Meta plans thousands more layoffs starting as soon as this week in its second round of job cuts in four months while Federal Reserve Chairman Jerome Powell’s testimony on Tuesday before Congress raised fears that continuing to raise interest rates would risk even more unemployment and hardship.
Powell suggested before Congress on March 7 that interest rates could go higher than central bank policymakers had expected. The Fed is prepared to return to larger rate hikes if necessary, and an unemployment rate of 4.5 percent—up from the current 3.4 percent rate—”is well better than most of the time for the last 75 years.” Powell said.
Signs of a decelerating inflation rate in late 2022 have reversed, Powell said, warning that more measures would be needed to slow the growing economy.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
Powell’s comments suggest that the peak or terminal level of the federal funds rate is likely to be higher than previously indicated by the Feds and the switch in February to a smaller quarter-percentage point increase could be short-lived if inflation data continues to run hot, Jeff Cox wrote for CNBC.
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Sen. Elizabeth Warren of Massachusetts accused Powell of unnecessarily risking large-scale layoffs and an economic recession by continuing to raise interest rates, Common Dreams reported. Two million people in the U.S. will be out of a job if the Fed’s projected unemployment rate of 4.6 percent by the end of 2023 becomes a reality.
“What would you say to them?” Warren asked. “How would you explain your view that they need to lose their jobs?”
Powell replied that he would “explain to people more broadly that inflation is extremely high, and it’s hurting the working people of this country badly—all of them, not just 2 million of them.”
Meta, which cut 11,000 workers — a 13 percent reduction — in November in its first-ever major layoff, plans 1000s more job cuts, Bloomberg reported.
Meta reported its cost and expenses rose 22 percent year over year in the fourth quarter of 2022 while overall sales dropped 4 percent to $32 billion.
CEO Zuckerberg called 2023 Meta’s “year of efficiency” with plans to lower company costs, cut projects that aren’t performing or may no longer be crucial and remove “layers of middle management to make decisions faster.”
Workers at the Silicon Valley company described high anxiety and low morale.
The federal government’s efforts to stanch inflation are disproportionately impacting Black Americans.
Higher interest rates make borrowing more expensive and hurt Black Americans — historically locked out of home ownership and affordable loans — the hardest, The Hill reported. Interest rates are already often higher for many Black homeowners than white, regardless of income, according to a 2021 Harvard University study. Part of that is because Black homeowners are seen as a bigger financial risk than whites.
Sen. Warren voiced concern that the Fed won’t be able to stop unemployment from rising beyond the projected 4.6 percent rate once it starts increasing.
“History suggests that the Fed has a terrible track record of containing modest increases in the unemployment rate,” Warren said. “In 11 out of the 12 times that the unemployment rate increased by a full percentage point within one year, unemployment went on to rise another full percentage point on top of that.”