5 Nov 2025
US companies like Amazon and Target are announcing thousands of layoffs, creating concerns about the labor market amidst a lack of official employment data and the impact of advanced AI automation. Monetary policy discussions highlight overly contractionary policies, with some advocating for faster interest rate cuts to prevent an economic recession caused by the policy itself, citing signs of stress in the credit market.
Major US companies like Amazon and Target have announced thousands of layoffs, raising concerns despite not yet being a widespread crisis. This trend is particularly worrying due to the lack of official employment statistics (NFE) for September and likely October, which limits insight into the labor market's true state.
While existing data, such as weekly jobless claims, does not yet indicate a severe rise in unemployment, a sustained increase in claims above 268,000 could signal an alarming trend. The labor market is becoming more sensitive to new data as policy makers like Mr. Powell now weigh labor market conditions alongside inflation.
Advanced automation and AI are significantly contributing to labor market pressure, as many tasks are being performed more efficiently by technology. A survey of executives revealed that over 60% anticipate AI will eventually take over entry-level and routine employee tasks, leading managers to be less hesitant about layoffs.
Companies are currently absorbing costs rather than fully passing them on to consumers, aiming to maintain demand. To protect profits amidst uncertainty, they are reducing labor costs through layoffs and increasingly relying on temporary and part-time workers instead of hiring permanent, long-term staff.
Myron argues for a faster reduction in interest rates, advocating for a 0.5% cut, as he believes current monetary policies are excessively contractionary and risk causing a recession. He emphasizes that the neutral interest rate is significantly lower than the current rate, and maintaining the current tight policy could trigger an economic downturn, citing visible stress in credit markets.
Sectoral tariffs that were scheduled to be implemented on November 1st have been postponed due to a government shutdown. These tariffs remain in a 'threatened' state, and their execution depends on the government's reopening.
The upcoming ISM manufacturing PMI is a crucial data point, expected to provide significant insights into pricing trends, employment stability within the manufacturing sector, and overall production growth.
The longer monetary policy remains contractionary, the closer it gets to the point where monetary policy itself causes a recession in the economy.
| Insight | Description |
|---|---|
| Increasing US Layoffs | Major US companies (e.g., Amazon, Target) are announcing thousands of layoffs, generating concern, especially given the absence of official employment data. |
| Labor Market Weakening Indicators | A sustained rise in weekly unemployment insurance claims above 268,000 would be a warning sign, as companies are increasingly reducing hiring and increasing dismissals. |
| AI's Role in Job Displacement | Advanced AI automation is contributing to labor market pressure, with managers increasingly willing to lay off staff, anticipating AI can perform tasks previously done by entry-level employees. |
| Corporate Cost Absorption & Labor Adjustments | Companies are absorbing costs and cutting labor expenses (layoffs, temporary staff) to protect profits and manage uncertainty, rather than fully passing costs to consumers. |
| Dissenting Views on Monetary Policy | Some economists, like Myron, argue that current monetary policy is overly contractionary, risking a policy-induced recession, and advocate for more aggressive interest rate cuts (0.5%). |
| Credit Market Stress Signals | Emerging signs of 'seemingly unrelated' credit market problems indicate that current monetary policy might be overly restrictive, according to dissenting views within the FOMC. |
| Unimplemented Sectoral Tariffs | Sectoral tariffs scheduled for November 1st remain unexecuted due to a government shutdown, highlighting ongoing policy uncertainty. |
