I’ve been waiting for,’” she said. “It really gives people hope.”In the meantime, there may be more layoff announcements — delivered through the now standard form of a letter from the chief executive posted to a company blog.These letters have taken on a familiar format. The bosses explain the grim economic outlook, citing inflation, “energy shocks,” interest rates, “one of the most challenging real estate markets in 40 years” or “probable recession.” They take the blame for growing too fast. They offer up support to those affected — severance, visa help, health care, career guidance. They express sadness and thank everyone.And they reaffirm the company’s mission. More

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    Labor Hoarding Could be Good News for the Economy

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    PROVO, Utah — Chad Pritchard and his colleagues are trying everything to staff their pizza shop and bistro, and as they do, they have turned to a new tactic: They avoid firing employees at all costs.Infractions that previously would have led to a quick dismissal no longer do at the chef’s two places, Fat Daddy’s Pizzeria and Bistro Provenance. Consistent transportation issues have ceased to be a deal breaker. Workers who show up drunk these days are sent home to sober up.Employers in Provo, a college town at the base of the Rocky Mountains where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers. Bistro Provenance, which opened in September, has been unable to hire enough employees to open for lunch at all, or for dinner on Sundays and Mondays. The workers it has are often new to the industry, or young: On a recent Wednesday night, a 17-year-old could be found torching a crème brûlée.Down the street, Mr. Pritchard’s pizza shop is now relying on an outside cleaner to help his thin staff tidy up. And up and down the wide avenue that separates the two restaurants, storefronts display “Help Wanted” signs or announce that the businesses have had to temporarily reduce their hours.Provo’s desperation for workers is an intense version of the labor crunch that has plagued employers nationwide over the past two years — one that has prompted changes in hiring and layoff practices that could have big implications for the U.S. economy. Policymakers are hoping that after struggling through the worst labor shortages America has experienced in at least several decades, employers will be hesitant to lay off workers even when the economy cools.Mr. Pritchard cannot hire enough employees to open the bistro for lunch at all, or for dinner on Sundays or Mondays.That may help prevent the kind of painful recession the Federal Reserve is hoping to avoid as it tries to combat persistent inflation. America’s economy is facing a marked — and intentional — slowdown as the Fed raises interest rates to chill demand and drive down price increases, the kind of pullback that would usually result in notably higher unemployment. But officials are still hoping to achieve a soft landing in which growth moderates without causing widespread job losses. A few have speculated that today’s staffing woes will help them to pull it off, as companies try harder than they have in the past to weather a slowdown without cutting staff.“Businesses that experienced unprecedented challenges restoring or expanding their work forces following the pandemic may be more inclined to make greater efforts to retain their employees than they normally would when facing a slowdown in economic activity,” Lael Brainard, the Fed’s vice chair, said in a recent speech. “This may mean that slowing aggregate demand will lead to a smaller increase in unemployment than we have seen in previous recessions.”For now, the job market remains strong. Employers added 263,000 workers in September, fewer than in recent months but more than was normal before the pandemic. Unemployment is at 3.5 percent, matching the lowest level in 50 years, and average hourly earnings picked up at a solid 5 percent clip compared with a year earlier.But that is expected to change. When the Fed raises interest rates and slows down the economy, it also weakens the labor market. Wage gains slow, paving the way for inflation to cool down, and in the process, unemployment rises — potentially, significantly.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.September Jobs Report: Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates.A Cooling Market?: Unemployment is low and hiring is strong, but there are signs that the red-hot labor market may be coming off its boiling point.Factory Jobs: American manufacturers have now added enough jobs to regain all that they shed during the pandemic — and then some.Missing Workers: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.In the 1980s, when inflation was faster than it is now and entrenched, the Fed lifted rates drastically to roughly 20 percent and sent unemployment to above 10 percent. Few economists expect an outcome that severe this time since today’s inflation burst has been shorter-lived and rates are not expected to climb nearly as much.Mr. Pritchard demonstrated how to stretch pizza dough in Fat Daddy’s Pizzeria, his other restaurant in Provo.Many of the workers Mr. Pritchard and his business partner, Janine Coons, have hired are new to the industry or young.Still, Fed officials themselves expect unemployment to rise nearly a full percentage point to 4.4 percent next year — and policymakers have admitted that is a mild estimate, given how much they are trying to slow down the economy. Some economists have penciled in worse outcomes. Deutsche Bank, for instance, predicts 5.6 percent joblessness by the end of 2023.Labor hoarding offers a glimmer of hope that could help the Fed’s more benign unemployment forecast to become reality: Employers who are loath to jettison workers may help the labor market to slow down and wage growth to moderate without a spike in joblessness.“Companies are still confronting this enormous churn and losing people, and they don’t know what to do to hang on to people,” said Julia Pollak, chief economist at the career site ZipRecruiter. “They’re definitely hanging on to workers for dear life just because they’re so scarce.”When the job market slows, employers will have recent, firsthand memories of how expensive it can be to recruit, and train, workers. Many employers may enter the slowdown still severely understaffed, particularly in industries like leisure and hospitality that have struggled to hire and retain workers since the start of the pandemic. Those factors may make them less likely to institute layoffs.And after long months of very tight labor markets — there are still nearly two open jobs for every unemployed worker — companies may be hesitant to believe that any uptick in worker availability will last.“There’s a lot of uncertainty about how big of a downturn are we facing,” said Benjamin Friedrich, an associate professor of strategy at Northwestern University’s Kellogg School of Management. “You kind of want to be ready when opportunities arise. The way I think about labor hoarding is, it has option value.”Employers in Provo, where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers.Instead of firing, businesses may look for other ways to trim costs. Mr. Pritchard in Provo and his business partner, Janine Coons, said that if business fell off, their first resort would be to cut hours. Their second would be taking pay cuts themselves. Firing would be a last resort.The pizzeria didn’t lay off workers during the pandemic, but Mr. Pritchard and Ms. Coons witnessed how punishing it can be to hire — and since all of their competitors have been learning the same lesson, they do not expect them to let go of their employees easily even if demand pulls back.“People aren’t going to fire people,” Mr. Pritchard said.But economists warned that what employers think they will do before a slowdown and what they actually do when they start to experience financial pain could be two different things.The idea that a tight labor market may leave businesses gun-shy about layoffs is untested. Some economists said that they could not recall any other downturn where employers broadly resisted culling their work force.“It would be a pretty notable change to how employers responded in the past,” said Nick Bunker, director of North American economic research for the career site Indeed.And even if they do not fire their full-time employees, companies have been making increased use of temporary or just-in-time help in recent months. Gusto, a small-business payroll and benefits platform, conducted an analysis of its clients and found that the ratio of contractors per employee had increased more than 60 percent since 2019.If the economy slows, gigs for those temporary workers could dry up, prompting them to begin searching for full-time jobs — possibly causing unemployment or underemployment to rise even if nobody is officially fired.Policymakers know a soft landing is a long shot. Jerome H. Powell, the Fed chair, acknowledged during his last news conference that the Fed’s own estimate of how much unemployment might rise in a downturn was a “modest increase in the unemployment rate from a historical perspective, given the expected decline in inflation.”But he also added that “we see the current situation as outside of historical experience.”Bistro Provenance opened in September.Dinner service at the restaurant.The reasons for hope extend beyond labor hoarding. Because job openings are so unusually high right now, policymakers hope that workers can move into available positions even if some firms do begin layoffs as the labor market slows. Companies that have been desperate to hire for months — like Utah State Hospital in Provo — may swoop in to pick up anyone who is displaced.Dallas Earnshaw and his colleagues at the psychiatric hospital have been struggling mightily to hire enough nurse’s aides and other workers, though raising pay and loosening recruitment standards have helped around the edges. Because he cannot hire enough people to expand in needed ways, Mr. Earnshaw is poised to snap up employees if the labor market cools.“We’re desperate,” Mr. Earnshaw said.But for the moment, workers remain hard to find. At the bistro and pizza shop in downtown Provo, what worries Mr. Pritchard is that labor will become so expensive that — combined with rapid ingredient inflation — it will be hard or impossible to make a profit without lifting prices on pizzas or prime rib so much that consumers cannot bear the change.“What scares me most is not the economic slowdown,” he said. “It’s the hiring shortage that we have.” More

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    U.S. Job Growth Eases, but Is Too Strong to Suit Investors

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    The gain of 263,000 was shy of recent monthly totals but still robust. Stocks fell on fears of a harder, longer Fed campaign to fight inflation.Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. But the strong showing left many investors unhappy because they saw signs that the fight against inflation may become tougher and more prolonged.Employers added 263,000 jobs on a seasonally adjusted basis, the Labor Department said Friday, a decline from 315,000 in August. The number was the lowest since April 2021 but still solid by prepandemic standards. The unemployment rate fell to 3.5 percent, equaling a five-decade low.“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed,” said Carl Tannenbaum, chief economist at Northern Trust.Officials at the Federal Reserve have been keeping a close eye on hiring and wages as they proceed with a series of rate increases meant to combat inflation. The job data indicates that, for now, they are doing so without tipping the economy into a recession that would throw millions out of work.But it also increases the prospect that the effort to subdue price increases will be more extended. For investors, that came as bad news, since higher interest rates raise costs for companies and weigh on stock prices.The S&P 500 recorded its worst one-day performance since mid-September, falling 2.8 percent and eroding gains from earlier in the week.Fed officials have signaled in speeches this week that they remain resolute in trying to wrestle inflation lower, and that they are waiting for clear evidence that the economy is headed back toward price stability before they pull back.Wage growth has subsided somewhat, at least compared with the trend a year ago. Average hourly earnings climbed 5 percent from a year earlier, roughly matching economists’ expectations but slowing down slightly from the prior annual reading.Wages are still growing, but less rapidly in some sectorsPercent change in earnings for nonmanagers since January 2019 by sector More