According to CCTV News, according to CNN, a spokesman for the US Federal Reserve said on the 22nd that the Fed system will cut about 300 employees before the end of this year, which is the first time the institution has cut staff in 13 years. At the same time, the Fed's financial report shows that the Fed lost more than $57.3 billion (about 418.2 billion yuan) in the first half of the year.
In recent years, the agency's headcount has reportedly been growing year over year as the Fed's influence in the economic and regulatory agenda has expanded. The layoffs are the Fed's first since 2010, and the layoffs are mainly for support positions.
According to expert analysis, the Fed's current round of aggressive interest rate hikes has also had a negative impact on itself. The Fed holds a large amount of U.S. Treasuries, but as it raises interest rates sharply, the price of U.S. Treasuries plummets, causing the Fed to lose a lot of money. Some netizens jokingly said that this is "boomerang piercing itself".
In addition, the Fed's aggressive interest rate hikes have caused a surge in borrowing costs for U.S. companies, and a large number of companies have gone bankrupt. Goldman Sachs strategists recently warned that U.S. companies are about to hit a huge debt wall that will mature in the next few years and trigger a new wave of layoffs that will shake the U.S. economy.
The loss in the first half of the year exceeded 400 billion
The Fed lays off jobs for the first time in 13 years
According to CCTV News on September 23, according to CNN, the spokesman of the US Federal Reserve Board confirmed on September 22 local time that the Fed system will cut about 300 employees by the end of this year.
The layoffs are the agency's first (13 years) since 2010. The Fed system currently has about 21,000 employees.
A Fed spokesman said on Friday that the layoffs were mainly concentrated in 12 local central banks, and the most affected were information technology work. Some of the engineers lost their jobs because the popularity of cloud services made them no longer needed by the Fed. Also because the Fed is consolidating a series of payment systems, it will also eliminate some jobs in the process. The spokesman also said that in addition to layoffs, there was also a factor in staff retirement.
It is reported that the layoffs occurred at a sensitive time for the Federal Reserve. According to the Fed's earnings report, the institution has a huge loss on its books, and the loss is gradually expanding. The Fed's financial statements for the first half of this year show that at the end of June, the Fed's assets were $8.34 trillion, but at the same time, the loss in the first half of the year exceeded $57.3 billion (about 418.2 billion yuan).
However, how many people the Fed laid off this fiscal year will have to wait until next year's annual report is revealed.
Expert: The Fed is raising interest rates aggressively this round
Causes self-influence
Expert analysis believes that the Fed's losses are mainly due to obvious term mismatches in the balance sheet. In addition, the rapid expansion of the Fed's balance sheet and the intensive interest rate hikes since last year are also reasons for its net operating loss. It can be said that the Fed's aggressive interest rate hike this round has also had a negative impact on itself.
In response to high inflation in the United States, the Federal Reserve began the current cycle of interest rate hikes in March 2022. There have been 11 rate hikes, with a cumulative increase of 525 basis points, pushing interest rates to the highest level in 22 years.
Experts say that judging by the Fed's balance sheet, the Fed holds a large amount of U.S. Treasuries. Many of these bonds were held by the Fed for a long time during periods of low interest rates, and as fixed income products, these low-rate bonds generate limited interest income. As the Fed raised interest rates sharply and market yields increased, the price of these Treasuries fell sharply, which is one of the main reasons for the Fed's book losses. High interest rates also lead to an interest rate mismatch between assets and liabilities in the Fed's balance sheet, that is, the interest rate on Fed assets is low, but the interest rate on liabilities is high, which in turn leads to a widening gap between its income and expenditure.
Hu Jie, professor at Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University: Since the Fed's interest rate hike has led to an increase in interest rates in the entire market over the past year, the assets held by the Fed, that is, a large number of government bonds, have depreciated on the books. So in an accounting sense, the Fed is indeed in a loss-making state.
Wang Qing, chief macro analyst of Oriental Jincheng: Because it receives less interest on its low-interest bonds, this leads to the Fed's books showing that its income is relatively low. From the perspective of liabilities, the Fed's liabilities are mainly the deposits of financial institutions in the Fed. The interest on these deposits needs to increase with the Fed's rate hike since last March, so the interest that the Fed needs to pay will also rise. This leads to a mismatch in interest rates on the balance sheet, which also exacerbates the Fed's income and expenditure gap and increases its book losses. More importantly, judging by the results of the latest Fed interest rate meeting, high interest rates may need to be maintained for a while. This means that the Fed will continue to lose money for a long time to come. This is the main reason for this layoff, and can also be seen as an additional consequence of the previous sharp interest rate hike.
In addition, the jobs that the Fed system will cut by the end of the year will mainly target support jobs. Experts say this is related to the use of new technologies.
Tian Lihui, Dean of the Institute of Financial Development of Nankai University: With the increase in the application of new technologies in work, it is also necessary to adjust the organizational structure of the back-office support department to adapt to new needs. Therefore, due to the change of job functions, it is also one of the reasons why the Fed made this decision to cut employees.
On average, more than 50 bankruptcies per month
Is the wave of corporate bankruptcy in the United States coming?
According to CCTV4, recently, the US "Market Watch" network quoted a report released by the Guggenheim Investment Company to report that due to the Fed's aggressive interest rate hikes leading to a sharp increase in corporate borrowing costs, as well as the uncertainty of the US economy, the number of bankrupt companies in the United States this year may reach the highest level since 2010. Analysts warn that a wave of corporate defaults could hit the U.S. economy.
According to the Guggenheim report, as of the end of August, more than 450 U.S. companies had filed for bankruptcy protection, more than the number of bankruptcies in the past two years combined. This equates to an average of more than 50 business bankruptcies every month.
According to media reports, according to the latest data released by the US bankruptcy filing data provider, the number of US commercial bankruptcies in August this year increased by nearly 17% compared with July. The total number of bankruptcies, including households and individuals, increased year-on-year for the 13th consecutive month. At the same time, corporate defaults are soaring.
Guggenheim analysts pointed out in the report that due to persistently high inflation and the Federal Reserve's continuous interest rate hikes, the borrowing costs of American companies have risen rapidly, and many companies have fallen into default and eventually faced bankruptcy due to their inability to repay their debts.
Although on the 20th of this month, the Fed decided to pause interest rate hikes and maintain the federal benchmark interest rate in the range of 5.25% to 5.5%, analysts warned that in order to reduce inflation, the Fed may still raise interest rates further. Goldman Sachs strategists recently warned that U.S. companies are about to hit a huge debt wall that will mature in the next few years and trigger a new wave of layoffs that will shake the U.S. economy.
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Daily economic news is synthesized from CCTV news and CCTV4
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