A puzzle in America: the demand for employment is increasing despite slowing growth and high inflation

Jim Fay is looking to hire 15 new drivers.

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This year, the United States is facing an economic puzzle, which is how to expand job opportunities and increase the demand for employment, despite the slowdown in economic growth and high inflation, and the exacerbation of fears of an imminent economic recession.

During the first half of 2022, GDP fell into negative territory, and the cost of borrowing rose sharply, due to the Federal Reserve's decisions to increase interest rates.

However, from January to August, monthly salaries grew to about $438,000 annually, nearly three times the pace before the start of the COVID-19 pandemic in 2019.

The Wall Street Journal quoted many employers as saying that they are still suffering from a significant shortage of employees, noting their reluctance to take decisions to reduce the number of employees, and in many cases, they are currently hiring.

"Our view is that companies prefer to keep their employees rather than fire them quickly, and then re-hire at a later time, because the recruitment challenges at the moment are very severe," said James Knightley, chief economist at ING International.

In Eau Claire, Wisconsin, USA, Jim Fay buys five to eight new buses each year to serve private schools, although he does not plan to buy any new buses during 2023, because high inflation also increased interest rates, and thus increased the purchase price The new buses, however, are looking to hire 15 new drivers for its 185 staff.

He indicated that he and some of his office employees are obliged to drive some buses on the roads sometimes due to the shortage of drivers.

Some economists argue that the difficulties caused by the labor shortage over the past year, including huge expenditures on recruitment and hiring, and high employee turnover, may make companies more reluctant to lay off workers, if the economy falls into a mild recession.

They stressed that companies did not fully meet the employment needs during the recovery period, but they are likely to withdraw job opportunities, which reached historical levels, before resorting to eliminating jobs, noting that there are more job opportunities today than in the past two decades, when Similar levels of unemployment.

Although some large companies, including Goldman Sachs, Snap Inc, and Wayfair, have recently indicated they are laying off employees, more companies have revealed that labor shortages are hampering their sales and production departments. .

Domino's Pizza said its store sales fell in the second quarter of the previous year, due to a shortage of employees, which led to a reduction in operating hours for some of its branches.

Job opportunities still far outnumber the number of job seekers, but the pace of employment is likely to decline, according to Federal Reserve Chairman Jerome Powell, who said, “The Fed’s moves to slow the economy will inevitably mean a decline in the labor market,” expecting the unemployment rate to rise from 3.7% in August to 4.4% in the fourth quarter of next year.

Amy Cruz Katz, chief economist at AC Cutts & Co., said she expects a sharp rise in the unemployment rate to more than 5% by the end of next year, stressing that large increases in interest rates will hurt demand and employment.

"Over the past seven decades, salaries have fallen within two quarters of the onset of the recession," she added.

Historically, between the years (1973-1975) the recession was a notable exception.

At the time, inflation was rising rapidly amid the oil price shock, prompting the Federal Reserve to raise interest rates.

The recession began in November 1973, with production falling, but employment continued to grow, then stabilized for about a year, and then the labor market eventually collapsed, with salaries dropping about 2.5 percent between October 1974 and the spring of 1975.

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