Job Cuts Soar Five Fold in 2023, with Tech Industry Announcing a Staggering 38,487% Increase
According to a report released by outplacement firm Challenger, Gray & Christmas, companies in the United States announced nearly 90,000 layoffs in March, indicating a sharp step up from the previous month and a giant acceleration from a year ago. Planned layoffs totaled 89,703 for the period, which is a 15% increase from February, and job cuts have soared to 270,416 for the year-to-date, a staggering 396% increase from the same period a year ago.
The technology industry was hit the hardest, announcing 102,391 cuts in the first quarter of 2023, which is a staggering increase of 38,487% from a year ago and accounts for 38% of all staff reductions. The report indicates that the tech industry has already cut 5% more jobs in the first quarter of 2023 than it did in all of 2022, and if it continues at this pace, it is on track to surpass 2001, which was the worst year ever for the industry during the dot-com bust.
Andrew Challenger, the senior vice president of Challenger, Gray & Christmas, said that the large-scale layoffs are likely to continue despite the economy still creating jobs, as companies approach 2023 with caution, with rate hikes continuing and companies reigning in costs.
The financial industry has announced the second-highest rate of job cuts this year, with 30,635 layoffs representing a 419% increase from the first quarter of 2022. The health care and retail sectors are next in line with high rates of job cuts.
Meanwhile, planned hiring waned in March, with only 9,044 jobs added, which is the worst for the month since 2015. Planned additions for the year-to-date are at the lowest quarterly total since 2016.
The report reveals that the main reason cited for job cuts has been market and economic conditions, with cost-cutting being the next most frequently mentioned factor.
The report comes ahead of the Labor Department‘s nonfarm payrolls count, with economists surveyed by Dow Jones expecting job growth of 238,000 for March, which would be the smallest increase since January 2020.
Despite the high level of layoffs, job openings have begun to fall, with available positions in February declining below 10 million for the first time since May 2021, indicating at least some loosening in the employment market. However, the pace of hiring has only edged lower by 164,000, while layoffs and discharges have decreased by 215,000, leaving nearly 1.7 job openings per available worker.
The Federal Reserve has been targeting an ultra-tight labor market as it battles inflation, which is still running near 40-year highs. The Fed has increased its benchmark borrowing rate by 4.75 percentage points over the past year or so to soften the demand that has propelled rising prices. The markets currently expect that the Fed is done raising rates and is likely to start cutting later this year, according to the CME Group’s FedWatch tool, which tracks pricing in the futures market.
The report concludes that while there is still some hiring going on, there are also a lot of layoffs, with the economy experiencing some loosening in the employment market. However, with companies approaching 2023 with caution and the Fed battling inflation, the future of the job market remains uncertain.