After months of searching, I finally got a new job last month. But, as President Biden gave his State of the Union address on February 7, it became apparent that I was one of thousands to have had a career shift. The new year of 2023 came with a spirit of opportunity for thousands of Americans, as job reports showed 517,000 new jobs created in the market as of January. Unemployment is at a record low of 3.4 percent (CNBC). Biden also mentioned in his speech the growth of new business applications — approximately 10 million new business applications between 2021 and 2022. If everything is going so well, then are there even any issues in the job market? What was that whole fiasco about tech company layoffs? Aren’t we heading into a recession?
Early in 2023, you may have come across news about the white collar layoffs: this largely means layoffs in the tech industry. Companies like Google, Goldman Sachs, Washington Post, Meta, and many more have been cutting down on employees. Coming across a headline like this is an obvious cause for concern because one increasingly questions the possibility of the economy heading into a recession. This is particularly concerning for the Bay Area, as we are home to many big-name corporations that were said to be laying off workers. So, what is the job situation in the Bay Area?
Bay Area unemployment rates are still remarkably low. Economists evaluated the layoffs situation and eventually stated that the fear and news of layoffs has been overblown. The number of people employed post-pandemic still stands way above the pre- pandemic number. In the larger scheme of the job market, people are employed and new jobs continue to be created. However, the fear of a recession crosses many minds due to a variety of other economic worries.
One of these worries is inflation, which is far harder to combat while the job market stays strong. With low unemployment rates come higher consumer spending. People earn money and spend money. So, despite The Fed raising interest rates to lower economic activity and investment rates, relatively high consumer spending sustains inflation. However, higher interest rates have a direct impact on businesses. Inability to break even due to increased costs of operations and lack of adaptability can cause businesses to shut down. More importantly, high interest rates make it hard to take out a loan, which can toughen circumstances for many businesses.
Knowing this, I was puzzled as to how it’s possible for there to be 10 million new business applications simultaneously with high interest rates. Also, how is there such a high rate of employment if times are tough for businesses? My educated guess is that we are in a lag period. A time period in between an incident and its impact. The strong consumer spending is keeping businesses afloat. It is also true that while inflation makes things harder for businesses, it is not to the extent of business shut-downs. Also, the concern of interest rate does not impact pre-existing, well established businesses as much as it may the new businesses. Since we are in a lag period, we must wait and see how many out of those 10 million new business applications actually persist through and how interest rates might impact the unemployment rate.