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First Cut: Challenger layoff intentions fade in December, hiring intentions solid

The Challenger report put job cut intentions in December at 32,843, down 26.3% form the prior month and down 25.2% from a year ago. Challenger said the monthly total was the lowest since 27,122 in July 2018. Job cut announcements were fewer for a second month in a row. The total for 2019 was 592,556 compared to the 538,659 of 2018. If the pace of layoff intentions picked up in 2019, the drop off toward the end of the year suggested that companies by-and-large had made their plans to adjust payrolls before the end of the year as is more usually the case.

Hiring intentions were up 38.0% in December from November, and up 64.5% compared to a year ago.

Layoff activity in 2019 was substantially higher for industrial goods compared to 2018 (70,894 versus 27,644), automotive (50,776 versus 30,587), and technology (64,166 versus 14,230). The ongoing restructuring in the retail sector had begun to fade but was still hefty (77,475 versus 98,563).  Layoffs in 2019 reflected the downturn for the manufacturing sector and restructuring in technology as some businesses tried to buy out more highly compensated workers and replace them with lower paid ones. Retail continued to feel the shrinkage in brick-and-mortar stores even as the retail sector itself did fairly well and laid off workers could find opportunities at healthier chains and online warehouses.

The reasons cited for layoff intentions in December were dominated by closing (7,712), restructuring (5,567), and cost-cutting (5,523), all of which are fairly normal at the end of the year. What is interesting to note among the reasons given is the rise in demand downturn which was 2,905 in December. This reason totaled 18,404 for 2019 and was the highest since 21,073 in 2016.  In 2017 it was only 10,516 and 2018 was 5,763. Demand downturn tends to peak during recessions and the 2019 total is still quite low. What it does suggest is that economic conditions are ones of normal modest-to-moderate expansion after the more hectic pace of the prior two years.

Hiring intentions in December got a boost from the aerospace/defense sector (13,000) which accounted for nearly half of the 26,313 total. However, intentions were also strong for automotive (4,293), industrial goods (3,720), and transportation (2,353). In fact, most of the sectors reporting plans to hire are those associated with more stable full-time employment with better wages and benefits. This is good new for consumer confidence which has been supported by a solid labor market.

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