The job market remains one of the U.S. economy’s main engines, with the nation’s unemployment rate near a 50-year low and wages finally pulling ahead of inflation. At the same time, major companies in technology, finance, media and other key sectors have all recently, with layoffs nationwide more than doubling in January from a month earlier.
U.S. companies in January announced more than 82,300 job cuts, a 136% increase from December, according to a new analysis from executive coaching firm Challenger, Gray & Christmas.
That may raise questions about the strength of the labor market as well as concerns among employees about their job security. On Friday, new government data is expected to show that businesses hired about 177,000 workers, with the jobless rate ticking up slightly to 3.8% from 3.7% in December, according to economists polled by FactSet.
Recent layoffs are mostly clustered in a few industries, with experts saying that the job market as a whole remains strong. Here’s what is 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 nation’s relatively low jobless rate and ongoing hiring.
Even so, the job market has definitely cooled from the hiring frenzy that occurred in 2021 and 2022. During those years, businesses snapped up workers as the economy began to recover from the initial shock of the pandemic, leading to a job market so tight it spurred millions of Americans to switch jobs in search of better pay and working conditions — a trend dubbed the
Americans may be comparing the unusually strong job market in those years with today’s cooler hiring. 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 is still higher than hiring in years prior to the pandemic, according to JPMorgan Wealth Management.
“[L]abor market conditions have loosened, but the job market remains healthy,” analysts with Oxford Economics said in a report this week.
One encouraging sign: 57% of small businesses — which account for roughly 46% of private-sector employees — plan to add jobs this year, according to a new Goldman Sachs survey of 1,459 small business owners taken earlier this month. Three-quarters also expressed optimism about their financial prospects this year, the investment bank found.