The job market remains one of the key drivers of the U.S. economy, with the country's unemployment rate nearing a 50-year low and wages finally outpacing inflation. At the same time, major companies in technology, finance, media and other key sectors have all recently Announcement of large-scale workforce reductionsLayoffs nationwide more than doubled in January compared to a month earlier.
U.S. companies announced more than 82,300 job cuts in January, a 136% increase from December, according to a new analysis from executive coaching firm Challenger, Gray & Christmas.
This may raise employee concerns about job security, as well as questions about the robustness of the labor market. New government data Friday showed businesses hired about 177,000 workers and the unemployment rate rose slightly to 3.8% from 3.7% in December, according to economists surveyed by FactSet.
Most recent layoffs have been concentrated in a few industries, and experts say the overall job market remains strong. Here's what's causing the recent surge in layoffs and what it tells us about the state of the economy.
Are the job market conditions bad?
That's not what economists say, pointing to America's relatively low unemployment rate and consistent employment.
Nonetheless, the job market has clearly cooled from the hiring frenzy that occurred in 2021 and 2022. During that period, as the economy began to recover from the initial shock of the pandemic, businesses began to attract workers, which left the job market so tight. It prompted millions of Americans to change jobs in search of better wages and working conditions. “Great resignation.”
Americans may compare the unusually strong job market of that time to the cooler job market of today. The U.S. economy added 4.8 million jobs in 2022, before slowing to 2.7 million new jobs in 2023, according to JPMorgan Wealth Management. The latter is still higher than employment in years before the pandemic.
“[L]Abortion market conditions have eased but the job market remains healthy, Oxford Economics analysts said in a report this week.
One encouraging sign is that 57% of small businesses, which account for about 46% of private sector employees, plan to add jobs this year, according to a new Goldman Sachs survey of 1,459 small business owners conducted earlier this month. Three-quarters also expressed optimism about their financial outlook for this year, the investment bank said.
How do layoffs in 2024 compare to previous years?
Excluding January 2023, this January's layoffs are the highest number announced in a first month since January 2009, according to Challenger, Gray & Christmas.
At the time, the U.S. economy was in the midst of the Great Recession, and companies cut more than 241,000 jobs that month.
Who will be laid off in 2024?
Challenger, Gray & Christmas noted that most of January's job cuts were in finance and technology companies.
Financial companies announced the largest number of layoffs last month at more than 23,200, the highest in the industry since September 2018, when more than 27,000 people were laid off. One of the biggest layoff announcements in the industry came from Citigroup. Plan to lay off 20,000 people.
Technical workers suffered the second highest number of layoffs, with nearly 16,000 people losing their jobs, according to the analysis. Alphabet-owned Google, Microsoft and Salesforce was in between Last month, big tech companies cut thousands of jobs.
The media industry has also increased workforce reductions, although the number of layoffs is relatively low. News companies cut a total of 528 employees in January, a 1,660% increase from December, Challenger, Gray & Christmas noted.
Why do companies fire employees?
Some companies are looking to cut costs due to rising interest rates, while others are laying off workers after a hiring binge during the pandemic. Other companies are refocusing. Invest in artificial intelligenceThis has prompted job cuts in some non-AI business units.
“[T]“These layoffs are driven by broader economic trends and strategic shifts toward increased adoption of automation and AI across a variety of sectors, but in most cases, companies cite cost cutting as the primary driver of layoffs,” said Andrew Challenger, senior vice president, Challenger. Gray & Christmas made the announcement in a statement.
Will layoffs increase further in 2024?
This appears to be a drive by many companies to cut costs. The unemployment rate could rise to 4.1% this year, according to the latest forecast from Oxford Economics.
Federal Reserve Chairman Jerome Powell said this week that the central bank wants the labor market to calm down without causing a spike in unemployment. soft landing, Or it could cool inflation and economic growth while avoiding a recession.
“We hope to see the labor market achieve better balance without the large increases in unemployment we have seen so far,” Powell said.