‘Yikes’: Top investment bank looks under the hood of the economy and finds ‘the labor market doesn’t look that good’ – Fortune

U.S. Labor Market Analysis: A Sustainable Development Goals Perspective

Introduction: Economic Outlook and Implications for SDG 8

A recent economic analysis by UBS indicates a significant weakening of the U.S. labor market, posing a material risk to households and the broader economic recovery. This trend presents a direct challenge to the achievement of Sustainable Development Goal 8 (SDG 8), which promotes sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. The report highlights that underlying data points to a deterioration that extends beyond headline job figures, signaling a potential contraction that could undermine progress toward key development targets.

Key Indicators of Labor Market Deterioration

The analysis identifies several critical indicators that collectively point to a decline in labor market health, moving away from the “low hire, low fire” environment previously observed. These metrics suggest that job destruction is outpacing job creation, a trend inconsistent with the objectives of SDG 8.

1. Rising Layoffs: Corporate layoff announcements have accelerated sharply. October saw 157,000 announced cuts, the highest monthly total since July 2020. The year-to-date total of 760,000 seasonally adjusted cuts is the highest since 2009.
2. Elevated Unemployment Claims: Unemployment insurance claims, layoff announcements, and WARN notices are all running ahead of the pre-pandemic pace, indicating a sustained increase in involuntary job separations.
3. Slowing Hiring Rate: The hiring rate, measured across multiple business surveys, has fallen to levels historically associated with recessions. Excluding the healthcare and social assistance sectors, private-sector payrolls have been declining.
4. Declining Job Openings: Job postings have fallen to their lowest level since 2021, with nearly every sector experiencing year-over-year declines. This reduction in opportunities further constrains the labor market.

Impact on Sustainable Development Goals

The weakening labor market has profound implications for several SDGs, threatening to reverse progress in poverty reduction, equality, and economic stability.

• SDG 8: Decent Work and Economic Growth: The core objective of full and productive employment is under threat. The report notes that household employment has been falling by an average of 72,000 jobs per month, a pace insufficient to keep up with population growth. The broadest measure of underemployment (U-6) has risen to 8.1%, driven by an increase in individuals working part-time for economic reasons, which signifies a decline in the quality of work available.
• SDG 1: No Poverty: As layoffs increase and hiring slows, household financial stability is jeopardized. A sustained period of job market weakness increases the risk of pushing more individuals and families into poverty, directly contravening the goal of eradicating poverty in all its forms.
• SDG 9: Industry, Innovation, and Infrastructure: The report links a portion of the job cuts, particularly in the technology and warehousing sectors, to automation and artificial intelligence. This highlights a critical challenge within SDG 9: ensuring that technological innovation supports, rather than undermines, inclusive and sustainable industrialization and employment.
• SDG 10: Reduced Inequalities: Labor market downturns often disproportionately impact vulnerable populations. The concentration of job cuts in specific sectors suggests that the economic strain is not evenly distributed, potentially exacerbating existing inequalities.

Compounding Factors and Broader Economic Sentiment

The negative trends are amplified by a significant downturn in seasonal hiring and a sharp decline in economic sentiment, further impacting the stability required for SDG 8.

• Weak Holiday Hiring: Announced seasonal hiring plans are substantially below pre-pandemic averages, with the National Retail Federation projecting a potential 40% decrease from the previous year. This reduction in temporary employment opportunities removes a critical economic buffer for many households.
• Plummeting Confidence: Consumer confidence has fallen to near-record lows, with a growing share of households expecting unemployment to rise. This erosion of confidence can lead to reduced consumer spending, creating a feedback loop that further weakens the economy and hinders progress toward sustainable growth.

Policy Considerations and Conclusion

The Federal Reserve faces a divided outlook, balancing the risk of rising unemployment against persistent inflation concerns. The UBS report concludes that if current trends of accelerating layoffs and decelerating hiring continue, the labor market is headed for a more obvious contraction. This “bathtub” effect—where outflows (layoffs) exceed inflows (hiring)—poses a material risk to the economic outlook. Such a downturn would not only undermine the U.S. recovery but also represent a significant setback for achieving the national targets related to SDG 1, SDG 8, and SDG 10, which depend on a stable and inclusive labor market.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The primary Sustainable Development Goal (SDG) addressed in the article is:

• SDG 8: Decent Work and Economic Growth

Explanation: The article’s entire focus is on the health of the U.S. labor market, which is the central theme of SDG 8. It discusses a “labor market, long a pillar of resilience, may be in real trouble,” highlighting issues directly related to employment, economic stability, and growth. The text analyzes job losses, weak hiring, rising unemployment, and the potential negative impact on “households and the broader recovery,” all of which are core concerns of SDG 8, which aims to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.”

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s discussion of the U.S. labor market, the following specific targets under SDG 8 can be identified:

1. Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries.
   • Explanation: While the article focuses on a developed country, the principle of sustaining economic growth is central. The analysis warns that the weakening labor market is a “material risk to the outlook” that could “undermine household confidence, consumer spending — and the entire recovery.” This directly connects to the goal of maintaining stable and sustained economic growth.
2. Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation…
   • Explanation: The article highlights a failure in “decent job creation.” It describes a “low hire” environment where the “hiring rate… has dropped to levels historically seen only in recessions.” The decline in private-sector payrolls and the sharp drop in seasonal holiday hiring plans further illustrate a negative trend away from the job creation goals of this target.
3. Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
   • Explanation: The article provides extensive evidence that the goal of “full and productive employment” is under threat. It details rising unemployment, a slipping labor force participation rate, and a significant increase in underemployment. The mention that “more Americans are working part-time for economic reasons” points to a decline in the quality and decency of work available, directly contradicting the aims of this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article mentions several specific economic indicators that are used to measure the health of the labor market and, by extension, progress towards the identified SDG targets.

• Unemployment Rate: The article explicitly states the unemployment rate “has now crept up to a post-2021 high.” This is a primary indicator for Target 8.5.
• Underemployment Rate (U-6): The text specifies that “the broadest measure of underemployment, known as U-6, has jumped by 0.6 percentage points since January to 8.1%.” This measures the quality of employment and is relevant to Target 8.5.
• Number of Layoffs/Job Cuts: The article provides concrete data, such as “October saw 157,000 layoffs” and a “year-to-date tally… [of] 760,000 seasonally adjusted cuts through October.” This directly measures job destruction, which is counter to the job creation goal of Target 8.3.
• Hiring Rate: It is mentioned that the “hiring rate, as measured by multiple business surveys, has dropped to levels historically seen only in recessions,” serving as a direct indicator for job creation efforts under Target 8.3.
• Job Openings: The article cites data that “job openings continue to decline,” with postings sinking “to their lowest level since 2021.” This indicates shrinking demand for labor, relevant to Target 8.3.
• Unemployment Insurance Claims: The text notes that “unemployment insurance claims… have all been running ahead of the pre-pandemic pace,” which is a key indicator of job loss and unemployment levels (Target 8.5).
• Labor Force Participation: The article points out that “Labor force participation has slipped, and more than 800,000 people have left the labor force but say they still want a job,” an important indicator for Target 8.5.
• Part-Time for Economic Reasons: The mention that “more Americans are working part-time for economic reasons” is a specific indicator of underemployment and the lack of “decent work” as described in Target 8.5.
• Consumer and Business Sentiment: The article references the “University of Michigan’s consumer confidence reading” dropping and small business optimism “struggling to gain traction.” These sentiment indicators reflect the broader economic outlook and are relevant to sustaining growth (Target 8.1).

4. Table of SDGs, Targets, and Indicators

Source: fortune.com