The pace of job cuts by U.S. employers accelerated in 2023, with the number of layoffs soaring 98% from a year earlier.
This is according to a new report published by Challenger, Gray & Christmas, with companies planning to cut 721,677 jobs last year, a significant increase from the 363,832 job cuts reported in 2022. It turned out that it did.
The problem could get even worse in 2024 as the labor market continues to soften in the face of high interest rates and stubborn inflation.
“Labor costs are high,” said Andy Challenger, senior vice president at Challenger, Gray & Christmas. “The hiring process is likely to slow down for many job seekers as employers remain very cautious and are in cost-cutting mode heading into 2024, and cuts will likely continue in the first quarter.”
Technology took the brunt. The rate of job losses in 2023 was 168,032, a staggering 73% year-on-year increase in the industry. This total is slightly less than the annual record of 168,395 reductions announced for the sector in 2001.
“The technology sector will continue to be impacted by the emergence of AI, mergers and acquisitions, and realignment of resources and talent,” Challenger said.
Retail companies also accounted for the bulk of the layoffs last year, shedding 78,840 jobs. This represents a 274% increase compared to the number of job cuts announced in the industry in the same period last year. Mr Challenger said retailers had to “brace themselves” this year, even though many companies had taken a cautious and flexible stance in hiring.
Healthcare and product manufacturers, including hospitals, are also making significant layoffs. The company cut 58,560 jobs in 2023, a 91% increase compared to the layoffs announced in 2022.
The top reasons cited for last year's job cuts were deteriorating market and economic conditions in the face of persistently high inflation, soaring interest rates and ongoing geopolitical tensions. Companies also blamed store closures, bankruptcies and artificial intelligence for layoffs.
The labor market has remained historically tight over the past year, contrary to economists' predictions of an economic slowdown. Economists say the economy is starting to normalize after last year's breakneck pace, but it is far from a breakthrough.
The report comes shortly after the Labor Department reported that the economy added 216,000 jobs in December, indicating a gradual slowdown in the labor market.
