Gary Cohn: Tariffs and Job Implications
Gary Cohn, a former economic advisor to President Donald Trump, stated that tariffs are increasing operating costs for companies, potentially making it harder to find a job. Cohn, who served as the Director of the National Economic Council during Trump's first term, noted that businesses are facing uncertainty due to rising input costs as a result of tariffs.
In an interview on "Face the Nation," Cohn explained that because companies feel unable to raise prices on consumers, they are turning to cutting costs that they can control. "The only lever they can pull to make sure their margins aren't getting hurt is to reduce labor costs," Cohn stated.
Data vs. Reality: Job Market Challenges
While White House spokesperson Kush Desai issued a statement claiming that Trump’s tariffs have brought trillions of dollars in investment to the U.S., boosting domestic construction and creating jobs, the reality paints a more challenging picture for the job market. Notably, global tech giants such as Google (GOOGL), Microsoft (MSFT), and Meta (META) have intensified their layoff efforts this year. According to data from Layoffs.fyi, 204 companies have laid off nearly 90,000 tech professionals since the start of this year alone.
Economic Impact and Rising Unemployment
Cohn, currently the Vice Chairman of IBM (IBM), pointed out that these layoffs are beginning to impact the economy. Recent employment data from the U.S. Bureau of Labor Statistics (BLS) showed only 22,000 jobs were added in August, a sharp decrease from the 79,000 added in July. In an attempt to curb this trend and boost the economy, the Federal Reserve cut interest rates by 25 basis points last week.
Difficulty Finding Work: Gen Z Challenges
Federal Reserve Chair Jerome Powell acknowledged in the press conference following last week's meeting that the overall layoff rate remains low. However, finding a job is becoming increasingly difficult, especially for Gen Z graduates, due to hiring freezes by companies. Powell admitted that "college grads, young people, and minority communities are having a hard time finding work."
Shift from 'Labor Hoarding' to 'Strict Cost Control'
Cohn pointed out that this trend is a stark contrast to the period following the COVID-19 pandemic when many companies were in a “hiring frenzy.” Today, these companies are not only laying off workers but are also ceasing to hire replacements for retiring employees, allowing the workforce to shrink naturally.
Cohn added that companies were having trouble finding and retaining employees during the COVID-19 pandemic, so they were "hoarding labor." Now, the situation has shifted from "labor hoarding" to "strict cost control,” and labor costs are one of the expenses they can control."
Current State and Future Outlook
While Americans are facing a "longer job-search cycle,” corporate performance appears to be doing well. In the second quarter of this year, corporate revenues grew by 6.3%, and profits saw double-digit growth. However, hard data and anecdotal evidence suggest that the job market is steadily deteriorating. The Federal Open Market Committee (FOMC) has hinted that it may cut interest rates at least twice more this year to help achieve the Fed’s dual mandate of price stability and full employment.
Cohn concluded by saying, "This job deterioration may be temporary, even short-term, but the reality is we're seeing a downgrade in the job market."
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