Charles Schwab Chief Investment Strategist, Liz Ann Sonders, discusses why the labor market is set to worsen as layoffs ripple through the tech industry.

You can watch the entire interview here.

Key takeaways

00:02: Why the labor market will only 'get worse from here'

00:23: The fed and labor market demands

00:42: On layoffs

1:02: How 'larger wage jobs out of the mix' should impact the economy

1:19: Possible 'false hope' for inflation

Video Transcript

LIZ ANN SONDERS: I think it's going to get worse from here. Every leading indicator suggests that the labor market will weaken. In addition, you've got the Fed essentially-- they're not gunning for a higher unemployment rate. They've got an unemployment rate about a percent higher than where it is right now, and their dots plots and their economic forecasts. But what Powell and pretty much every member of the Fed has been very clear about is they want to see a significant dent to labor market demand sort of crush job openings without causing a significant increase in the unemployment rate.

Now we are starting to see some pretty sizable layoffs. Interestingly, there are larger companies. And they're more on the goods side of the economy, where you're still seeing hiring on the services side of the economy. What it should have the effect of doing is continuing to bring down measures of wage growth that are done with averages, like average hourly earnings, because you're now increasingly taking larger wage jobs out of the mix.

And the services areas that are hiring, leisure and hospitality as an example, tend to be on the lower end of the wage spectrum. So just that's the way the average works. You take some of the larger numbers out. It's going to bring it down. That may be some false hope or maybe actual justified hope on the inflation side, but it's not necessarily a great sign for the economy, more broadly.