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First Cut: Challenger layoff intentions fall in June, but underlying trend is still a bit more elevated

The Challenger report on layoff intentions saw a 28.3% month-over-month decline in announced job cuts in June to 41,977. The level was 12.8% above the 37,202 in June 2018. The calculation for the three month moving average in June was 46,859, the lowest since 40,293 in September 2018.

Businesses started to increase plans to cut jobs as soon as there were signs of a slowdown in economic activity in late 2018. Sluggishness in global demand for US goods, uncertain trade and tariff policy, and a lack of skilled workers which result in increased automation have all played a part in businesses restructuring that is mainly in automotive (32,350 for 2019 to-date) and industrial goods (47,651 for 2019 to-date). Closures in retail are ongoing and still dominate layoffs (53,248 for 2019 to-date).

It is possible that the wave of layoff intentions that were in direct response to concerns about an economic downturn will fade further in coming months. Surveys of activity for manufacturing and services suggest that businesses are still hiring and in need of skilled labor.

For June 2019, the largest number of announced layoffs were in automotive (10,904, or 26% of the total). Automakers are responding to decreased consumer demand for new motor vehicles, but they are also trying to reduce costs by laying off higher paid workers through buyouts and voluntary severance. This would allow them to increase automation and workers who would be more junior on the pay scales.

The most common reasons given for layoffs were cost-cutting (12,185, or 29% of the total) and closing (12,048, or 28.7% of the total). Although restructuring continues to be the main reason for layoffs for 2019 to-date (86,165), closing has risen (62,768) as retail store closures continue.

Announced hiring plans were up 37.9% in June to 11,946 from 8,663 in May, and were down 11.5% from 13,504 in June 2018. Hiring plans were strong in categories associated with higher pay and benefits. Technology was the largest (3,680), followed by aerospace/defense (1,326), and automotive (1,052).

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