UPS to lay off 12,000 workers after failing estimates
UPS plans to cut 12,000 jobs and explore a sale of its Coyote truck brokerage business.
Bloomberg
Friday's blockbuster jobs report, highlighted by a staggering 353,000 wage gains last month, once again pointed to a nagging question: If the economy and labor market are so strong, why aren't more Americans feeling it?
To be fair, people feel better than they have in the last two years. Consumer sentiment in January According to the University of Michigan index released on Friday, it rose to its highest level since July 2021 on easing inflation and rising incomes.
But the closely watched measure is still below its pre-pandemic level and slightly below its long-term average.
Remember that the January job offer is not a drop. Job growth in November and December was revised up by a total of 126,000, meaning an average of 289,000 jobs added per month since November. Last year's average monthly increase of 255,000 is down from 399,000 in 2022, but still strong.
So what gives?
Inflation, inflation, inflation
Of course, Americans like to see good headlines about serious hiring.
But „consumers hate inflation,” says John Lear, chief economist at Morning Consult, a research firm that conducts a monthly consumer confidence survey. Although the monthly jobs may seem brief, people are feeling the effects of higher prices in their wallets.
But doesn't inflation slow down when wages rise sharply?
Yes. Wage growth has outpaced inflation since last spring, meaning workers' inflation-adjusted wages are rising after months of falling. Last month, according to the jobs report, average annual wage growth was 4.5% from 4.3%.
By some measures, total average wage increases have caught up with total price gains since the inflation run-up began in mid-2021. In other words, average Americans now have more purchasing power than they did, according to a recent Treasury Department study.
So why aren't more consumers laughing?
Shoppers look at petrol and supermarket prices every day. They don't necessarily look at or think about their paychecks, Leer says. While inflation has eased, most prices have not.
„It will take some time for (higher but stable prices) to change how Americans think about their financial situation,” Leer says.
The Federal Reserve's preferred annual inflation measure was 2.6% in December, above 7% in the summer of 2022, but above the central bank's 2% target.
Even after inflation drops to 2%, „there's a very serious risk that we'll get inflation under control,” but because prices won't come down on their own „people will still feel depressed.”
What increases consumer confidence?
A record stock market, fueled by the prospect of federal interest rate cuts this year, and relatively low gasoline prices have boosted sentiment, says Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The outlook for high-income Americans who are heavily invested in the market through stocks or mutual funds has improved significantly, Leer says.
But a large number of low-income families are still burdened with credit card debt and debt that is at a 13-year high. As incomes outpace inflation, that group's mood is also starting to improve, but it will take time for them to feel a big difference, Leer says.
Also dampening sentiment: Interest rates are still high and pandemic-related savings are falling, says Grace Schwemmer, an economic research analyst at Oxford Economics.
Central bank officials have signaled they will cut interest rates this year as inflation continues to ease. But they hinted that the cuts from this week won't happen for at least several months.
Shouldn't Americans at least feel better about the job market?
Yes, but overall job growth has cooled over the past year. There are fewer job openings, but there are still a lot of candidates job hunting, which makes finding a position more challenging.
While 353,000 jobs were added last month, the number was slightly up with seasonal adjustments. Fewer people were laid off in January as retailers hired fewer temporary holiday workers last holiday season. Although the industry actually lost jobs, retailing resulted in a seasonally adjusted gain of 45,000 jobs.
Most workers' views are influenced more by news of layoffs than job gains, Leer says.
Recently, companies such as UPS, Google, Amazon and Microsoft have announced thousands of layoffs, although the overall job cuts have been modest.
Employees, he says, are like stability.
„We're not in a stable period right now,” he says.