The economy has slowed since last year. Large companies such as Amazon AMZN, +1.53%, Dell DELL, -0.39% and Disney DIS, +0.70% have announced layoffs. And the odds of recession are rising.
Put another way, even in a time of economic duress, businesses are only cutting jobs when they have few or no other options. By and large, they are avoiding the usual prescription of mass layoffs. The scarcity of labor is another big factor. Companies have struggled mightily to hire and are reluctant to lay off workers who were hard to find in the first place.
The story might be a bit different among service-oriented businesses, particularly those that rely on less skilled labor such as retailers and restaurants. It’s generally been easier to find people to fill those jobs, and Nieves said he’s seen little indication of labor hoarding so far in those occupations.
“There is mounting evidence that businesses are actually hoarding labor,” said money-market economist Thomas Simons of Jefferies LLC in a recent note to clients. “The bottom line is that labor supply is not increasing in any meaningful way, and there is no evidence that this will change any time soon.”
Whatever the case, few economists predict the unemployment rate will rise much above 4%, let alone 5%, in the next year or two.