'Delayed' Mass Layoffs Spell Bad News for US Economy—Analyst

A recent string of mass layoffs across the U.S. could be the sign that the country's economy is finally sliding into the recession many feared would hit the nation last year, financial analyst Gary Shilling told Newsweek.

Last year, Shilling said, the U.S. economy avoided a recession primarily because the labor market ran stronger than the Federal Reserve expected. But now, the financial analyst is picking up on clues that the labor market is starting to weaken.

"You had a lot of people that were hired before the pandemic and then, during the pandemic, there was no desire to lay them off," Shilling told Newsweek. "And so, you haven't had the weakness in labor markets reflected yet. But if you look at wage increases and other indicators, labor markets are atrophying," he added. "I think it's really just a slow but delayed response."

Shilling is known for having correctly predicted the financial crisis of 2007-2008, warning in 2007 that the U.S. housing bubble would "sink the economy." In 2008, he said that a recession was going to hit the U.S., as it did.

"Forecast is not a science," Shilling told Newsweek. "But I think conditions are such that, if we avoid a recession, we might end up with a soft landing—maybe."

In 2023, more than 191,000 workers at U.S.-based tech companies were laid off as part of a slowdown of the sector, as reported by Crunchbase News. This year, experts expect mass layoffs to continue.

Three companies—ShipMonk, Anodyne and Student Transportation—already announced this year that they were letting hundreds of employees go, with three states—New Jersey, Georgia and Florida—taking the brunt of this decision.

E-commerce fulfillment company ShipMonk said it would lay off 148 workers in New Jersey by June 30—about 25 percent of its entire workforce. Lightweight solutions provider Aludyne said it will let go 193 employees in Georgia—about 8 percent of its total workers.

Student Transportation of America, the third-largest school bus transportation service provider in North America, will be laying off 225 staff members in Florida out of its more than 5,000 employees.

Now, Shilling said he expects more layoffs across the country in the coming months, which, in turn, would bring about the weakening of the U.S. economy.

"Obviously if you get enough layoffs, it takes the whole economy down," Shilling said. "But so far it's been confined to very specific areas, particularly areas where there was huge hiring before the pandemic. A lot of the tech areas have backed off after over-hiring, and now they're having layoffs."

But Shilling said businesses are reluctant to lay off people after spending so much time and energy hiring during the years of the pandemic. "So it's a delayed response," Shilling said.

"And as long as that's the case, the Federal Reserve is in no rush to cut [interest] rates. I mean, why should they? There's no evidence that the economy is showing the kind of weakness that would indicate the rate cuts are needed," he continued.

"So the longer that situation lasts, the longer it's going to be before you have any rate cuts and the more likely it is the economy is going to slip," he added.
According to the financial analyst, a recession—should it happen—could hit the nation "in the next six months or so."