Layoffs swelled 46% in September compared to August figures, with U.S. employers announcing 29,989 job cuts for the month, a study released Oct. 6 by executive outplacement firm Challenger, Gray & Christmas showed. This represents a 68% bump from layoffs reported in September 2021, the report found.
Although layoffs appear to be ticking upwards at the same time hiring is slowing, the number of job openings still exceeds that of individuals seeking employment, according to data released Oct. 4 by the Labor Department.
The ratio of job openings to unemployed individuals contracted slightly to 1.67 from 1.97 between July and August, CFO Dive recently reported, with the Labor Department announcing job openings fell to 10.1 million in August from 11.2 million in July.
Red-hot labor market compounds inflation worries
The contraction of job openings does show expanding caution on behalf of employers and a shortening of competition for workers generally, said Matthew Bidwell, professor of management at the Wharton School of Business in an interview.
“We will see less hiring than we have,” Bidwell said. “I expect we will see unemployment go off a bit. The big question is whether that's going to be a little or a lot.”
The continued imbalance of available job openings to unemployed workers is typically taken as a signal of an overheated labor market for the Federal Reserve, indicating that the central bank is unlikely to soften its efforts to clamp down on inflation by raising the benchmark interest rate.
“I do not have a crystal ball when it comes to the Fed, but I would not anticipate a rate cut in the very near future — although it would greatly benefit homebuyers who are currently facing crushing mortgage rates,” Todd Vachon, director Labor Education Action Research Network (LEARN) at the Rutgers School of Management and Labor Relations wrote in an email.
The persistent strength of the labor market combined with the bump in consumer confidence seen between August and September shows workers are still feeling positively about their economic prospects, he said in an email.
“In sum, I’m not seeing a lot of evidence that the market is cooling significantly,” Vachon wrote.
Challenger’s report also shows that although September marks the fifth time this year cuts were higher than those made during the corresponding month in 2021, overall planned job cuts in 2022 are still markedly below those of the previous year.
Employers have detailed plans to cut 209,425 jobs thus far, a 21% dip from the 265,221 such cuts that were announced between January and September 2021, according to the report.
Layoffs can prove costly
Reports of layoffs and potential future job cuts at several high-profile companies have emerged in recent months, however, as employers facing a persistently strong labor market look to slash costs in the face of a possible 2023 recession.
Power and home equipment retailer Stanley Black & Decker reportedly cut 1,000 finance jobs in late September under the leadership of its former CFO, according to a Sept. 30 report by the Wall Street Journal.
The company, which confirmed in a subsequent report by Barron’s it had conducted the job cuts, disputed the Wall Street Journal’s 1,000 figure as inaccurate, but did not confirm the number of employees who were laid off. Black & Decker did not immediately respond to requests for comment.
Payments processing firm Fiserv, meanwhile, made yet another round of employee cuts recently as it looks to navigate economic pressures.
The financial sector has announced 14,832 job cuts so far in 2022, an 81% jump from the number of layoffs announced the year prior through September 2021, according to Challenger’s report.
“I think what we are seeing is actually more of a mixed bag than a broad trend,” Vachon wrote of the current labor market in an email. “Some industries have slowed their hiring or are even engaged in layoffs, but others, especially many customer-facing service occupations, are still facing labor shortages and having a difficult time attracting and retaining applicants.”
While it is likely we will continue to see layoffs — something that happens even when the economy is doing well, Bidwell pointed out — executives who “fire in haste, repent at leisure, is my general view,” he said.
Companies who moved to quickly cut headcount during previous downturns saw costlier consequences than they might have expected. Many companies who slashed their workforces during the COVID-19 pandemic struggled to rehire during its aftermath, for example, he said.
“My advice would be, be very cautious,” he said. “It costs an enormous amount to rehire, it costs an enormous amount to reintegrate people into the company, so unless you really expect that kind of soft demand over multiple quarters, I would rather kind of incur some short term losses in order to maintain and build a strong workforce, then I would try and match my workforce to demand in real time.”