On the good news/bad news roller coaster that is the U.S. economy, many headlines at the end of August suggested a downward turn: a wave of layoffs was reported across a range of industries.
Farmers Insurance was one of the latest national employers to announce layoffs: the company said on Aug. 25th that it would cut 2,400 jobs, or about 11% of its workforce. T-Mobile said it expected to lay off around 7% of its employees over the summer. Pharmacy giant CVS announced job cuts of 5,000 positions. JP Morgan announced earlier in the year it would cut 500 jobs. Shopify, Spotify, and Grubhub were among the tech/service companies that have also announced cuts in recent months.
This followed a round of earlier cuts — 6,000 jobs by 3M announced in April, 2,000 jobs at retailer Gap, and 1,200 jobs cut at financial advisory firm Deloitte.
A Forbes analysis found that job cuts started last year, when inflation was still rising and there was a lot of uncertainty around the health of the economy. “Cuts came on the heels of a series of layoffs that swept through manufacturers, banks, and tech startups throughout the second half of last year, with more than 120 U.S. companies conducting major rounds of layoffs between June and December. Those layoffs also came as employers feared record inflation and the Federal Reserve’s interest rate hikes could tip the economy into recession,” the analysis said.
A sudden jump in job cuts in August
The August bump in layoffs came after a relatively quiet July. Challenger, Gray & Christmas, a global outplacement and business and executive coaching firm, noted that the nearly 24,000 job cuts in July were a 42% decrease from June. In addition, the number was 8% lower than the corresponding month in 2022.
At the time, Challenger said the job market was remaining resilient, as consumers continued to spend and inflation moderated. “Companies, weary of letting go of needed workers, are finding other ways to cut costs. Many have slowed hiring, but wages continue to rise, particularly for the lowest-wage earners, for the moment,” said Andrew Challenger, labor expert and SVP of Challenger, Gray & Christmas, Inc.
A month later, the outlook had changed. The company’s blog noted that there was a 217% increase in job cuts in August, compared to July. It was 267% higher year-over-year when compared to August, 2022.
“Job openings are falling, and American workers are more reluctant to leave their positions right now. The job market is resetting after the pandemic and post-pandemic hiring frenzy,” said Challenger. “The increase in job cuts is not surprising as technological disruption and companies taking a cost-savings approach on the economy claim positions.”
On the other hand…
Zooming out to see the bigger picture might ease some of the panic seen in the job-cut headlines. Although layoffs are making headlines, hiring still remains relatively robust, and overall unemployment is quite low — and economists say that U.S. Bureau of Labor statistics suggest that more people are re-entering the workforce.
This CNBC report noted that in August, the rate of labor force participation reached the highest level since the start of the COVID-19 pandemic. The article said that the “great resignation” may be over, with wages rising and workers more likely to stay with their jobs.
Read more: The importance of COBRA in a time of layoffs
The CNBC report also noted that the net change in jobs in the month of August was mostly positive. Health care and social assistance added 97,000 jobs overall. Leisure and hospitality added 40,000 jobs. Construction added 22,000. Manufacturing added 16,000 jobs. Only three areas were in negative figures: mining and logging (-2,000); information (-15,000) and transportation and warehousing (-34,000).
The different findings may paint a picture of an economy finding its balance, some analysts suggested. “The labor market was sprinting last year and now it’s getting closer to a marathon pace,” said Nick Bunker, head of economic research at job site Indeed. “A slowdown is welcome; it’s the only way to go the distance.”