The job market is strong. So why did layoffs double in January?
The labor market remains one of the main drivers of the US economy, as the country’s unemployment rate is approaching its lowest level in 50 years, and wages are finally ahead of the inflation rate. Meanwhile, major companies in technology, finance, media and other major sectors have recently…with layoffs across the country more than doubling in January compared to the previous month.
U.S. companies in January announced more than 82,300 job cuts, a 136% increase from December, according to a new analysis by executive training firm Challenger, Gray & Christmas.
This may raise questions about the strength of the labor market as well as concerns among employees about their job security. New government data on Friday is expected to show that companies hired about 177,000 workers, with the unemployment rate rising slightly to 3.8% from 3.7% in December, according to economists polled by FactSet.
The latest layoffs are mostly concentrated in a few industries, where experts say the job market as a whole remains strong. Here’s what’s driving the recent spike in layoffs and what it tells us about the state of the economy.
Is the job market in bad shape?
Not according to economists, who point to the country’s relatively low unemployment rate and steady hiring.
However, the job market has definitely slowed down after the hiring frenzy of 2021 and 2022. During those years, companies poached workers as the economy began to recover from the initial shock of the pandemic, significantly tightening the labor market. Motivated millions of Americans to switch jobs in search of better wages and working conditions – a trend he called ”
Americans may compare the unusually strong labor market in those years to today’s more subdued employment rates. The U.S. economy added 4.8 million jobs in 2022, with that pace slowing to 2.7 million new jobs in 2023 — the latter still higher than employment in the years before the pandemic. According to To JP Morgan Wealth Management.
“[L]“Labor market conditions have eased, but the labor market remains healthy,” analysts from Oxford Economics said in a report this week.
One encouraging sign: 57% of small businesses – Which represents approx 46% of workers in the private sector — plans to add jobs this year, according to a new Goldman Sachs survey of 1,459 small business owners conducted earlier this month. The investment bank found that three-quarters of them also expressed optimism about their financial prospects this year.
How do layoffs in 2024 compare to previous years?
Excluding January 2023, this year’s January layoffs represent the largest number of job cuts announced in the first month of the year since January 2009, according to Challenger, Gray & Christmas.
At the time, the US economy was mired in the Great Recession, prompting companies to cut more than 241,000 jobs that month.
Who will be laid off in 2024?
Challenger, Gray & Christmas noted that job cuts in January were mostly at financial and technology companies.
Financial companies announced the largest number of layoffs last month, at more than 23,200, representing the largest number of job cuts in the industry since September 2018, when more than 27,000 jobs were cut. One of the biggest layoff announcements in the sector came from Citigroup, which said so.
Technology employees suffered the second-highest number of layoffs, with nearly 16,000 people losing their jobs, according to the analysis. Alphabet is owned by Google, Microsoft, and SalesforceBig tech companies cut thousands of jobs last month.
Media companies have also increased job cuts, although the number of layoffs is relatively small. News companies cut a total of 528 workers in January, an increase of 1,660% from December, Challenger, Gray & Christmas noted.
Why do companies lay off workers?
Some companies are seeking to cut costs amid rising interest rates, while others are laying off workers after a hiring spree during the pandemic. Other companies are refocusing onwhich led to job cuts in some business units not related to artificial intelligence.
“[T]“These layoffs are also driven by broader economic trends and a strategic shift toward increased automation and AI adoption across sectors,” said Andrew Challenger, Amazon’s senior vice president, although in most cases, companies cite cost cutting as the primary driver for the layoffs. Laborers”. Challenger, Gray and Christmas, in a statement.
Will there be more layoffs in 2024?
This is likely in light of the pressure exerted by many companies to reduce costs. The unemployment rate could rise to 4.1% this year, according to recent forecasts from Oxford Economics.
Federal Reserve Chairman Jerome Powell said this week that the central bank wants to see the labor market calm without causing a jump in unemployment — part of the so-calledOr calm inflation and economic growth, while avoiding recession.
“We hope to see … a continuation of what we’ve seen, which is the labor market coming into better equilibrium without a significant increase in unemployment,” Powell said.