Payden & Rygel: US job cuts / the unemployment rate
Amid a dearth of government data, investors are turning to alternative sources to gauge the health of the labor market. ADP reported that the U.S. economy gained only 42,000 jobs in October after a 29,000 contraction in September.
Job-cut announcement data from the global outplacement and executive coaching firm Challenger, Gray & Christmas, was of particular interest to us, as Fed Chair Powell claimed we are still in a low-hire, low-fire environment. But, are we?
The Challenger report showed the total layoffs in the 12 months ending in October increased by 60% year-over-year. Historically, a rise in layoffs often precedes an increase in the unemployment rate. Challenger layoffs don't always translate to big increases in the unemployment rate, as 2022 saw a spike in tech-sector layoffs coupled with only a modest rise in the unemployment rate. And non-survey-based data, such as state-level initial jobless claims data, suggested that layoff activity remains subdued in October. But at the very lest, in our view, the risk of higher unemployment is rising.