The Challenger report on layoff activity in August was another warning that the economy is facing a downturn, and uncertain trade policy and tariffs can take a large share of the blame.
Job cut intentions rose 37.7% in August to 53,480 from 38,845 in July, and were up 39.0% compared to 38,472 in August 2018.
Year-to-date, job cut intentions totaled 423,312, 36.2% higher than the 301,773 for January-August in 2018 and was the largest number of layoffs for the same period in 2015 when cuts totaled 434,554. Andrew Challenger said, “We are continuing to see investor concerns shaking confidence in the market, and employers appear to be cutting workers in response to a slowdown in demand for their products and services.”
Contraction in the retail sector was a driving force in previous layoff announcements in 2018 and early 2019,kl but August shows that is no longer the case. The largest number of announcements was in technology (15,355, or 28.7% of the total), government (5,785, or 10.8% of the total), and healthcare (5,040, or 9.4% of the total).
The reasons cited for layoffs are more varied than they have been. While restructuring was for a long period the main reason, it now looks like economic factors rather than business efficiency are once again coming to the fore. The largest share of reasons was closing (16,718, or 31.3% of the total) and trade difficulties (10,488, or 19.6% of the total). Trade looks even worse if tariffs (646) are added in.
There are a number of warning signs in the layoff numbers, including layoffs reaching a wider variety of sectors and signs that one-month increases are getting bigger and more frequent. The reasons are also less about factors that drive prosperity and more about softness in economic conditions.
Hiring intentions were up slightly in August to 24,937, up 11.7% from the prior month and up 44.4% from the 17,274 in August 2018. Much of the increase was concentrated in retail (9,150, or 36.7% of the total). However, it looks like construction remains on the upswing while the housing market is solid (5,500, or 22.1% of the total). While intentions remain good for areas associated with higher wages, there is also still a hint that some layoffs are to get rid workers who are paid more in favor of bringing in less experienced and lower earning workers. Looking forward to September, this is the time when retailers announce plans for seasonal workers. Given the difficulties in trade and concerns about a recession, these may be significantly lower this year.
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