The latest survey of Fidelity sector analysts shows growing expectations of layoffs by US and European companies over the next year, while China heads in the opposite direction.
Just for a moment, this week’s Chart Room shifts the focus away from banks, liquidity and capital buffers and back to the simple pleasures of examining real-world job markets. Once a quarter we ask our analysts what they think will happen to headcounts over the next 12 months at the companies they cover. China’s rebound is writ large across the resulting chart - and so is the potential for a deterioration in hiring in the developed world that, together with those banking concerns, might focus the minds of policymakers on the need to go easier on further monetary tightening.
Fidelity’s regular survey of our more than 150 sector analysts around the world shows how last summer’s substantial expectations of new hiring have fallen steadily. Analysts now expect net layoffs in both North America and Europe. The expectations of our China-focused analysts, by contrast, have spiked upward since last September, driven first by the anticipation - and then by the reality - of the country’s dramatic reopening from Covid lockdowns.
Sign of the times?
While official US hiring numbers have remained buoyant, the survey suggests that may be reaching an end. Consumer demand is faltering and as one North America-focused analyst, who covers online businesses, puts it starkly: “Companies are taking cost actions.”
Other results of our regular monthly and quarterly analyst polls show similar, if less disturbing, bifurcations. The global sentiment indicators remain positive but management sentiment in Europe and North America is on the verge of dipping back down into negative territory, while sentiment in China is spiking higher.
A majority of analysts globally still expect to see wages rise in the next six months, but, again, that may just add to pressure on companies rather than suggesting any kind of improvement to the outlook for demand. “The non-food retail outlook is dismal,” says one analyst who covers European consumer discretionary companies.
If the next year brings a rise in unemployment, as these numbers suggest, then that outlook is likely to deteriorate further.
