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Might We See a Minimal Job Loss Recession? Why Not?

March 21, 2022

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7:14 pm

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18 comments

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Economics

Nonfarm Payrolls data from BLS, chart by Mish

To recover jobs to the level they were at pre-Covid, the economy needs 152,504,000 minus 149,721,000 jobs (2,783,000).

But to recover to the trend the economy needs 6,279,000 jobs.

Job Openings

What if instead of firing millions of leisure and hospitality workers, the openings vanish?

Will we need construction workers if housing slows?

What about manufacturing jobs if the automotive sector takes a dive?

Comparison to Double Dip Recession

If we look back at the 1980-1981 double dip recession, the number of jobs lost was minimal.

The 1980 recession gained jobs for the first two months of the recession then compared to pre-recession lost less than a million jobs.

The larger 81 recession lost less than 2 million jobs.

In both cases, the number of jobs rose before the recession ended in stark contrast to the housing bubble bust.

Nonfarm Payrolls 2006-2014

Comparison

The housing bubble “Great Recession” suffered immense job josses with a very slow job recovery.
The double dip recessions in the 1980s had small job losses and speedy recoveries.

I expect the next recession to look much more like the 1980s inflationary recessions than the housing bubble “Great Recession”.

I also envision very steep stock market declines. As a result of the stock market wealth impact, people start looking for work even some of those who retired early.

So while the employment loss may be relatively small, the change in unemployment rate is likely to be more significant.

What Can the Fed Do About the Price of Food, Medicine, Gasoline, or Rent?

The answer is nothing or next to nothing. Rates hikes will not impact inelastic items.

For discussion, please see What Can the Fed Do About the Price of Food, Medicine, Gasoline, or Rent?

Bubbles Will Pop

If you think the Fed can fix decades of easy money and reckless Congressional spending while not remotely understanding inflation, you are only nuts.

Please note Most People Have No Idea How Much Stocks are Likely to Crash

This post originated at MishTalk.Com.

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18 Comments

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MPO45

4 years ago

There are shortages of almost every key labor source from cheap menial labor to pilots, doctors, nurses, lawyers, technology professionals and more.

Did you hear the news? 10,000 boomers retired yesterday and 10,000 retired today and 10,000 will retire tomorrow. Each and every day until we hit 60 million by 2030. That is a depletion of the labor force by 40, 50 or 60 million people, choose your number and let the numbers dance in your heads.

Please let me know where America will conjure up 60 million replacements. And if its robots, who’s going to build them? Tick tock…tick tock…that’s the sound of another boomer retiring. Oh and gen xers are retiring too but I don’t want to scare you guys with that info yet, you just aren’t ready for it.

davidyjack

4 years ago

Reply to MPO45

If the labor problems are so bad why aren’t wages keeping up with inflation?

ColoradoAccountant

4 years ago

In housing bubble 1.0 buyers were underwater when they moved in. That doesn’t seem the case now. The buyer has more skin in the game (down-payment), and lack of inventory on his/her side.

Casual_Observer2020

4 years ago

Reply to ColoradoAccountant

Agree. But I still see some housing deflation on the horizon. In order for prices to tread water, you at least need those move up buyers. I think the “move up” buyers were mostly inflows from China and elsewhere laundering money through housing this cycle. There are a larger chunk of homes on the coast that are unoccupied but were bought by foreign companies or LLCs.

Dean_70

4 years ago

With housing bubble 2.0 extending WAY further than housing bubble 1.0 I expect to see major job losses once asset price deflation becomes a reality and accelerates. This will be a painful stagflationary recession.

Casual_Observer2020

4 years ago

In what world is “quickly” a period of 3 years ?

https://www.cnn.com/2022/03/21/economy/federal-reserve-powell-bostic-interest-rates/index.html

Casual_Observer2020

4 years ago

Reply to Casual_Observer2020

“I believe that [our] policy actions and those to come will help bring inflation down near 2% over the next three years,” said Powell on Monday.

Scooot

4 years ago

Reply to Casual_Observer2020

Seems like an acknowledgment that it’s going to be above 2% for at least 3 years and they’re going to move to a neutral rate regardless. Reading between the lines I don’t think they’re too happy with the market doubting their intentions.

Casual_Observer2020

4 years ago

Reply to Scooot

After Volcker, the Fed was in the back pocket of the bankers. Until they stop catering to the derivatives asset class, we are all screwed.

Tony Bennett

4 years ago

Talked to a supervisor for a brake manufacturer a few days ago. Asked about jobs situation. Said it was poor. They hire but can’t get them to stick. Said one hire had been on the job for only a few days. Operated a forklift. Told he needed to wear ear plugs. Quit. Amazing.

ohno

4 years ago

Reply to Tony Bennett

It’s that way at all mfg jobs now. I know one that gives 7 attendance points per year where I was a supervisor a year ago. We had people with 20 attendance points trying to keep them on. 100% turnover rate. Constant fights over stupid crap. Problem is the employers are evaluating themselves and its the people. I went into QC so I didn’t have to deal with all that crap it was insane.

Tony Bennett

4 years ago

Blood in the streets today re bond market. Inversions intensifying. 3yr and 10yr inverted.

Average 30yr mortgage +20 bps today. Ugly. Spring selling season will be a bust (at least on volume).

Mortgage Rates and Market Data (mortgagenewsdaily.com)

Christoball

4 years ago

Reply to Tony Bennett

There is now a gradual return to normal levels of foreclosure activity after two
years of artificially low numbers due to government and industry efforts
to protect financially-impacted homeowners from defaulting. Just as supply may get more available, borrowing will get more expensive. Prices will not hold.

Casual_Observer2020

4 years ago

FWIW, any huge drop in economic activity usually means the mass layoff number goes up. I remember the late 90s when companies literally flipped from hiring anyone with a pulse until equities tipped over in the spring of 2000. By summer companies started mass layoffs and this did not stop for about 2 years as many companies lost 70% of their value or more.

Tony Bennett

4 years ago

Reply to Casual_Observer2020

Yes. Business protects margins at all costs. Even small firms play close attention to the digits right of the decimal on P&L statement.

Furthermore, when covid hit 2 years ago over 20 million lost jobs. Yes, most have been hired back, but no loyalty built. Recent hires will be tossed aside like yesterday’s newspaper.

Lisa_Hooker

4 years ago

Reply to Tony Bennett

And today’s recent hires won’t show up for work tomorrow like yesterday’s alcoholic doper.

TexasTim65

4 years ago

Reply to Casual_Observer2020

Don’t forget there was a Y2K fear that caused thousands, if not 10s of thousands of people to be hired to review old code looking for and fixing date problems. All of which turned out to be a big nothing burger.

I still recall plenty of friends getting hired to review old code even though they weren’t even coders themselves (they were self taught or took a couple of elective courses in college). Jan 2nd, 2000 they got let go in droves.

Casual_Observer2020

4 years ago

The job openings number is a big red herring for more corporate jobs. Companies aren’t hiring anyone that’s unemployed for these jobs because the people they want are already employed. So then when employee A jumps from company X to company Y, then the number of openings stays the same. When the company that lost employee A tries to go hire someone else, they have to poach from elsewhere or just distribute the work amongst other staff. I predict there will be a nosedive in job openings as rates go up and the economy slows. Most of the openings listed are also just for legal purposes and not actual openings. The company already has someone in mind and has to jump through hoops or is hiring someone on a work visa.

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Might We See a Minimal Job Loss Recession? Why Not?

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