Labor Market Flashes ‘Reliable’ Recession Warning

U.S. employees are working fewer hours, which is a reliable predictor of mass layoffs, as companies brace for an economic downturn, according to The Wall Street Journal on Sunday.

Private-sector laborers worked just 34.3 hours in May, down from the 35 hours per week peak set in January 2021 and below pre-pandemic averages set in 2019, the WSJ reported. Historically, widespread cuts to working hours have preceded waves of layoffs, which are in turn often followed by recession.

“In the past, reducing working hours has been a reliable harbinger of a wave of layoffs,” Aichi Amemiya, senior U.S. economist at Nomura Securities, told the WSJ.

Some economic indicators — including gross domestic income, gross domestic product and unemployment — are showing signs that the economy is slowing or in outright recession, the WSJ reported. Despite this, employers have been hiring aggressively, adding an unexpectedly high 339,000 workers in May, for a total of 1.6 million year-over-year.

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Mark Patterson, sales manager for truck engine manufacturer American Fleet, told the WSJ that the company is cutting hours instead of jobs because of difficulties finding qualified workers. While the pandemic-era boom in manufacturing has slowed, Patterson is hopeful that the firm will be able to weather the current economic headwinds with its current headcount.

“There’s such a shortage of labor we’ll do everything we can to keep everybody because you’re afraid you won’t get them back,” Pattereson told the outlet. “The labor situation is the hardest we’ve ever faced, and we’ve been in business 35 years.”