The Challenger report on layoff intentions showed a decline of 21.1% to 60,587 in March from 76,835 in February and was up a scant 0.4% from 60,357 in March 2018. The decline was a welcome development after the sharp rise in the prior month but does not disguise that the first quarter 2019 total of 190,410 is the highest since the third quarter 2015 when the total was 205,759 at a time when layoffs in the energy sector started to increase rapidly.
Something similar is evident in the first quarter 2019 with 8,149 in energy for March after 2,152 in February. Also marking the higher layoff intentions for the first quarter is the automotive sector. There were 8,838 announced layoffs in March following on 3,100 in February and 3,949 in January. Together the two sectors accounted for about 28% of the total for March.
The next highest number of layoffs was in retail (4,860) and financial (4,884). It would appear that the wave of retail layoffs is coming to an end after widespread consolidation in brick-and-mortar stores. More concerning is the increase in financial sector layoffs which can herald concerns about consumer spending and services activity.
Surveys of manufacturing and service sector activity have indicated that many businesses are looking into improving automation and efficiency at a time when skilled workers are scarce and costs for wages and benefits have increased substantially. Also, there are greater concerns about future costs related to trade and tariff policy. Overall, businesses may be more inclined to cut workforces in an effort to contain costs and ensure operations remain lean.
Reasons given for cutting workers in March were largest for closing (13,374) as the retail sector continued to contract. The auto sector often turns to voluntary severance (7,000) and financial businesses probably accounted for much of the number associated with restructuring (6,986) and cost-cutting (4,499). The reset to a lower pace of activity for many manufacturing and service business was likely reflected in demand downturn (5,756).
What may be a cause for wariness about labor market conditions is that both the sectors where layoffs are occurring and reasons for reducing labor forces are more widespread. While this does not point to any particular point of weakness in the economy, the overall increase could point to some softening for the labor market as a whole.
Nonetheless, hiring intentions remained about on track with 16,368 in March, up 7.1% from the prior month and up 12.7% from a year-ago. A positive note is that the increase for automotive (10,250) accounted for about 63% of the total. Jobs in the auto industry are generally better-paying and include good benefits. The surprise in hiring intentions was that there were none for the retail sector for the first time since November 2016. This would suggest that retail workers being laid off will have a harder time finding fresh employment in that industry.
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