Do layoffs change things?

Posted by: Paul Donovan

09 Feb 2023 2 min read
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Daily update

  • Another company—Disney this time—has announced headcount reductions. We get US initial jobless claims data today, and the macroeconomic data does not match the high profile press releases of job losses. A major reason is that large companies are not that important economically—smaller businesses matter most to labor markets. Smaller businesses tend to have underemployment rather than unemployment. It is quite hard to fire 10% of a three-person company.
  • The announcements of job losses may still have an economic impact. Post-pandemic labor market churn has been significant—it is one reason for elevated job vacancy data. Churn pushes up wages and pushes down productivity. If people feel less secure about the labor market, falling churn could depress labor costs even more.
  • Delayed German January consumer price inflation data was lower than expected (although the consensus range was a very wide 2.1 percentage points). This will give a downside bias to the Eurozone data.
  • Bank of England Governor Bailey testifies to the UK Parliament today—with markets sensing the peak of the UK rate cycle is near. There are several ECB speakers, but the ECB is assumed to be hiking on autopilot in the absence of firm leadership.

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