Layoff Announcements Surge, but Job Cuts Remain Historically Low

The new year has begun with a flurry of layoffs—possibly the last gasps of major job cuts which began in 2023, especially in the tech sector.

Employers have made a steady stream of layoff announcements this past month, but job cuts remain at historically low levels, despite high interest rates and inflation. 

UPS announced plans Jan. 30 to cut about 12,000 jobs and said that those jobs aren’t likely to return even when shipping volumes rebound, as the company will try to shift to using artificial intelligence and other new technologies to boost its operations.

Google laid off hundreds of employees in January, with more layoffs promised this year, as the company continues to reverse its pandemic hiring spree. Amazon is eliminating hundreds of jobs across its film and television studio and Twitch streaming platform. Citigroup announced it would eliminate 20,000 jobs by the end of 2026 as part of a multiyear restructuring plan. In addition, eBay, Macy’s, Microsoft and Salesforce announced sizable cuts.

In many cases the downsizing is a result of pandemic-era excess hiring, and layoffs are expected to continue to be slightly elevated this year. But experts do not believe the layoffs are signs of overall economic troubles.

“Several prominent technology companies are laying off workers once again, but it is not something to worry about,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “Last year’s batch of layoffs did not represent what was happening in the rest of the U.S. labor market, and the same is true now. Both waves of tech layoffs appear to be mostly about rebalancing workforces to adjust to the current economic outlook after a burst of hiring in 2021.”  

Julia Pollak, chief economist at ZipRecruiter, explained that most of the layoffs are the result of business activity and hiring reverting back to more typical levels seen prior to the post-pandemic recovery. “For example, employment in transportation and warehousing rose 16.5 percent after the pandemic and has since pulled back 1.4 percent,” she said. “Employment in software publishing rose 30 percent after the pandemic and has since pulled back 3 percent. Industries that boomed as a result of pandemic conditions are still much larger now as a result but are either stable or contracting slightly in response to normalizing industry demand.” 

Pollak added that higher interest rates are also playing a role. “Interest rates are restricting access to capital, causing business uncertainty and encouraging many economic actors to take a wait-and-see approach in anticipation of likely improvement in financial conditions in the back half of the year, rather than investing and expanding now,” she said.

Then there’s the seasonal employment variable, which can make it harder to gauge true layoff trends. Layoffs peak each year in December and January, Pollak said.  

“About 20 percent of all layoffs in a year take place during those months, so it always feels as though layoffs are accelerating at the start of the year, even when we are merely in the midst of the usual temporary seasonal surge.”

According to the latest turnover data from the U.S. Department of Labor, layoffs picked up in December 2023, although cuts were mainly confined to a few industries. As the year came to a close, layoffs were mostly felt in professional and business services (393,000), leisure and hospitality (226,000), and construction (169,000). But one of the biggest jumps in layoffs from November to December was in transportation and warehousing (43,000).

There were 1.6 million layoffs in December 2023, down from the 2019 pre-pandemic monthly average of about 1.8 million layoffs. Experts believe that employers have been loath to let workers go after the recent experience with labor shortages.

“The most recent data on layoffs show employers are still holding onto workers at a higher rate than before the pandemic,” Bunker said.

And despite high-profile layoffs in the technology and professional services industries, job openings have also risen in those same industries.

“People have been spinning a narrative of mass layoffs,” said Layla O’Kane, research director and senior economist at Lightcast, a labor market analytics company in Moscow, Idaho. “But it’s easier to notice the layoffs at ‘name’ companies. Everyone knows Amazon, but nobody knows the small IT services company that is still hiring. And that means the overall tech sector remains strong, with opportunities for tech workers who have lost their jobs. The real softening is in transportation and warehousing, as the pandemic-era surge in purchasing goods rather than services has faded.”

Daniel Zhao, lead economist and senior manager on Glassdoor’s Economic Research team, analyzed how the technology sector has fared since the unrelenting series of layoff announcements began last year.

“The reason that it may feel like the sky is falling in the tech industry is that even the modest job losses in 2023 are a harsh reversal from the blockbuster growth in tech over the last decade,” Zhao said. “Employment in tech grew 10 percent in 2021 and 9 percent in 2022, compared to the 1 percent decline in 2023. Similarly, the tech industry experienced three straight months of job losses in 2023, for the first time since 2009.”

Ultimately, 2023 may have been the worst year for tech employers in over a decade, even though the data reveals stagnation rather than a significant tech job recession, he said.

A bigger threat may come from continuing high interest rates, Pollak noted. “Job growth has slowed and narrowed substantially, financial risks abound, and layoffs are ticking back up. High interest rates will continue to put pressure on capital-intensive, interest rate-sensitive industries, the housing market, and the banking sector,” she said. “Businesses are in an excellent position to invest and grow again once rates are more favorable, but the labor market is likely to continue gradually cooling until then.”