Wave of layoffs intensifies in the United States, sounding an alarm for the job market.

The phenomenon of "labor hoarding" that has led American employers to hold tightly onto employees in recent years now seems to be coming to an end. With a wave of layoffs announced one after another by prominent companies such as Starbucks and Amazon, a round of job cuts is hitting corporate America and raising increasing concern among economists about the health of the labor market—a possible early warning of impending market shifts.

Recent developments show that, although each layoff comes with its own business rationale, collectively these events form a troubling pattern. From Starbucks' corporate restructuring, to Amazon attributing layoffs to artificial intelligence, to Target cutting jobs to improve operational efficiency—what seem like isolated decisions are being interpreted by the market as signals of a broader trend.

According to data from career consultancy Challenger, Gray & Christmas, there is strong data supporting this trend. As of September this year, the total number of layoffs announced by U.S. companies has approached 950,000, marking the highest level for the same period since 2020. Dan North, Senior Economist at Allianz Trade Americas, notes that when a figure is nearly the worst since the Great Recession, "it’s not an encouraging number."

Although Federal Reserve Chair Jerome Powell believes that the labor market is undergoing "a very gradual cooling," market participants are highly alert to any signs of deterioration. The scale and speed of layoffs suggest that corporate managers are being more decisive in cutting labor costs to protect profits; the formerly stable state of "low hiring, low firing" may have come to an end.

Layoff Numbers Hit New Highs

This year, layoff figures in the U.S. job market have been particularly striking. According to a report by Challenger, Gray & Christmas, in the first nine months of this year, the number of announced layoffs in the U.S. has nearly reached 950,000. Not only is this the highest level for the same period since the early days of the pandemic in 2020, but excluding the exceptional circumstances of 2020, this figure even exceeds the total annual layoffs for any year since 2009.

The layoff phenomenon has spread across multiple industries. Government agencies have been hit particularly hard, with close to 300,000 job cuts announced this year. The technology and retail sectors have also been severely affected; for example, Southwest Airlines carried out large-scale layoffs for the first time in its history. Due to government shutdowns and cuts to federal statistical systems during the Trump administration, official data from agencies such as the Bureau of Labor Statistics have been less available, making data from private firms like Challenger especially important for evaluating the state of the market.

From "Labor Hoarding" to Cost-Cutting

The recent wave of layoffs marks a major shift in corporate employment strategies. Until recently, the U.S. was still in what economists called a "low hiring, low firing" mode. Due to the difficulty of hiring during the pandemic, many companies tended to "hoard labor," preferring not to lay off employees even when business slowed.

Now, things have changed. Citi economist Veronica Clark says, "Overall, companies may feel there is no longer a need to retain excess staff." Dan North puts it more bluntly: "We are no longer in a 'low hiring, low firing' environment; we are laying off." There are several key factors behind this shift in corporate attitudes. First, advances in artificial intelligence and automation have made managers more confident when carrying out layoffs. According to a LinkedIn survey, over 60% of executives believe AI will eventually replace some entry-level jobs. Second, in order to protect profits, many large companies prefer to absorb extra costs such as tariffs by cutting labor costs instead of passing them entirely onto consumers.

Economists Divided, Market Remains Vigilant

Although layoff data is concerning, economists are divided on the outlook for the job market. Fed Chair Jerome Powell has expressed relative optimism, believing the market is only "very gradually cooling" and not suffering severe problems.

However, many market observers are more cautious. Clark says she would be more worried if initial jobless claims consistently stayed at 260,000 or above, while the number has mostly ranged from 220,000 to 240,000 over the past year. Cory Stahle, senior economist at job search website Indeed, is closely watching layoffs outside the tech sector, believing that increases in transport and retail layoffs "are what truly marks a worrying beginning."

In this uncertain environment, demand for temporary workers has risen. According to Noah Yosif, Chief Economist of the American Staffing Association, demand for short-term employment services has rebounded in recent months after about three years of weakness. This shows that, while companies remain cautious about permanent hiring, they are using temporary staff to fill gaps left by eliminated permanent positions, highlighting corporate uncertainty about where the economy is headed.

Risk Warning and DisclaimerThe market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions mentioned in this article are suitable for their own circumstances. Investment decisions made accordingly are at your own risk.