Why They're High, But Job Cuts Still Remain Low
The Truth Behind the Current Job Layoff Announcements
and their Impact on Our Overall Economic Health
There has been a surge in layoff announcements at the end of 2023 following into this year. In December 2023 alone, there were 1.6 million layoffs. Google laid off hundreds in its hardware, voice assistance, and engineering teams while Microsoft has cut 1,900 jobs in its gaming division, or 8% of its total gaming workforce. Salesforce and eBay followed similar patterns laying of 10% and 9% of their total workforce, respectively.
What has led to this trend of downsizing? Several factors including a rebalancing of the workforce following excess hiring during the pandemic, companies transitioning to AI and other new technologies to streamline processes and boost operations, and higher interest rates.
A recalibration of the post-pandemic workforce is the largest of these factors as the industries that grew (and hired) the most in the early 2020s are also those experiencing a majority of these layoffs, including tech, transportation, and warehousing.
However, this upward trend in layoff announcements may not be as indicative of an economic downturn as it initially seems, and is simply the result of these industries transitioning back to their pre-pandemic activity levels.
For example, transportation and warehousing employment rose 16.5 percent after the pandemic and has since pulled back only 1.4 percent according to Chief Economist at ZipRecruiter Julie Pollack. Likewise, employment in software publishing rose 30 percent post-pandemic and has since lowered by 3 percent. This means that these industries are still larger as a result of their pandemic boom, but are now pulling back just slightly to adjust to the more normal economic conditions.
So, the good news? Despite these layoff announcements, high interest rates, and inflation, job cuts remain at a historical low. As mentioned, there were 1.6 million layoffs in December 2023 alone, but this is still 200,000 less compared to the monthly pre-pandemic average of 1.8 million. This shows that despite these announcements, companies are still holding onto workers at a higher rate – they haven’t forgotten the labor shortage issues they were recently experiencing during the pandemic.
Moreover, despite the layoffs and hiring losses we’ve seen at big name companies such as Google, Microsoft, Amazon, and UPS, there are still small to medium-sized companies with several job openings that appear to be doing great. According to ADP, medium-sized organizations with between 50-499 employees led job creation in January 2024 adding 61,000 and small businesses added 25,000.
In conclusion, despite these layoff announcements, job cuts still remain at a historical low, and experts believe that these layoffs do not indicate larger economic troubles. In fact, ADP reported a 5.2% annual rise in wage gains in January 2024, which is a figure above the government’s average measure of hourly earnings and ADP’s Chief Economist Nela Richardson said that the economy looks like “it’s headed toward a soft landing in the U.S. and globally.”
Businesses should approach these headlines with caution and discernment, understanding while they do signal change, they do not necessarily signal impending economic downturn. In other words, make adjustments but don’t succumb to panic. And having a partner like Premier HR Solutions can help you do just that in these uncertain times. We provide tailored human resources solutions to help businesses weather fluctuations in the market and maintain stability and growth, even amidst uncertainty. Click the link below to schedule a free consultation and learn how we can help empower your small to medium-sized business to thrive regardless of external pressures.