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Biden says the economy is booming. So why are all these companies laying people off?

by

Daily Caller News Foundation

American workers have been ravaged by rounds of layoffs starting off the year as companies adjust to harsh market conditions, despite claims by the Biden administration that the job market is booming.

Numerous companies have announced layoffs since the start of the new year, with a report from outplacement firm Challenger, Gray & Christmas finding that the number of positions cut by employers in January jumped by 136% from December. President Joe Biden has pointed to strong job gains in January and a deceleration in inflation as proof that his economic policies are working for Americans, despite the increase in the number of workers being let go as employers look to cut operating expenses to adjust to rising costs from persistent inflation and high interest rates.

“Many of the layoffs we’re seeing, which are broad-based but generating a lot of headlines in the case of large tech companies, are tied to efforts to maintain profitability,” Peter Earle, an economist at the American Institute for Economic Research, told the Daily Caller News Foundation. “Inflation has pushed prices up for producers as well as consumers over the past few years, and the general price level (based upon the Consumer Price Index) is still rising at over 3% annually. Also, the Fed last hiked rates in July 2023, and those higher interest rates are starting to bite. So increases in both operating and financing costs are squeezing profit margins, leading corporate managers and executives to cut costs where they can. Unfortunately, headcounts are frequently where the process of trimming expenses begins.”

UPS announced in late January that it would be laying off 12,000 employees in an effort to cut operating costs, blaming a new union deal for the increase in labor expenses.

DocuSign is laying off 6% of its workforce, Estee Lauder is shedding 5% of employees, Snap is reducing headcounts by 10% and Zoom will cut 2% more of its workforce after cutting 15% a year ago, according to The Wall Street Journal.

Layoffs have been even more pervasive in the tech sector, particularly among tech giants, which started announcing cuts last year. Google is looking to drop its global headcount by around 6%, while Meta, Alphabet, Amazon and Microsoft have recently cut 50,000 jobs, according to Forbes.

Media companies have also resorted to cutting employees, including The Los Angeles Times, CNN, The Washington Post and Sports Illustrated. NPR, Vice Media and more have also announced layoffs, according to CNN.

Inflation has pushed up costs for consumers and producers alike, with the consumer price index rising 17.6% since Biden took office in January 2021, according to the Federal Reserve Bank of St. Louis. Most recently, inflation rose 3.4% year-over-year in December, far higher than the Federal Reserve’s 2% target.

“If we look at the jobs numbers for the past many months, growth has primarily come from government jobs and industries that are highly dependent on government (social services and healthcare),” Michael Faulkender, chief economist and senior advisor for the Center for American Prosperity, told the DCNF. “Sectors that are primarily private sector dependent have been struggling, the natural result of greater government spending and regulation.”

Job growth in January exceeded expectations, with the U.S. economy adding 353,000 nonfarm payroll jobs while the unemployment rate remained low at 3.7%. Recent job gains have been largely dominated by three sectors, with private education and health services adding 557,000 positions in the last six months while the government added 298,000 and the leisure and hospitality sector added 195,000 in that same time period, according to the Bureau of Labor Statistics.

Government spending also grew substantially in the fourth quarter of 2023, crowding out private spending and job growth, with the federal deficit increasing over $800 billion in just the quarter. The result of the huge government spending was an increase in the U.S. sovereign debt to over $34 trillion.

“We closely monitor any reports of Americans losing their jobs — President Biden knows what the impact losing a job can have on a family and an entire community,” a White House spokesperson told the DCNF. “Thanks to the strong economy under President Biden, layoffs are near record lows. In fact, they’re lower than the average during the prior administration, even before COVID.

The number of layoffs and discharges remained relatively stable in the ten years before the COVID-19 pandemic, staying in a range of 1.6 million to 2 million, spiking to around 13 million in March 2020, according to the Federal Reserve Bank of St. Louis. Following mass layoffs due to pandemic slowdowns, layoffs and discharges receded to an all-time low in June 2021 of around 1.3 million and have since begun to climb as the labor market adjusts to current market conditions, rising to over 1.6 million in December.

The Federal Reserve, in an attempt to bring down sky-high inflation, has set the federal funds rate to a range of 5.25% and 5.50%, the highest level in 22 years, raising the costs of credit and leaving many companies with a lack of capital to continue current operations. The Fed has projected that rates will be lowered to 4.6% by the end of 2024, possibly providing relief to businesses and consumers.

“The fact that so many firms in different sectors are presently laying off employees is a clear sign that the massive expansion of the money supply early in 2020 misled entrepreneurs and business executives, leading them to expand their businesses and lengthen their structures of production needlessly,” Earle told the DCNF. “Monetary hijinks are the driver of boom-bust cycles, and thus Federal Reserve policies are to blame for clusters of entrepreneurial error and the subsequent economic whipsaws.”

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Republished with permission from Daily Caller News Foundation

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