The US economy appears to be doing well, but employment data — an important indicator of future trends — indicate that caution needs to be exercised. The US unemployment rate touched a high of 4.3% in July but settled lower at 4.2% in August. Layoffs and low hiring plans are keeping the job market subdued amidst a higher-rate environment.
US businesses have faced higher interest rate scenarios in recent years, despite sustained earnings due to robust consumer demand. Cost pressure, economic conditions, and AI waves are causing concern, with the job sector facing the brunt.
Challenger, Gray & Christmas, a global outplacement and business and executive coaching firm, tracks the US jobs market and in a recent report, points out the reasons why companies are cutting jobs and have low hiring plans — Last month (August), 37,403 job cuts were attributed to ‘Cost-Cutting,’ while 16,439 were due to ‘Market/Economic Conditions.’
For the first time since April, employers specified Artificial Intelligence (AI) as a reason for job cuts. Last month, 5,943 cuts were due to AI, all of which occurred in the Technology space. So far this year, 7,126 cuts are due to AI.
What seems to be disturbing is low hiring by US employers. The Challenger report says that U.S. employers have announced 79,697 hiring plans, down 41% from the 135,980 plans recorded through August last year. The year-to-date total is the lowest since Challenger began tracking in 2005. The previous lowest total through August occurred in 2008 when 80,387 hiring plans were announced.
U.S.-based employers announced 75,891 cuts in August, a 193% increase from the 25,885 cuts announced one month prior. It is up 1% from the 75,151 cuts announced in the same month in 2023.
For the year, companies have announced 536,421 job cuts, down 3.7% from 557,057 announced through August of last year. Excluding the 115,762 job cuts announced in August of 2020, last month was the highest August total since 2009, when 76,456 layoffs were recorded.
“August’s surge in job cuts reflects growing economic uncertainty and shifting market dynamics. Companies are facing a variety of pressures, from rising operational costs to concerns about a potential economic slowdown, leading them to make tough decisions about workforce management,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc.
Last month, Technology announced the most job cuts in 20 months when 41,829 cuts were recorded for January 2023. The sector announced 39,563 job cuts in August, for a year-to-date total of 105,426. That is down 29% from the 149,452 announced through the same period last year.
“The Tech sector is moving from a growth and innovation focus into one of profitability and efficiency. AI and automation adoption is also driving job cuts at Tech companies across roles and functions. This talent, however, is still in high demand. Many of these professionals will land elsewhere, in and outside of the Tech industry. That said, we’re entering a period of slower hiring, so it may take longer than it has at any point in the last decade,” said Challenger.
