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After the Department of Commerce announced that the US economy contracted
during the first quarter of 2022 at an annual rate of 1.4%, fears of a recession and uncertainty have begun to emerge about what can happen to the jobs of millions of Americans.
The data arise when inflation is affecting households at as gas and food prices rise, borrowing costs soar and the world economy is rocked by Russia’s invasion of Ukraine.
For a recession to occur, it is necessary to record contractions for several consecutive quarters, so, despite Based on these latest data, some experts expect the economy to accelerate its growth in the quarter from April to June.
A sign to be optimistic is that the US labor market, considered the most important pillar of the economy, continues being strong: the number of Americans who have applied for unemployment benefits registered the lowest amount since February 800, according to the latest weekly report from the Department of Labor.
Companies have also continued hiring, adding a record 6.7 million jobs last year and an average of 560,000 more jobs each month so far from 2023.
Furthermore, in the quarter, from January to March, businesses and consumers increased their spending
at an annual rate of 3.7% after adjusting for inflation.
However, Deutsche Bank has been less optimistic in its forecasts and assures that there will be a “great recession” . In a report released Thursday, he said it could happen between the end of 2023 and the beginning of 2024.
For its part, Goldman Sachs calculated the probabilities of a recession in the next two years in a 35%, while Morgan Stanley’s chief investment officer wrote last month that her team was “far from calling a US recession
This is what could happen to jobs in the midst of a recession, according to experts.
Massive layoffs due to reduction of demand
At the beginning of a recession, which usually starts when companies face the decrease in demand, profits and increase in debt, many begin to lay off workers to reduce costs.
As co Consequently, as the number of unemployed workers increases, demand and production decline further and newly unemployed workers find it more difficult to find new jobs.
For this reason, the increase in unemployment is one of several indicators that define a recession and is usually extend for several months after the end of the recession is declared.
For example, during the short two-month recession caused by the pandemic in early 2020, the unemployment rate peaked at 14.7% in April 2020, the month in which the recession ended.
Unemployed take more likely to find a new job
People who lose their jobs during recessions are more likely to become long-term unemployed and find it more difficult to re-enter the labor market later.
Among the workers displaced during the Great Recession, only among the 35% and the 40% were employed full-time in January 2010.
The rates of people who found a new job remained unusually low for workers who lost their jobs until 2013.
Another survey found that men lose an average of 1.4 years of income if they are laid off with an unemployment rate below 6%, but twice as much if the unemployment rate is above 8%.
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