Was That Killer Jobs Report A Head Fake?

Key Takeaways:

• You’ve seen the numbers. We just had a seemingly outstanding jobs report.
• This employment picture certainly doesn’t indicate a recession. 
• So what to make of recent layoffs, particularly in technology, and the rise in part-time work. 

Biden acted like he wasn’t surprised. But you know he was. Nobody expected Friday’s jobs report to come in double what economists anticipated. 

• 528,000 jobs added in July. The most since February. 
• Unemployment ticked down to 3.5%. The lowest in nearly 50 years. 

Of course, a strong labor market likely means persistent inflation. If people are working – and have cash to spend – don’t expect prices to come down in any meaningful way. If the present trend continues, The Fed will likely raise interest rates again – maybe by another 0.75 percentage point – in September. 

Bottom line before the final bottom line: This job market makes recession fears seem unwarranted. Those two straight quarters of GDP contraction – mere blips on the radar screen of life. 

However, a look beyond the headlines raises at least a shadow of a doubt.

Maybe There’s More To The Story

Maybe we’re on the backend of good news on the unemployment front. And on the very front end of not so good news. 

Consider the following data, starting with recent layoffs in tech and beyond:

• Stubhub lays off “a majority” of its employees in San Francisco and Shanghai as it closes offices there. 
• OnDeck lays off 73 employees, three months after firing a fourth of its staff. 
• BeyondMeat (BYND) fires 40 workers. 
• Robinhood (HOOD) lets go of 30% of its workforce, or 1,013 people. 
• Metromile cans 60 people, or 20% of its staff. 
• EV maker Rivian fires 840, the equivalent of 8% of its headcount. 
• Oracle (ORCL) downsizes by an unknown number of people, but reports indicate it’s a meaningful number. 
• Walmart (WMT) laid off about 200 corporate employees. 
• Ford (F) will cut roughly 8,000 jobs. 

And that’s just a sampling of what we’ve seen over the last few months, in and out of tech. 

You can write some of this off to companies that enjoyed too much success too soon, however you certainly can’t say this about Oracle, Walmart, and Ford. 

Are These Layoffs A Sign Of More To Come? 

The answer to this question – also confusing. 

Focusing on tech, in June, just 9% of workers in the sector said they feel secure in their jobs. That’s down from 80% who expressed confidence in March. Attribute that drop in sentiment to the 32,000+ who have lost technology jobs so far in 2022. 

At the same time, there are way more job openings than applicants. Some companies – across sectors and at nearly all levels – are finding it hard to fill positions. 

However, maybe this is shifting too. At least in tech. 

Data from Indeed.com shows a steady decline in the number of tech job listings. 

Then there’s the data on part-time work. 

In July, the full-time workforce shed 71,000 people, while the number of part-time employees increased by 384,000. Of that 384,000, about 303,000 were working part-time because of “economic reasons,” such as poor business conditions leading to reduced hours. 

In July, there were 3.9 million of these “involuntary” part-time workers. That’s higher than June of this year, but below the 4.4 million it was just before the pandemic struck in early 2020. 

The Bottom Line: While we haven’t seen what we can call broad or massive layoffs yet, the news from Walmart, Oracle, and Ford – alongside the part-time employment data – should, at the very least, give us pause amid Friday’s jobs report hysteria. 

From an investing perspective, dig this: 

Ford performed well on its layoff announcement. Walmart and Oracle stayed just about even. 

While you can’t predict which company will drop the ax next, generally speaking investors often respond well to workforce trimming. 

Companies usually make these moves for one of two reasons: To trim fat to beef up the bottom line or to free up cash to invest in growth. Ford’s move involves a little bit of both, particularly the latter, as it plans to invest in electric vehicles. 

This sounds good to Wall Street. So if we see more sizable layoffs at big firms, it might actually have a positive impact on stocks.