Despite Big Tech Layoffs... Hot US Labor Market

[Asia Economy New York=Special Correspondent Joselgina] Although a cold wave of employment is blowing mainly in big tech companies such as Amazon, the overheated U.S. labor market is hardly cooling down. At the end of last year, the private sector employment growth rate far exceeded expectations, further strengthening the tightening stance of the central bank, the Federal Reserve (Fed).

[Image source=Reuters Yonhap News]

According to the national employment report by private employment firm ADP on the 5th (local time), private employment in U.S. companies increased by 235,000 in December compared to the previous month, greatly surpassing the forecast of 153,000. The year-end big tech layoffs did not have a significant impact on the overall labor market and indicators. While large companies reduced employment by 151,000, small and medium-sized enterprises significantly increased jobs, offsetting the decline. The number of Americans filing for unemployment benefits also hit a 14-week low. Last week, new unemployment claims decreased by 19,000 from the previous week to 204,000, far below market expectations.

These indicators are cited as grounds for the Fed to implement additional tightening. In the overheated labor market, companies raise wages to secure personnel, potentially leading to a vicious cycle of wage-driven inflation again. Fed Chair Jerome Powell has repeatedly expressed concerns about wage growth. The wage growth rate in December was 7.3% compared to the same month last year. For workers who chose to change jobs, it reached 15.2%.

Hawkish remarks from Fed officials continue. On this day, Esther George, President of the Federal Reserve Bank of Kansas City, suggested that interest rates could remain above 5% next year. The day before, the Fed drew a line against market expectations of a pivot in the minutes of the December Federal Open Market Committee (FOMC) regular meeting.