MOLINE, Ill. — Last week, the U.S. Department of Labor reported that the number of people receiving unemployment insurance for at least one week increased by 62,000 to an 11-month high of 1.67 million.
That increase was the largest jump in continuing unemployment claims dating back to November 2021.
This week, Quad Cities Investment Group partner Mark Grywacheski joined News 8's Ann Sterling on Good Morning Quad Cities to break down the numbers and see what the labor market's biggest challenges will be in 2023.
Watch more 'Your Money with Mark' segments during the 6 a.m. hour on Good Morning Quad Cities or on News 8's YouTube channel.
Sterling: Over the past few weeks, we’ve seen a number of different reports being released by the Department of Labor. When you look at all the information, in your opinion, how would you describe the current state of the labor market?
Grywacheski: Overall, the labor market is still fairly strong but it is starting to show some signs of softening. For the past nine months, the unemployment rate has held firm at around 3.5-3.7%. Each month the economy continues to add a steady pace of new jobs. We still have over 10 million unfilled job openings which means employers still have a strong demand for workers.
But that said, we are starting to see some cracks beginning to form. More and more employers have been announcing either layoffs or hiring freezes. The number of new jobs being added each month has been steadily declining. Since January, the number of job openings has declined by almost a million.
Sterling: What do you think are the biggest challenges for the labor market as we get into 2023?
Grywacheski: I think it’s this growing concern of a recession in 2023. Even though inflation has come down slightly, it’s still near a 40-year high. To help get this inflation under control, the Federal Reserve has been aggressively raising interest rates. The problem, however, is this current environment of high inflation and high interest rates is a very potent combination that acts as a tremendous strain on the US economy.
And that’s why in a recent survey 95% of CEOs project some type of recession within the next 12 months. As CEOs brace for this expected recession, many are already starting to take steps to control their costs. And part of those costs they’re starting to reduce is labor costs.
Sterling: With the unemployment rate currently at 3.7%, where do you see it potentially rising to next year?
Grywacheski: I’ve had a number of conversations with some former trading colleagues of mine on Wall Street and the general consensus is for the unemployment rate to rise from 3.7% to 4.5-5% by the end of next year. But this is heavily dependent on the extent of any recession we get.
The forecasts we’re hearing range from “short and mild” to “long-lasting and very severe”. I think Wall Street will be continually revising their forecasts for the unemployment rate based on how they see this recession playing out. If it’s short and mild, you might see an unemployment rate around 4-4.5%.
But if it’s long and severe, some Wall Street traders I spoke to think the unemployment rate could spike to 6% or even higher by the end of next year.
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