Marketplace Morning Report - Episode: A Dramatic Drop in New Jobs
Release Date: March 5, 2025
Introduction
In this episode of Marketplace Morning Report, host Sabri Beneshore delves into significant developments affecting the U.S. economy, focusing on the recent dramatic decline in job growth. The report also touches upon regulatory actions involving major financial institutions and provides expert insights into the implications of these economic shifts.
CFPB Drops Lawsuit Against Zelle and Major Banks
[00:01] Sabri Beneshore opens the episode with breaking news from the Consumer Financial Protection Bureau (CFPB):
"The Consumer Financial Protection Bureau is dropping its lawsuit against the operator of the payment platform Zelle, along with three large banks." ([00:01])
The lawsuit, initiated in the final days of the Biden administration, accused Zelle and major banks—Wells Fargo, Bank of America, and JP Morgan Chase—of inadequately protecting consumers from fraud. These institutions were alleged to have hastily launched Zelle to compete with startups like Venmo and Cash App without implementing sufficient safeguards, resulting in approximately $870 million in customer losses over seven years.
[00:26] Henry AP further explains:
"In a court filing Tuesday, lawyers for the CFPB dismissed the lawsuit with prejudice, meaning they won't take up the case again." ([00:26])
A Zelle spokesperson expressed satisfaction with the dismissal. This decision aligns with a series of recent actions where the CFPB has withdrawn other lawsuits against prominent companies, including Capital One and Berkshire Hathaway. The episode highlights the broader context of the current administration's efforts to scale back the agency's influence, although a federal judge recently halted mass layoffs at the CFPB.
Significant Decline in Job Growth
Transitioning to the labor market, Sabri Beneshore presents alarming data from ADP:
[01:28] Sabri Beneshore:
"The major payroll processing company says according to its data and estimates, the US added 77,000 jobs in February. That is a dramatic drop from the 186,000 it estimated for January." ([01:28])
To unpack these figures, Beneshore welcomes Susan Schmidt, a portfolio manager at Exchange Capital Resources.
Expert Insight: Susan Schmidt on Slowing Job Growth
[01:47] Sabri Beneshore introduces Susan Schmidt and poses a pivotal question:
"You've got talent. Firms like Challenger Grand Christmas recently saying they were expecting layoffs to accelerate and that they were seeing more of them. And then you have this ADP report showing the smallest level of job growth since July. Why is this happening?" ([01:48])
[02:02] Susan Schmidt responds:
"There's general concern among businesses that costs are going to be increasing and so they're not eager to go out and hire more workers, which would increase costs as well. Businessmen are telling you that they're having some concerns. No one is sure what the impact of these tariffs will be and how much those baseline prices are going to have to increase." ([02:02])
She elaborates on the market's response to these economic indicators:
[02:22] Susan Schmidt:
"They've been focused on the tariffs, but there is some hints from the administration that there might be some compromise on the tariffs that were just imposed on Mexico and Canada. However, the markets are less optimistic than they were 12 hours ago because now we have this labor data. The jobs growth from the private payrolls number at only 77,000 jobs added this month when 103,500 jobs were estimated is very different than market expectations and an indicator that the economy is probably slowing." ([02:26])
[02:59] Sabri Beneshore summarizes:
"Portfolio manager at Exchange Capital Resources, Susan Schmidt, thank you so much." ([02:59])
[03:04] Susan Schmidt:
"Thank you." ([03:04])
The discussion underscores a growing anxiety among businesses regarding rising operational costs and uncertain trade policies, leading to cautious hiring practices and contributing to the significant slowdown in job creation.
Accelerating Layoffs and Their Impact
Continuing the conversation on the labor market, Sabri Beneshore addresses the surge in layoffs:
[03:19] Sabri Beneshore:
"Almost 100 companies have announced layoffs in March and we're only five days in. Layoffs are a fact of life even in a healthy economy, but they do appear to be accelerating. And today's ADP estimates of job growth like Susan Schmidt was just talking about, were pretty low. We'll get a clearer picture at the end of this week when the Bureau of Labor Statistics releases official jobs data. But watching layoffs happen from inside a company experiencing them or a government experiencing them affects morale and even productivity." ([03:19])
To explore the psychological and organizational effects of layoffs, Beneshore invites Adam Grant, an organizational psychologist from the University of Pennsylvania's Wharton School.
Expert Insight: Adam Grant on the Psychology of Layoffs
[03:56] Adam Grant greets Sabri Beneshore:
"Great to be here." ([03:56])
[03:57] Sabri Beneshore poses a crucial question:
"The labor market is still strong, but it's been cooling down for a while. There have been a number of high profile layoffs. If that results in even less leverage for employees, what does that mean for their happiness?" ([03:57])
[04:11] Adam Grant provides his analysis:
"Well, I think the short term effect of layoffs obviously is to increase job insecurity among people who are still lucky enough to be employed. And with that sometimes comes survivor's guilt where people feel like it should have been me, I should have been the one whose job was cut. And we know that's bad for productivity. We also know that when workplaces start to cut jobs, the biggest superstars, the people who have the most options elsewhere, are the quickest to jump ship. And so this can be a pretty short sighted strategy for employers. And my hope is that as we see more haphazard downsizings, leaders start to learn that actually this behavior backfires for them. And the evidence is strong on this one. There was a paper published in a top academic journal about downsizings that literally called them dumb and dumber, which is not, not language that academics normally get away with. But it was a study comparing thousands of firms in similarly dire financial straits. Some of them downsized and cut jobs. Others found alternative ways to, to deal with the financial pressure, like for example, executive pay cuts. And lo and behold, the firms that downsized actually ended up performing worse." ([04:11])
Grant emphasizes the detrimental effects of layoffs on remaining employees' morale and productivity, as well as the long-term negative impact on companies that choose to downsize instead of exploring alternative cost-saving measures.
Strategies for Effective Workforce Management
[05:25] Sabri Beneshore seeks solutions:
"What is the way to manage a workforce that improves productivity and offers a sense of fulfillment and purpose?" ([05:25])
[05:34] Adam Grant outlines his approach:
"I think instead of being micromanagers, we need leaders to be macro managers. I think that a great macro manager is somebody who helps you understand why your work counts. I studied this early in my career. I was doing randomized, controlled experiments with fundraising callers who were bringing in donations to a university, and they had no idea where the money they raised actually went. So I designed a simple experiment to connect those dots. And a month later, the average caller had spiked more than double in phone time per week and nearly triple in revenue per week. All I'd done was bring in one scholarship student who was able to say, here's how the money you raised changed my life. And I think intellectually, the callers knew that work was happening. They were aware that they were raising money that benefited somebody. But it wasn't until they were able to connect that work to a living, breathing human being that they found a reason to invest their full energy and attention in their job." ([05:34])
Grant advocates for macro management, where leaders focus on the overarching purpose and impact of their employees' work, fostering a sense of fulfillment and driving higher productivity. He illustrates this with a compelling example from his research, demonstrating how connecting employees to the tangible outcomes of their efforts can significantly enhance their performance and job satisfaction.
Conclusion
The episode of Marketplace Morning Report presents a comprehensive analysis of the current economic landscape, highlighting the troubling slowdown in job growth and the rising trend of layoffs. Through expert interviews with Susan Schmidt and Adam Grant, the report underscores the multifaceted challenges businesses face, including rising costs and uncertain trade policies, and explores the psychological impacts of workforce reductions. The insights offered provide valuable guidance for leaders aiming to navigate these turbulent times by adopting management strategies that prioritize employee morale and long-term productivity.
For more detailed discussions and updates on these topics, tune into future episodes of Marketplace Morning Report.