The April jobs report blew past economists’ expectations, adding 253,000 jobs, while unemployment declined to 3.4%, according to the United States Bureau of Labor Statistics. Despite the Federal Reserve Bank’s program to downplay job creation, in an effort to whip inflation, the labor market is still strong and resilient. The jobs report offered some good news for workers in the face of high interest rates, a potential banking crisis, concerns over a possible recession, and uncertain geopolitical events.
In past recessionary environments, blue-collar and frontline workers were the first ones to lose their jobs. Currently, the U.S. is seeing a white-collar reckoning for office workers. The jobs report shows solid gains in the restaurant, hotel, leisure, food services and other in-person service industry sectors. Meanwhile, there has been a steady flow of layoff announcements of college-educated, white-collar workers at companies ranging from tech to Wall Street to media, including Meta, Google and Walt Disney.
Although there is a glimmer of good news, the U.S. will likely see a challenging job market for white-collar professionals for the next four to six months.
What the Job Market Will Look Like Over The Next Few Months
The summer months are one of the slowest times of year for hiring, as many people are out of the office on family vacations or long weekends at the beach. Juggling schedules for interviews becomes problematic, as it’s nearly impossible to get the three to 10 people who need to interview a candidate to coordinate scheduling. The stop-and-start nature of the interview process becomes so cumbersome that both companies and applicants defer to September to re-engage in the job search and hiring.
Although costs are high due to inflation, people are still spending money, even if it means relying on credit cards. After enduring a yearlong pandemic, people are engaging in revenge travel and entertainment, dining out and attending concerts and sporting events. This is good news for frontline and blue-collar workers.
Who Will Benefit
White-collar workers are another story. Given the drama in the banking sector, there won’t be much hiring. The banks have been exposed to questionable balance sheets. Leadership will focus on cutting costs and remain disinterested in adding new headcount. There may be exceptions, such as hiring auditors, risk managers and financial control personnel to dig into the organization’s financial status.
What You Should Do
If you have a job, hold onto it tightly, as you won’t want to be in between roles during an economic or hiring slowdown. Even if you are not in banking, the fear spreads throughout other sectors.
For example, the commercial real estate market remains vulnerable, as hybrid and remote work leave office buildings vacant. The loss of tenants impacts their revenue. As banks lend to these commercial real estate operators, it places a larger threat on the financial institutions. Banks will be highly cautious in their lending practices, which will stifle the growth of startups and large companies that require financing.
What You Should Know About The Banking Problems
The rapid flow of customers’ funds out of First Republic Bank and deteriorating confidence in the high-net-worth money management firm led to regulators brokering a deal to have JPMorgan take over its assets. After the closures of Silicon Valley Bank and Signature Bank, First Republic became the second-largest bank failure in U.S. history after Washington Mutual, which imploded during the financial crisis and needed to be rescued. San Francisco-based PacWest Bancorp saw its stock price crater, and is considering looking for a potential buyer or partner, Bloomberg reported Wednesday. A recent study of the banking system disturbingly concluded that nearly 190 banks—with $300 billion in assets—are at risk of failure.
Banks need to be hypercautious about their lending activities amid this hostile environment. The more rigid lending standards or avoidance of new business loans could cause problems for companies and average Americans. The more restrictive mindset will lead to cost-savings layoffs, and potential job seekers will be more hesitant to search for new jobs, according to the Wall Street Journal.
Why This Is Happening
After the financial crisis, the Fed kept inflation and interest rates low for over 10 years. Many banks purchased long-duration government and mortgage bonds, yielding low coupon rates. The income from the bonds—while low—was deemed safe, as banks paid under 1% in interest on customer bank accounts.
Once the Fed started hiking interest rates, money market funds, Treasury bills and CDs began offering 4% rates. People scrambled to switch from low-interest accounts to these relatively safe, better-paying alternatives. A long-term bond with a 1.5% interest is not attractive compared to what could be purchased at higher rates. The change in circumstances created a situation in which banks, which thought they were being smart and prudent, are now sitting on paper losses of billions of dollars, making them look like they’re insolvent.
Strong Competition
The acquisitions of Credit Suisse by UBS and First Republic Bank by JPMorgan, along with the implosions of Silicon Valley Bank and Signature Bank, and fears of further layoffs in the banking, tech, media and other sectors will result in an overhang of people looking for a new job. Job seekers will face intense competition from both the people who were laid off and workers who are considering switching jobs.
It’s reasonable to conclude that banks will be cautious about hiring due to the uncertainty. Hiring pauses will be enacted, and employees will be closely evaluated to determine if they should stay or be deemed low performers and nudged to leave.
When too many people are looking for a new job during one of the slowest times of year, it will discourage people from continuing their job searches. The path of least resistance for many will be to enjoy late spring and summer, then reignite the search in September. September is seen as the adult version of going back to school, except it’s back to the work grind. Once the summer fades away, people reconcile to the fact that they need to return to reality and seek new opportunities.
Source: Forbes
