One of the most closely watched economic data points is the state of the job market here in America. It’s one of the most personal ways we measure how well we think the economy is performing. When a friend or family member losses their job or gets a new job, it’s very tangible and can impact those around them. As the old saying goes, “a recession is when your neighbor loses his job, but a depression is when you lose your own.”

That is why the headlines from the past few months about hiring freezes and layoffs from various technology companies have been so alarming. How can these household names; names that we use every day be in trouble? In the past month, we heard about job cuts at Meta (META), Amazon (AMZN), Twitter, and Salesforce (CRM) to name a few. That is on top of the cuts at smaller technology startups and in the cryptocurrency sector. In November alone, over 200 different tech companies cut about 34,000 jobs*. The biggest losses since the second quarter of 2020.

This is in sharp contrast to national statistics from the government’s Bureau of Labor, which still shows that the national job market remains surprisingly strong. We continue to add about a couple hundred thousand jobs to the economy each month, so our unemployment rate (a slightly different statistic) remains at a shockingly low rate of 3.7%, extremely low by historical standards.

The layoffs at the big tech companies tend to be more attention-grabbing because they are coming from so many popular names, but they don’t actually represent a huge part of the American job market. For example, technology stocks are a huge part of the stock market; that single sector accounts for over 26% of the S&P 500. But the technology sector accounts for less than 3% of total US employment**. The American labor market consists of many other types of jobs that aren’t captured in the S&P 500. Manufacturing and hospitality jobs account for a large swath of the job market but don’t make up much of the stock market.

It is now clear that 2021 was an exceptional year for stock markets, the economy, and thus the job market. 2022 is a different year so naturally, the job market will reflect that. So far, the job market remains quite strong. So far.

Benjamin Lau, CFA
Chief Investment Officer & Principal

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