The Next Job-Market Challenge: American workers have given up their intention to quit. Last month, Wall Street’s financial results came amid warnings from some companies that workers are not performing as well as employers expect. The US economy has so far weathered inflation without massive layoffs, but the seemingly healthy job numbers from One Great Resignation can be hard to read.
Just a year ago, the financial services industry was one of many industries facing a labour crisis. The number of job vacancies in the industry is set to reach a record 499,000 in June 2022, according to the Bureau of Labor Statistics, as strong demand for workers from companies grapples with nationwide labour shortages. Since then the recruitment process has cooled down. The sector added 6,300 jobs last month, which is almost half of the gain seen in July 2022.
Also, read Friendship Day 2023: All You Need to Know
But a big input into companies’ hiring plans is “attrition” — the number of workers who leave a job. Veteran lender Wells Fargo (WFC.N) said on July 14 that the company’s sales were “slower than expected” in the second quarter. State Street (STT.N) gave the same message — which was also shared by other companies, executives have told Breakingviews. This creates the problem of high manpower costs, at least for a while.
Companies generally do not expect their employees to walk. But when interest rates are rising and employees are demanding higher wages, quitting a job seems like a painless way to reduce the wage bill. It’s not that simple anymore, as the so-called attrition rate – the percentage of the workforce leaving their employer – is back to pre-pandemic lows.
One response is that companies are hiring less, and the ratio of job vacancies to existing employees in the financial sector has fallen to its lowest level since September. If that doesn’t work, layoffs happen. Their rate is getting higher. However, companies have the incentive to postpone the moment of the axe, for fear of appearing more troubled than their rivals. Last year’s Wall Street collapse showed that once one company moves on, others quickly follow.
The reassuringly low unemployment of the last 12 months, then, needs to be looked at carefully. This could be a sign that rising rates have not hurt the economy. But it can also indicate that employees tend to stick around until the push comes. The great resignation of recent years was an example of how people can behave in surprising ways, temporarily distorting economic predictions. This season’s corporate earnings may reveal whether another surprise is in store.
The Next Job-Market Challenge: reference news
The Bureau of Labor Statistics said on August 1 that the percentage of workers in the United States who left their employer fell to 2.4% in July from 2.6% the previous month. The so-called job attrition rate in the finance and insurance sector fell to 2.4%. 1.1%, well below the peak of 2.4% in April 2022.
Wells Fargo flagged “slower than expected” job hiring as a driver of higher severance costs during the bank’s July 14 earnings call. State Street cited similar pressure from fewer job losses during its own analyst call the same day. Citigroup also cited severance expenses as the reason for the 9% year-over-year increase in operating costs on July 14.
The Bureau of Labor Statistics said on August 4 that the US economy added 187,000 non-farm payrolls in July. The unemployment rate fell from 3.6% to 3.5%.