The U.S. labor market, for as tight as it has been over the last couple of years, is about to get a little looser, experts warn.
In California, New York and Washington, companies are gearing up for a steep number of layoffs affecting a wide range of sectors from tech giants to hospitality and health care. A total of 25,210 employees in these states are set for layoffs in the next few months, which will trigger a wave of new job seekers.
However, according to Pantheon Macroeconomics chief economist Ian Shepherdson, this could just be the start.
"On the firing side of the payroll equation, the message coming from employers and employees is consistent: more layoffs are coming," Shepherdson shared with Newsweek via email. "State WARN notices of imminent plant closures and mass layoffs are increasing, as is the Challenger measure of job cut announcements, and Google searches for "claim benefits" have risen sharply."
The 25,210 number comes from Warn Tracker, a website that tracks upcoming layoffs based on WARN notices, which are legal documents filed by companies when they anticipate workforce reductions.
To understand the data, it's important to grasp the concept of WARN notices.
The Worker Adjustment and Retraining Notification (WARN) Act, a federal law enacted in 1988, mandates that employers notify employees and government officials 60 days in advance of mass layoffs or plant closures.
The WARN Act mandates specific thresholds for issuing WARN notices based on employee count and location, and they encompass plant closings and mass layoffs. Plant closings involve job losses for at least 50 full-time employees within 30 days at a single site, while mass layoffs occur when there is a workforce reduction of either 500 or more full-time employees at a single location or job loss for at least 33 percent of the company's full-time workforce, with at least 50 full-time employees affected at a single site.
Not all layoffs require WARN notices, however, meaning there could be more than 25,210 layoffs in the three states.
Leading the pack, California is bracing for the most substantial impact, with 13,259 workers expected to face layoffs, according to Warn Tracker. The tech industry, home to Silicon Valley behemoths like Apple and Google, along with sectors such as hospitality and health care, is set for a period of reduction in the coming months.
The diverse range of services, including the California Institute of Technology (Caltech) which is laying off 521 employees on April 7, signals a broader tremor rather than an isolated industry downturn.
"The labor market appears increasingly likely to see both slower gross hiring and increased layoffs, for the first time in this cycle, pushing down job growth in the spring," Shepherdson shared with Newsweek. "We see a decent chance that across the second quarter, job growth is concentrated mostly in the non-cyclical economy, mostly health care and education, where demographics are the key factor."
Washington is also seeing broad-based layoffs, with 5,994 employees facing job losses in multiple sectors. Companies like Expedia and Walmart, along with Unity Technologies and Del Monte Foods, underline the widespread nature, affecting the digital and the tangible aspects of the state's economy.
A significant number of layoffs in the state are from RaterLabs, a search engine rating company based in Kirkland, which announced a permanent layoff of 3,657 employees effective April 6.
New York's scenario, with 5,951 layoffs on the horizon, presents the same broad-based job cuts.
From the banking sector, including Citigroup, which is laying off upward of 310 employees, to educational institutions like The College of Saint Rose, the layoffs cut across the financial and academic fibers of the state.
Impending job losses at UPS (up to 100) and Paramount Global (up to 500) further exacerbate the situation, underscoring the widespread nature of the workforce reduction.
Reasons Behind Looming Layoffs
While the data from Warn Tracker paints a concerning picture, Shepherdson said several factors that are contributing to the trend.
He pointed to a "dip in gross hiring intentions" coupled with the "upturn in layoffs," which suggests that businesses are becoming more cautious and willing to downsize their workforce.
Shepherdson also said that rising borrowing costs due to the Federal Reserve's rate hike campaign are pressuring companies, sharing with Newsweek that "working capital is now extremely expensive" due to the higher interest rates, making it difficult for companies to maintain current staffing levels.
Tighter credit conditions are making it harder for businesses to access the funds they need to invest and grow, Shepherdson said, noting that "credit is harder to get" as "the stock of bank lending to commercial and industrial companies is shrinking outright."
That financial difficulty forces companies to make challenging workforce decisions, Shepherdson said.
While he believes the layoffs don't necessarily signal a looming recession, they do represent a "downshift in job growth."
The current slowdown could be significant enough to influence the Fed's monetary policy, potentially leading to rate cuts sooner than expected.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Aj Fabino is a Newsweek reporter based in Chicago. His focus is reporting on Economy & Finance. Aj joined Newsweek ... Read more
