Economic news

US economy sees robust increase in jobs

Jobs growth in the US remained strong last month even as the economy wrestled with the impact of fast-rising prices.

Employers added 223,000 positions in December, pushing the jobless rate down to 3.5%, from 3.6% in November.

The resilience of the labour market has raised hopes that the world’s largest economy will avoid a severe economic downturn this year.

The US central bank is raising borrowing costs to try to cool the economy and ease the price pressures.

As firms struggle with the impact of higher interest rates and the possibility of lower consumer spending, recent news of big job cuts at banks and tech companies, such as Amazon, has drawn attention.

But the monthly report from the US Labor Department showed nearly every sector in the economy adding jobs, with bars and restaurants, health care firms and construction businesses helping to drive the gains.

Though job losses are rising – especially in the tech sector – the figures overall remained near historic lows last year, said Andrew Challenger, senior vice president at Challenger, Gray & Christmas, which has been tracking such announcements since the 1990s.

“The overall economy is still creating jobs, though employers appear to be actively planning for a downturn,” he said.

Job cuts and falling shares: how did it all go so wrong for the US tech sector?

Amazon expanded planned job cuts this week from 10,000 to 18,000 as its chief executive admitted “we’ve hired rapidly over the last several years”. Andrew Jassy added that an “uncertain economy” was a key factor, as pandemic-related corporate growth meets a US and global economic slowdown.

In March 2020, Amazon’s global workforce was 628,000 but it surged to 1.5 million as consumer habits became even more online-oriented during the pandemic. The latest wave of cuts will be centred on its stores division – which covers online retail, warehousing and its physical outlets – and human resources.

Also this week, the business software firm Salesforce said it was laying off about 8,000 employees, or 10% of its workforce. Marc Benioff, its chief executive, said the company had overexpanded.

“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” Benioff wrote to employees.

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The UK recession will be almost as deep as that of Russia, economists predict

LONDON — The U.K. economic contraction of 2023 will be almost as deep as that of Russia, economists expect, as a sharp fall in household living standards weighs on activity.

In its 2023 macro outlook, Goldman Sachs forecast a 1.2% contraction in U.K. real GDP over the course of this year, well below all other G-10 (Group of Ten) major economies. This is set to be followed by a 0.9% expansion in 2024, the lender anticipates.

The figure places Britain only fractionally ahead of Russia, which the bank projects will see a 1.3% contraction in 2023 as it continues to wage war in Ukraine and weather punitive economic sanctions from Western powers. This will be followed by a 1.8% expansion in 2024, Goldman figures suggest.

The Wall Street giant forecasts U.S. expansions of 1% in 2023 and 1.6% in 2024. Germany — the next worst performer among major economies after Russia and the U.K. — is expected to see a 0.6% contraction this year, then expand by 1.4% next year.

Goldman’s projections for the U.K. are below what it cites as a market consensus that sketches a 0.5% contraction in 2023 and a 1.1% expansion in 2024. However, the Organization for Economic Cooperation and Development has also forecast that the U.K. will lag significantly behind other developed nations in the coming years despite facing the same macroeconomic headwinds, putting London closer in performance to Russia than to the rest of the G-7.

The euro area and the U.K. are both already in recession, Goldman Chief Economist Jan Hatzius and his team concluded, since both have endured a “much bigger and more drawn-out increase in household energy bills” that will drive inflation to higher peaks than seen elsewhere.