- The rate of layoffs and dismissals in January was 1.1%, which remains historically low.
- But highly visible companies are making job cuts, and it’s making headlines.
- This is why it feels like everyone is being fired, even when the data tells a different story.
It’s easy to assume that everyone is on layoff right now. After all, the layoff announcements and dire warnings from CEO as Sundar Pichai And Mark Zuckerberg seem to dominate the headlines, and the economy.
But the reality of the situation is that layoffs are near historic lows. In fact, according to the latest data from the Bureau of Labor Statistics Job postings and labor turnover survey (JOLTS), the rate of layoffs and firings hovered around 1.1% in January, a slight increase from 1.0% in December. While January’s rate isn’t the lowest since the BLS began tracking this kind of data in December 2000 — it would be the 0.9% that showed up a few months in 2021 and 2022 — it’s still extremely low. historically.
Parts of the tech-heavy economy have seen increased layoffs, even as major job cuts have yet to emerge in the broader labor market. The professional and business services sector, which includes technology-related services, saw layoffs and layoffs jump from 338,000 in December to 528,000 in January. The rate for this industry climbed 0.8 percentage points, from 1.5% in December to 2.3% in January.
“The layoff rate has increased where you would expect it to be low,” Aaron Terrazas, chief economist at Glassdoor, told Insider. “It has increased in exactly the industries that you would expect to be most affected. I think the stark reality is that the risk-intensive sectors that are most vulnerable right now are not only a small part of the national labor market.”
There were 1.7 million total layoffs and layoffs in January, according to data from the Bureau of Labor Statistics. While this is up from some historic lows seen over the past two years, it’s just around the pre-pandemic low of 1.6 million seen in September 2016.
“Something has changed,” Julia Pollak, chief economist at ZipRecruiter, told Insider. “Companies in most industries seem much more reluctant to fire or lay off workers, even underperforming workers.”
Of course it’s true that thousands of employees are laid off Across the country. It certainly remains some workers in difficult times and upset families and businesses. And, of course, the number of layoffs and dismissals increased by 241,000 from December to January.
But there are still far fewer layoffs than the U.S. economy typically sees, even outside of a recession. What’s happening is that, overall, the economy and the labor market are booming, but the companies making layoffs are some of the most visible and they’re all following each other’s leads.
Pollak noted that the current low layoff numbers could be partly a statistical mirage, as the JOLTS survey looks at a smaller slice of businesses than other big sources of employment data, like unemployment claims and the BLS Monthly Employment Report. The survey also saw a low response rate. Still, she noted that the layoff numbers are consistent with those other strong labor market numbers.
“It looks like we’ve changed, and American workers now have more job security than before the pandemic,” Pollak said.
In addition to the rate of dismissals and dismissals, Initial unemployment insurance claims can also give an indication what layoffs look like. Initial jobless claims have slowly but steadily fallen for months, standing at just 190,000 in the week ending February 25, well below the 2022 peak of 261,000 in mid-July.
So why do layoffs seem to be everywhere?
This is partly because they are concentrated in high profile sectors, such as technology and journalism. The lure of Big Tech has attracted thousands of workers over the past decades, pampering them with high salaries and benefits. During the post-vaccine hiring spree, these companies were throwing money away, and wages and hiring skyrocketed.
As Pollak noted, BLS Research finds that layoffs historically occur at the fastest growing companies before cuts – and so, as tech blew up during the pandemic, it’s deflating now.
When one of the most ambitious industries — and most visible, since almost everyone interacts with Big Tech on a daily basis — started making big cuts, it made headlines.
“A lot of the layoffs that have taken place have been concentrated in the technology sector. We’re talking about a lot of high-profile companies that are cutting jobs,” said Russell Weaver, director of research at the Cornell ILR Buffalo Co-Lab. . , said Insider. “That’s one of the reasons we see layoff headlines so often in the news, because we’re talking about big companies — Twitter, Meta, Facebook, Amazon, Disney.”
The workforce is large, Weaver said, and when those layoffs number in the hundreds or even thousands, they still don’t increase the layoff rate. This is where the disconnect comes in: the job losses are small, but they are very concentrated.
“Layoffs are happening in industry and sectors that have a bigger share of the talk than their share of employment,” Nick Bunker, director of economics research at jobs site Indeed, told Insider. “It’s history in that they’re very well known, but that doesn’t mean they’re representative.”
While BLS data may show a low layoff rate in the U.S. overall, layoff announcements in the tech sector are significant, given Pollak said tech and finance are “synonymous with aspirations Americans in general. Pollak pointed the finger at ZipRecruiter Job seeker confidence survey, which found that while 4% of respondents work in the technology sector, 20% actually want to work in this industry.
“What happens in tech can matter out of all proportion to everybody, because it’s sort of the pinnacle of the American economy,” Pollak said.
And, geographically, these industries have more influence in some regions than in others.
“These leading industries that have had layoffs are certainly very important in certain communities,” Terrazas said. “They are only a small part of the overall economy, but in a handful of markets, in a handful of cities, they are the dominant sector.”
“These markets are highly exposed to tech layoffs, and technology plays a disproportionate role in the economy,” Terrazas added. “But I think more importantly, I think the technology and risk-intensive sectors play a disproportionate role in our collective imagination simply because they’ve been seen for so long as the frontier of innovation and have been the engine of growth in recent years – if not the last decade.”
And even those layoffs may have more to do with copycat behavior than a slowdown felt across the economy.
Jeffrey Pfeffer, Thomas D. Dee II Professor of Organizational Behavior at Stanford Graduate School of Business, told Insider’s Sarah Jackson that tech layoffs are more about companies copying each other than actually saving costs. In turn, these layoffs lead to lower personnel costs and thus create the slowdown that companies were trying to avoid.
“There’s a lot of interest in how investors perceive market conditions. They’re looking at each company’s stock and deciding, again, where to allocate funds,” Weaver said. “Companies notice what their competitors are doing, and they do the same whether it’s strictly necessary or not.”
Not everyone in tech is affected by the job cuts. Pollak told Insider that layoffs at tech companies are “relatively low” and that “many companies aren’t pursuing layoffs across the board either.”
Although the layoff rate is very low, job seekers may still be concerned about these headlines. Terrazas said that just as companies are sensitive to risk, so are job seekers.
“The last few years have been incredibly disruptive to people’s lives, and I think a lot of job seekers right now are hyper-focused on stability,” Terrazas said. “When they envision work, when they envision the business in which they will invest their days and their lives, they focus on stable business prospects and a stable and healthy work environment.”