- Record layoffs suggest Americans are confident of finding better jobs.
- The unusual labor market development could give way to several encouraging developments for the US economy.
- Here are four reasons the surge in layoffs could benefit the US, from higher wages to a productivity revolution.
- Check out Insider’s business page for more stories.
On the surface, the job market didn’t make a lot of sense.
Take April, for example: Ten million Americans were unemployed even though almost as many jobs were open (9.3 million, a record high). In the same month, hiring slowed to a minimum and 4 million more people quit their jobs (another record high). This sum could be even larger; According to a Microsoft report, around 40% of employees have considered quitting survey.
For the first time in decades, labor is scarce, not jobs. And companies’ efforts to attract new employees could bring improvements long overdue for the average worker.
Here are the four reasons a wave of layoffs can pay off for working Americans.
1. More power for workers
During record-breaking layoffs like a
Data from the
Bank of New York Consumer Expectations Survey underpin this narrative. Americans’ job search expectations rose in May to their highest level since February 2020, just before the COVID-19 lockdowns began. Likewise, expectations of wage growth rose.
Taken together, the data and the rise in layoffs suggest workers are harnessing new power in the economy. Given the high demand for labor, companies are offering perks such as signing bonuses and better benefits to expedite their hiring efforts.
2. Higher wages
The clearest sign of increased workers’ power is nationwide wage growth. The salary has increased by in the past two months the fastest rate since the 1980s as companies competing for labor raise entry wages. Big employers like Amazon, McDonald’s, Chipotle and Under Armor have all announced wage increases in recent weeks.
A raise can quickly benefit the entire economy, especially as wages rise among low-income Americans who are most likely to spend new money instead of parking it in a bank. Studies of how stimulus checks were issued support the claim.
3. A productivity revolution
The wave of layoffs has also opened the door to stronger productivity growth. Many companies that survived the pandemic were forced to reduce their operations to the bare minimum. Waiters have been replaced with QR codes, hotel check-ins have been completed using online apps, and property tours have become virtual.
The country has since withdrawn many of its COVID-19 restrictions. However, a sharp surge in worker productivity suggests some of the changes of the pandemic era will persist. Companies pay their employees more, and employees use new technology to do more. productivity boomed 5.4% fastest rate in over 20 years in the first quarter.
Firms that do more with fewer workers and higher productivity can trigger what business writer Noah Smith believes is a “virtuous cycle” for the broader economy. Technological advances and new innovations can further increase productivity, giving workers better arguments for higher wages, Smith wrote in a 13th edition. blog entry.
4. Smarter job creation
Americans have long feared that automation would permanently remove jobs from the US economy. But earlier periods of widespread innovation prove otherwise, wrote Smith. The industrial revolution has pushed countless Britons out of antiquated professions and into higher-paying jobs. The Internet has increased productivity in practically all areas of the economy, but has also paved the way for entirely new industries.
The nationwide drive for higher wages and productivity should be viewed as an encouraging development, not a doom and gloom, Smith wrote.
“Believing in technological progress means believing in human potential,” he said. “Do we really believe that QR code ordering in restaurants will be the innovation that will make people redundant for good?”