Scott Moore via flickrIt wasn’t too long ago when everyone was totally freaking out about the sequester — the $85 billion of federal budget cuts that were scheduled to take effect.
One of the biggest concerns was that huge job cuts would rip through the economy.
But with the sequester now in play, many people are scratching their heads wondering what happened to those cuts.
Today’s initial jobless claims report was expected to get hit. And while the claims number did tick up, it wasn’t all that bad.
Mesirow Financial economist Diane Swonk tweeted: “Sequestration still not showing as layoffs; key will be if it shows up as loss in hours worked“
This latter point was something that UBS’s U.S. economist team has been stressing since the beginning of the year.
Here’s UBS’s Maury Harris:
…Our public sector employment projections are very much under various job loss estimates stemming from the $85 billion Federal spending sequester in fiscal 2013. The major flaw in sequester- related government job loss estimates is that they typically are generated by simply dividing spending cuts by average wages and salaries for Federal workers. However, the sequester instead is being implemented primarily through furloughs entailing one- or two-day drops in the monthly workweek per worker. Such furloughs “spread the pain” and do not entail major headcount cuts.
To think companies will just axe jobs is a bit too simplistic.
Still, fewer hours worked will nevertheless have an unfavorable impact on the economy.