Layoffs around the U.S. surged in the first three months of the year, a sign the labor market is softening amid efforts by the Federal Reserve to hit the economic brakes in a bid to quash inflation.
In the first quarter of 2023, companies announced 270,000 job cuts, according to outplacement firm Challenger, Gray & Christmas —more than four times the number of cuts in the year-ago period.
“We know companies are approaching 2023 with caution, though the economy is still creating jobs. With rate hikes continuing and companies’ reining in costs, the large-scale layoffs we are seeing will likely continue,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in a statement.
The technology sector led the cuts, Challenger said. Announced layoffs in tech this year have already exceeded the total for all of last year. If that continues, tech could have its worst year on record, surpassing the cuts of 2001 and 2002, when the dot-com bubble deflated.
In recent months, tech giants including Amazon, Google, Facebook parent Meta, Microsoft and Yahoo have all announced major layoffs, slashing tens of thousands of jobs.
While still low by historical standards, layoffs have steadily risen since bottoming out last fall. Weekly unemployment claims, a proxy for layoffs, rose from about 200,000 in January to more than 240,000 in late March, according to revised data issued by the Labor Department on Thursday. (The revision adjusted the statistical techniques government uses to account for seasonal variation, such as large numbers of layoffs after the holidays and at the end of the summer.)
“While the job market is still strong, [it] hit peak tightness in early 2022 and has been softening since,” Bill Adams, chief economist of Comerica Bank, said in a research note, adding that “the data in hand right now suggest the job market lost momentum since last fall.”
Continuing jobless claims — a measure of workers who are unemployed for an extended period of time — have risen by about half a million since the start of the year, to a typical pre-pandemic level of 1.8 million.
Meanwhile, monthly payroll growth has slowed from its breakneck pace last year. The government’s monthly employment report, set to be released Friday, is expected to show about 240,000 jobs added in March, down from a pace closer to 400,000 last year.
Small businesses, in particular, have scaled down hiring plans. According to a National Federation of Independent Businesses survey, the portion of businesses planning to increase headcount slid from about 1 in 4 a year ago to 1 in 6 today.
“[I]t is now clear layoffs are increasing, while other data — notably the NFIB survey — point to much slower gross hiring,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a report, adding, “the economy is heading rapidly into a spring/summer recession.”