US Economy Unemployment Illustration for US Job Openings Article. Image by Gerd Altmann from Pixabay

Another Negative Economical Record: 2022 US Job Openings

The US job openings, a key indicator of economical activity, had its 2nd-largest drop ever

Before showing the numbers (if you want to see them directly, jump to the last subtitle, but you will lose a lot of information), it’s important to understand how we got here and why this economic catastrophe is starting to happen.

In early 2021, journalists and economists argued that we were experiencing the great resignation. While the superlative is exaggerated, multiple countries in the world had a wave of young professionals resigning.

The great resignation happened because businesses had to close or reduce staff during the lockdowns and then hire them back when the economy reopened.

Since many of these people opened their own businesses, found other sources of income, or lived off their stimulus, companies had to raise salaries during the reopening phase.

These higher salaries caused a wave of resignations inside companies that never laid off workers during covid, but kept them with the same salaries. These people quit for higher-paying jobs announced by companies that needed to rebuild their teams.

Due to low-interest rates, companies could afford higher salaries (until the beginning of 2022, the US FED interest rate was only 0.15 percent per year).

But then…

The Inflation Dragon was Awakened (I’m not referring to China here)

Inflation Dragon
Image Source: Senhor Mercado

During Brazil’s high (and then hyper) inflation years, economists used a Dragon to illustrate the problem. The explanation was simple: just like a raging dragon burns entire villages in mythology, inflation burns our purchasing power.

The great resignation, together with people resigning from stable jobs to look for higher salaries, was one of the many ingredients that triggered the current inflationary wave. I am not saying here that it is wrong to change jobs looking for higher salaries, but that if this happens suddenly and massively due to artificial events, like the lockdown and posterior re-opening, it can be disastrous.

Is this the only cause of inflation?

NO. Absolutely not.

In fact, far from that. 

There are other factors contributing to the inflationary pressure besides the enormous wave of resignations following the reopening. Other events contributed to our current (growing) problem of skyrocketing prices to an equal or greater degree:

How Predictable Was The Inflation Problem?

For anyone that can tie the dots, it’s very predictable. Last year, I warned multiple times that we were starting the largest inflationary wave of the last 40 years. Some people criticized me and called my articles end-of-the-world porn.

At least one of them returned and, well, recognized that my 2021 predictions for 2022 were correct.

Commentary I received in an article about Inflation saying that I was right.
Commentary I received in 2022 about this article from 2021

But there is one of my predictions that is going out of course. Or at least, at the wrong pace.

And this happened because the main tool of the central banks to fight inflation is fiscal tightening (or, in other words, increasing interest rates).

The Big Layoff Is Starting… and It Is Earlier (And Faster) Than I Expected

Recently, I wrote about what you can expect for the next 12 months.

One of the most dramatic forecasts I made was that, due to fiscal tightening and stagflation, massive layoffs would start in the first quarter of 2023.

Why in 2023? Quoting the previous article:

Interest rates take some time to have an effect on the economy. And they will keep increasing throughout the entire year of 2022. Companies will not lay off before the sales spikes of Black Friday or Christmas. But when January hits, it will come as a post-cheap-wine new-year party hangover. Massive layoffs in the US, Europe, Latin America, and Asia will be accompanied by a second catastrophic consequence.

But there is a considerable chance that layoffs will already start THIS YEAR. 

And the reason for that is the number of job openings released by the US Labor Department.

All the Hows of a First-Time Business Owner: There is a thin line between bankruptcy and the freedom to be an entrepreneur: An idea for a present for yourself (or to any entrepreneur).
An idea for a present for yourself (or to any entrepreneur).

How Big was the Drop in the US Job Openings

It dropped by more than 600 thousand, to only 10.7 million open vacancies. One could argue well, there are still 10 million jobs open!, and that is true.

But it is simply not ordinary for such a large drop to happen during the month of June!

The chart below shows, in fact, that this drop is not common in any month and is the second worst in history, only behind the drop during the beginning of the COVID-19 lockdowns.

US Job Openings in June of 2022. 600 thousand drop.
Source: Bloomberg, via a tweet from Otavio Costa.

One could also say that this is just temporary. But since it is very likely that the FOMC will keep raising interest rates to fight inflation, it is likely that will see further decreases in the number of job openings and, ultimately, layoffs. Massive layoffs.

Some people would argue that this is due to the US engaging in a sanctions war against Russia and losing. Nothing further from the truth: the inflationary crisis started before the war, and it is a myth that the Russian economy is not suffering, as I explained here.

Others would say that this is a western problem, and this is another fake statement, as China is close to a collapse of its mortgage system (which could trigger an even more monstrous crisis).

So, while the events predicted in my article a few months ago are still in the course of happening, there is a considerable chance that they may happen slightly before what I expected.

Still, there is no reason for panic. Below I leave 2 pieces that may be helpful after the negative US Job Openings:

Good luck, and good reading.

Subscribe (for free) to receive my articles directly in your inbox and receive a special gift. If you enjoy this article, please consider becoming a Medium member by using this link and have access to premium, unbiased content from authors not tied to big media.

Levi Borba is the founder of expatriateconsultancy.com, creator of the channel The Expat, and best-selling author.

Leave a Comment

Your email address will not be published.