Morning Report: Job cuts increase

Posted on December 7, 2023 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning on no real news. Bonds and MBS are down.

Companies announced 45,510 job cuts in November, according to the Challenger, Gray and Christmas Job Cut Report. This is a 24% increase from October, but is down 41% from a year ago. Year-to-date, job cut announcements are up 11% compared to a year ago.

“The job market is loosening, and employers are not as quick to hire. The labor market appears to be stabilizing with a more normal churn, though we expect to continue to see layoffs going into the New Year,” said Andrew Challenger, labor expert and Senior Vice President of Challenger, Gray & Christmas, Inc.

Tech is the biggest sector cutting jobs, followed by retailers and healthcare. Year-to-date, hiring plans are the lowest since 2015, and seasonal hiring is the lowest in 10 years.

This year has been been the least affordable for housing on record, but it looks like 2024 will be better, according to Redfin. The typical homebuyer earning the median income would have to spend 41% of their income on housing costs to buy the median home. Blame a combination of rising home prices in 2021 and 2022 along with soaring mortgage rates.

“A perfect storm of inflation, high prices, soaring mortgage rates and low housing supply caused 2023 to go down as the least affordable year for housing in recent history,” said Redfin Senior Economist Elijah de la Campa. “The good news is that affordability is already improving heading into the new year. Mortgage rates are coming down, more people are listing homes for sale, and there are still plenty of sidelined buyers ready to take a bite of the fresh inventory. We expect these conditions to continue to improve in 2024.”

The share of median income varies widely by MSA, with California cities like San Francisco requiring 85%, and Midwest cities like Detroit requiring only 18%.

Initial Jobless claims ticked up 1,000 to 220k. On an unadjusted basis they rose by 94k to 294k. It appears that the job market is really a tale of two markets: white collar jobs, where hiring is sluggish and skilled labor where there is still a shortage of workers.

Blackstone Mortgage Trust (BXMT) is a mortgage REIT that focuses on commercial mortgage backed securities and can be seen as kind of a proxy for the problems in commercial real estate. One big short seller is targeting the stock as credit losses are looking to be picking up. As this stock goes, so goes the pain in the banking sector and possible rate cuts.

Filed under: Economy | 27 Comments »