Anyone following stock market news recently will have heard plenty about companies announcing job cuts: 14,000 positions at Amazon, 15,000 at Horizon and 1,800 at supermarket chain Target. The Netherlands hasn’t been spared either; ABN Amro, for example, announced 5,200 redundancies.
"},"alignedImage":{"position":"bottom"}},{"componentType":"sectionTitle","title":"Trade unions fear a real wave of layoffs"},{"componentType":"paragraph","richBody":{"value":"These job cuts are pushing unemployment higher. For the first time in four years, there are more jobseekers (414,000) than vacancies (387,000) in the Netherlands. And it’s set to get worse: trade union CNV warns that we are on the brink of thousands more redundancies, a so-called ‘jobocalypse’. According to them, unemployment will soon rise sharply, as one in three companies with which they are negotiating collective agreements is preparing rounds of layoffs.
"},"alignedImage":{"position":"bottom"}},{"componentType":"sectionTitle","title":"The era of ‘labour hoarding’ is over"},{"componentType":"paragraph","richBody":{"value":"This raises the question of where this sudden wave comes from, after years of relative calm. Is it down to the rise of artificial intelligence (AI), which has been such a hot topic in recent years? Or are other factors at play? Ultimately, the layoffs are mainly linked to the state of the economy, which is slowing due to structural problems, Trump’s trade war and various other geopolitical uncertainties.
Economists also point to the end of what is known as ‘labour hoarding’. During the pandemic, employers feared it would be difficult to find enough staff once the economy picked up again. As a result, certain sectors hired and retained large numbers of employees (‘hoarded’ them), and very few were let go.
"},"alignedImage":{"position":"bottom"}},{"componentType":"sectionTitle","title":"A clear signal to shareholders"},{"componentType":"paragraph","richBody":{"value":"Employers are now taking a more critical look at their workforce. In fact, announcing layoffs serves an important signalling function to shareholders: management demonstrates its intention to cut costs and focus on productivity and margin improvements. In the US especially, there are examples of CEOs who seem to boast about the number of jobs they plan to cut. Shareholders, anticipating future profitability, often ‘reward’ such companies with a higher share price.
The opposite also happens: when payment company Adyen announced that it would hire large numbers of staff to enable expected growth, the market punished the company severely.
"}},{"componentType":"sectionTitle","title":"Fed rate cuts tied to the labour market"},{"componentType":"paragraph","richBody":{"value":"For investors in US equities, reports of a weakening labour market offer an additional advantage. The US central bank (the ‘Fed’) has a dual mandate, meaning the policy rate is more likely to be cut if the labour market – and therefore the economy – deteriorates, provided inflation allows.
Currently, signals are mixed. But a report from Challenger, Gray & Christmas shows that the number of redundancies in the US last month was at its highest level since November 2022. For this reason, the market expects the Fed (following the cut on Wednesday 10 December) to reduce rates further in the new year. This generally benefits riskier investment categories, such as equities.
To attribute it all to AI would be going too far, but many developments in the labour market are indeed linked to its rapid rise. There is no conclusive evidence yet that AI is actually ‘taking over’ jobs, but there does appear to be anticipation: companies are preparing for a smaller office population in the future. It will be interesting to see what AI ultimately means for society: merely productivity gains, or also lower employment? Fortunately, there is a good chance that AI will create space in our still-tight labour market for all sorts of new jobs we cannot yet imagine.
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