A ‘catastrophe’ is coming for the economy, but it’s not recession or inflation, says Secretary of Labor Marty Walsh
Secretary of Labor Marty Walsh speaks during a news conference at the White House in Washington, April 2, 2021.
Erin Scott | Reuters
There has been a lot of talk about looming layoffs, and by some recent surveying, as many as half of large employers are thinking about labor cost cuts as the economy slows. But U.S. Department of Labor Secretary Marty Walsh doesn’t see the recent job gains reversing, according to an interview at CNBC’s Work Summit on Tuesday.
“I still think that we’re going to have job gains as we move into the end of this year, early next year. A lot of people are still looking at different jobs,” he told CNBC’s Kayla Tausche at the virtual event. “We saw a lot of moving around over this last course of the year. People leaving jobs, getting better jobs, and I’m not convinced yet that we’re headed towards that.”
For the Federal Reserve, some level of higher unemployment is necessary to cool an economy that has been bedeviled by persistent inflation. Unemployment, at 3.5% now, went down in the last monthly nonfarm payrolls report. The Fed is targeting unemployment of 4.4% as a result of its policy and higher interest rates.
“We definitely have to bring down inflationary pressures,” Walsh said at the CNBC Work Summit, but he added that the way to do it isn’t layoffs.
A House inquiry released on Tuesday found that the 12 largest employers in the nation including Walmart and Disney laid off more than 100,000 workers in the most recent recession during the pandemic.
Walsh said in a slower economy, the federal government’s infrastructure act will support job growth in sectors including transportation. “Those monies are there. … if we did have a downturn in the economy, those jobs will keep people working through a difficult time.”
In the battle against inflation, Walsh said moving people up the income ladder is a better way of helping Americans make ends meet than laying them off.
“I think there’s a way to do that by creating good opportunities for people so they have opportunities to get into the middle class, and not enough people in America are working in those jobs, quite honestly. … I think there’s a lot of Americans out there right now that have gone through the last two years, a lot of concern in the pandemic, they were working in a job maybe making minimum wage, maybe they had two or three jobs. Really I think the best way to describe what is a middle class job is a job you can work, one job, get good pay, so you don’t have to work two and three jobs to support your family.”
From a policy perspective, Walsh expressed disbelief that a higher federal minimum wage remains a contentious issue on Capitol Hill.
“It shocks me that there are members in the building behind me, if you can’t see the building behind me it’s the Capitol, that think that families can raise their family on $7-plus, on the minimum wage in this country,” he said.
But Walsh conceded that legislation to increase the minimum wage, which was held up in the Senate, has an uncertain future ahead of the midterm elections.
Here are a few of the other major policy issues the Labor Secretary weighed in on at the CNBC Work Summit.
Lack of immigration reform is a ‘catastrophe’ in the making
Amid one of the tightest labor markets in history, Walsh said the political parties’ approach to immigration — “getting immigration all tied up” — is among the most consequential mistakes the nation can make in labor policy.
“One party is showing pictures of the border and meanwhile if you talk to businesses that support those congressional folks, they’re saying we need immigration reform,” Walsh said. “Every place I’ve gone in the country and talked to every major business, every small business, every single one of them is saying we need immigration reform. We need comprehensive immigration reform. They want to create a pathway for citizenship into our country, and they want to create better pathways for visas in our country.”
The demographic data on the U.S. working age population is concerning, with baby boomer retirements expected to accelerate in the years ahead, compounded by a peak being reached in high school graduates by 2025, limiting both the total size of the next generation labor pool and the transfer of knowledge between the generations of workers.
“We need a bipartisan fix here,” Walsh said. “I’ll tell you right now if we don’t solve immigration … we’re talking about worrying about recessions, we’re talking about inflation. I think we’re going to have a bigger catastrophe if we don’t get more workers into our society and we do that by immigration.”
Won’t say whether Uber and Lyft are in crosshairs of new gig economy rulemaking
A proposed DoL rule on independent contractors hit the shares of gig economy companies including Uber and Lyft a few weeks ago. The rulemaking is still in review and seeking public comments, and some Wall Street pundits don’t expect it to have a significant impact on the rideshare companies.
Walsh wouldn’t even say if they are a target of the rulemaking.
“We haven’t necessarily said what companies are affected by it, and what businesses are affected by it. What we’re looking at is people that are employees that are working for companies that are being taken advantage of as independent contractors. We want to end that,” Walsh said.
He did mention a few of the jobs that would likely be covered, and one of those does overlap with the Uber, Lyft and DoorDash business models. “We have plenty of businesses in this country, like dishwashers and delivery drivers in areas like that, where people are working for a business that other employees in that business are employees, and they’re labeling them as independent contractors. So we’re going to look at this. We’re in the rulemaking process now. We’re taking in the comments now, and we’ll see when the comments come in what the final rule looks like.”
Walsh added that the idea an independent contractor want to retain their flexibility doesn’t wash with him. “Flexibility is not an excuse … pay somebody as an employee. You can’t use that as an excuse.”
Unionization will finally gain in 2023, 2024
Walsh, a union-book carrier, said that the public support for unions should be matched by actual gains in union ranks in the next two years. The most recent survey available from the Bureau of Labor Statistics showed that labor jobs decreased by more than 240,000 in 2021, even as U.S. public support for unionization has surged and major brands including Apple, Amazon, and Starbucks face a rising tide of unionization at stores and in operations like warehouses, albeit still on the margins as far as total numbers of workers they employ.
“I don’t have the number of 2022, but 2021 was a unique year,” Walsh said. “The numbers went down in a lot of ways because companies’ unions weren’t organizing, number one, and number two, we had a pandemic and a lot of people retired, left their business or they retired. Those jobs weren’t backfilled by companies. … It’s like 65%, 70% of Americans still looking favorably upon unions … the highest in 50 years. I don’t think you’ll see the benefit of that organizing until probably 2023, 2024.”
Other recent polling has found that public support for unions is higher than union member support for their own labor organizations.
Biden’s broken promise on child care
President Biden promised on the campaign trail to do more on child care; promised to include it in the infrastructure act; promised to include it in a second act after dropping it from the core infrastructure package; and then it was dropped from that back-up plan.
Walsh said the government has to make good on that promise for families and workers in the child-care sector.
“Childcare is a basic necessity to get millions of women back into the workforce on a full-time basis,” he said.
The recent Women in the Workplace study from McKinsey and LeanIn.org finds that women are still opting out of the workforce in large numbers, a reversal of labor market gains that began during the pandemic.
“Child care has not been addressed by this country or by most states in this country for the last 50 years. The cost is too high for the average family and we can’t retain the workers in those industries. We lost a lot of workers in the childcare industry because they’re paying them minimum wage or a little bit above minimum wage,” Walsh said, referring to estimates that 100,000 workers left the sector during the pandemic.
“We have to respect them and pay them better wages. Anyone watching today that has kids in child care, you know, you’re paying 30%, 40%, 50%, 60% of your salary for child care,” he said. “A lot of families have made the decision [that], ‘We don’t want to have two people working, one person will maybe stay home, work part time and make up those costs,’ so that issue has to be resolved. It’s not just an economic issue. It’s a human rights issue in our country to get good child care,” he added.
Artificial intelligence chipmaker Cerebras Systems said on Friday that it’s withdrawing plans for an IPO, days after announcing that it raised over $1 billion in a fundraising round.
In a filing with the SEC, Cerebras said it does not intend to conduct a proposed offering “at this time,” but didn’t provide a reason. A spokesperson told CNBC on Friday that the company still hopes to go public as soon as possible.
Cerebras filed for an IPO just over a year ago, as it was ramping up to take on Nvidia in an effort to create processors for running generative AI models. The filing revealed a heavy reliance on a single customer in the United Arab Emirates, Microsoft-backed G42, which is also a Cerebras investor.
In its prospectus, Cerebras said it had given voluntary notice to the Committee on Foreign Investment in the United States about selling shares to G42. In March, the company announced that the committee had provided clearance.
Since its initial filing to go public on the Nasdaq, Cerebras has shifted its focus away from selling systems and more toward providing a cloud service for accepting incoming queries to models that use its chips underneath.
The announced withdrawal comes three days into a U.S. government shutdown that’s left agencies like the SEC operating with a small staff. In a plan for a shutdown published in August, the SEC said its electronic system EDGAR “is operated pursuant to a contract and thus will remain fully functional as long as funding for the contractor remains available through permitted means.”
On Tuesday, Cerebras said it had raised $1.1 billion at a valuation of $8.1 billion in a private funding round. At the time, CEO Andrew Feldman said that the company still wanted to go public, rather than continue to raise venture capital.
“I don’t think this is an indication of a preference for one or the other,” he told CNBC in an interview. “I think we have tremendous opportunities in front of us, and I think it’s good practice, when you have enormous opportunities, not to let them fall by the wayside for lack of capital.”
Feldman thought the original prospectus from last year was out of date, especially considering developments in AI, the spokesperson said on Friday.
Well heeled technology companies have been quickly signing up for additional infrastructure to handle demand. On Tuesday CoreWeave, which rents out Nvidia chips through a cloud service, said it had signed a $14.2 billion agreement with Meta. ChatGPT operator OpenAI said last week that it had committed to spending $300 billion on cloud services from Oracle.
The government shutdown did not factor into Cerebras’ decision, the spokesperson said.
An employee arranges a salad dressing display at an Amazon Fresh grocery store on December 12, 2024 in Federal Way, Washington.
David Ryder | Getty Images
Amazon is closing four more Fresh supermarkets in Southern California as the e-commerce giant continues to focus its grocery strategy around Whole Foods and delivery.
The closures will take place in the coming weeks, Amazon confirmed to CNBC. They follow the shuttering of four other U.S. locations in recent months, in Washington, Virginia, New York and a Los Angeles suburb.
“Certain locations work better than others, and after an assessment, we’ve made the decision to close these Amazon Fresh locations,” Amazon spokesperson Griffin Buch said in a statement. “We’re working closely with affected employees to help them find new roles within Amazon wherever possible.”
At one Fresh supermarket in La Verne, California, employees were told to gather for an all-hands meeting on Wednesday, according to an internal message viewed by CNBC. They learned at the meeting that the store would close in mid-November, and that employees would receive a severance package, according to a person familiar with the matter who asked not to be named because the details were confidential.
The other three stores that are closing are in cities of Mission Viejo, La Habra and Whittier.
Last week, Amazon said it intends to close 14 Fresh grocery stores in the U.K. and convert its five other locations there into Whole Foods markets.
Amazon said it regularly evaluates its store portfolio, which can lead to opening, reopening, relocating or closing certain locations. In the U.S., the company has more than 60 remaining Fresh stores. Last year, the company removed its “Just Walk Out” cashierless technology from the stores. It’s also been culling its footprint of Go cashierless convenience stores.
Amazon has been determined to become a major grocery player for nearly two decades. The company launched Amazon Fresh in 2007, then a pilot project for fresh food delivery, before acquiring upscale chain Whole Foods for $13.7 billion in 2017, its biggest purchase on record.
Amazon debuted its Fresh grocery chain in 2020, with an eye toward mass-market shoppers. The rollout has been turbulent since its early days.
The company opened a flurry of Fresh locations by 2022, but the expansion plans ran into CEO Andy Jassy’s widespread cost-cutting efforts as the company reckoned with the impact of rising interest rates and soaring inflation. In 2023, Amazon announced it would shut some Fresh stores and halt further openings temporarily as it evaluated how to make the chain stand out for shoppers.
While it’s closing Fresh stores, Amazon continues to “innovate and invest in making grocery shopping easier, faster, and more affordable,” Buch said. The company still maintains 500 Whole Foods locations and has opened mini “daily shop” Whole Foods stores in New York City.
On Wednesday, Amazon also launched a new “price-conscious” grocery brand that will be offered online and in its physical stores. And last month, Amazon expanded same-day delivery of fresh foods to more pockets of the U.S.
Jassy and other company executives have touted the success of sales of “everyday essentials” within its online grocery business, which refers to items such as canned goods, paper towels, dish soap and snacks. Jassy told investors at the company’s annual shareholder meeting in May that he remains “bullish” on grocery, calling it a “significant business” for Amazon.
WATCH: Amazon grocery could be a trojan horse to more revenue
Technology
Quantum stocks Rigetti Computing and D-Wave surged double-digits this week. Here’s what’s driving the big move
Inside Google’s quantum computing lab in Santa Barbara, California.
CNBC
Quantum computing stocks are wrapping up a big week of double-digit gains.
Shares of Rigetti Computing, D-Wave Quantum and Quantum Computing have surged more than 20%. Rigetti and D-Wave Quantum have more than doubled and tripled, respectively, since the start of the year. Arqit Quantum skyrocketed more than 32% this week.
The jump in shares followed a wave of positive news in the quantum space.
Rigetti said it had purchase orders totalling $5.7 million for two of its 9-qubit Novera quantum computing systems. The owner of drugmaker Novo Nordisk and the Danish government also invested 300 million euros in a quantum venture fund.
In a blog post earlier this week, Nvidia also highlighted accelerated computing, which it argues can make “quantum computing breakthroughs of today and tomorrow possible.”
Investors have piled into quantum computing technology this year, as tech giants Microsoft, Nvidia and Amazon have embraced the technology with a wave of new chip announcements, multi-million dollar investments and research plans.
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