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Illustration: Eniola Odetunde/Axios

The fourth quarter is a major inflection point. The U.S. economy is moving out of its bounce-back recovery from the coronavirus depression and could be returning to slower growth and recovery or it could be moving toward a recession.

The state of play: We are about to see a second wave of job losses — this one more likely to permanently push millions out of the labor force, lower wages and leave long-lasting scars on the economy.

On one side: The coming October jobs report is expected to show employers added 625,000 jobs last month — demonstrating a labor market continuing to slow but still moving in a positive direction.

On the other side: Layoff announcements picked up at the end of October, with ExxonMobil, Chevron, Charles Schwab and Raytheon all announcing the elimination of thousands of white-collar jobs.

  • Those followed major layoffs from Wells Fargo, Goldman Sachs, Salesforce, Allstate and WarnerMedia.

The intrigue: Rather than a panic-driven effort to cut costs and stay above water, these job losses are largely a result of companies reducing headcount after mergers and acquisitions or as part of a longer-term strategy.

  • Businesses have been positioning themselves for an increasingly competitive landscape by boosting productivity and reducing costs, so they've been cutting jobs and investing in new technology, as I wrote in September.
  • "Almost every client that we deal with, irrespective of sector, is trying to drive cost down and make their products and services more affordable," Tim Ryan, U.S. chair and senior partner at PwC, said during a September call with reporters.

By the numbers: In the first half of 2020, more than 3,600 companies filed for bankruptcy, according to legal services provider Epiq, and the pace has picked up since.

  • In June, just over 600 companies filed for bankruptcy protection, up 43% from June 2019.
  • In September, 747 companies filed, a 78% increase over September 2019.
  • “These commercial filings are primarily small businesses that do not have access to capital or stimulus," Deirdre O’Connor, managing director of corporate restructuring at Epiq said last month. "Unfortunately, those bankruptcies will continue to rise in the current economic environment."

Go deeper

Dion Rabouin, author of Markets
Jan 8, 2021 - Economy & Business

Labor market is moving in the wrong direction

Data: U.S. Department of Labor via FRED; Chart: Axios Visuals

More than 1 million Americans filed for unemployment benefits for the first time last week, even as new applications for the Pandemic Unemployment Assistance program fell to their lowest level since March.

State of play: The $900 billion stimulus bill passed by Congress at the end of December extended the PUA program through at least March but also added a new verification process that forces applicants to reapply in order to reduce fraud.

Bill Gates faces scrutiny over relationship with Microsoft employee, Epstein ties

Photo: Alessandro Di Ciommo/NurPhoto via Getty Images

Representatives for Bill Gates pushed back on claims Sunday that he left Microsoft's board because of an earlier sexual relationship and against two other reports detailing more extensive ties with Jeffrey Epstein than had previously been reported.

Driving the news: Microsoft said in an emailed statement to Axios that it "received a concern" in 2019 that its co-founder "sought to initiate an intimate relationship with a company employee in the year 2000," but denied a Wall Street Journal report that its board members thought Gates should resign over the matter.

AT&T in talks with Discovery to combine media assets

Illustration: Annelise Capossela/Axios

AT&T is in talks with media giant Discovery about merging its media assets, like CNN, TBS and TNT, according to two sources familiar with the discussions.

Why it matters: A potential merger could allow AT&T and Discovery to better compete with entertainment giants like Disney and Netflix in the video streaming wars.