Former Trump Official Warns of Job Market Deterioration
Gary Cohn, vice chair of IBM and former director of the National Economic Council under President Trump, expressed concerns about the current state of the job market, stating on August 27, 2023, that “we’ve seen the job market degrade.” While he acknowledged that this downturn could be “temporary,” he emphasized the significance of the Federal Reserve’s recent actions and statements regarding the labor market.
Cohn’s remarks came shortly after the Federal Reserve announced a reduction of its benchmark interest rate by 0.25 percentage points. This marked the first rate cut since December 2022, a move attributed to slower economic growth and a cooling labor market. Fed Chair Jerome Powell noted that the risks to the labor market have shifted, stating, “you see a very different picture.”
The labor market has been under scrutiny, especially following a disappointing July jobs report that led to the dismissal of former Bureau of Labor Statistics Commissioner Erika McEntarfer. Cohn referenced recent job creation statistics, highlighting a decline from over 100,000 jobs created monthly to less than 50,000 jobs in the past few months. He pointed out that companies are responding to a challenging economic environment by reducing their workforce.
According to Cohn, businesses facing rising input costs, exacerbated by tariffs, are unable to pass those costs onto consumers. Consequently, they are compelled to cut labor costs to maintain profit margins. He remarked, “the one lever they can pull to make sure they keep their margins intact is they can cut down on the cost of labor.”
Cohn noted a significant shift from a period where companies were “hoarding labor” to one where they are actively managing their expenses, particularly labor costs. He indicated that companies are allowing their workforce to decrease naturally as employees retire. He added, “I think it’s clearly showing up, and the Federal Reserve recognized that in this week’s action.”
The trend of workforce reduction, according to Cohn, is not confined to the technology sector but spans various industries. He reported hearing from corporate CEOs across multiple fields who have taken steps to reduce their human capital overhead.
Reflecting on the recent Federal Reserve rate cut, Cohn described it as providing “a lot of important information.” He acknowledged the Fed’s efforts to maintain independence in its decision-making, especially given recent tensions regarding its autonomy. “I think the Fed clearly showed themselves to be independent thinkers,” he stated, reinforcing that their projections and actions are based on current economic data.
In summary, Cohn’s insights highlight a growing concern about the job market’s trajectory and the steps companies are taking to navigate economic pressures. With the Federal Reserve’s recent actions and the ongoing scrutiny of labor data, the economic landscape remains uncertain as businesses adjust to these challenges.
