American employers announced a decrease in layoffs in July compared to the previous year, offering hope that the labor market will help steer the economy away from a recession. According to a report released by employment firm Challenger, Gray & Christmas, 23,697 job cuts were announced in July, marking a 42% drop from June and an 8% decrease from July 2022. This is the first year-over-year decrease since May 2022 and represents the fewest announced layoffs since August of last year.
Earlier this year, economists predicted that the Federal Reserve’s aggressive interest-rate hiking campaign would lead to a recession and significant job losses. The first quarter of 2023 saw a flurry of layoffs, with over three times as many announced job cuts compared to the same period last year. However, the trend appears to be coming to an end as employers have continued to add jobs throughout the year, defying expectations that the Fed’s interest rate hikes would increase the unemployment rate.
Companies have found alternative ways to cut costs rather than letting go of needed workers. Many have slowed down their hiring, but wages have continued to rise, especially for low-wage earners. The technology sector has seen the highest number of cuts, accounting for nearly one-third of the announced layoffs in 2023. Business closures and market economic conditions were the most commonly cited reasons for layoffs in July.
This decrease in layoffs aligns with other indicators of labor market strength. Payrolls processor ADP estimated that 324,000 private-sector jobs were added in July, surpassing expectations. The Department of Labor is set to release its monthly unemployment figures and payroll changes on Friday, with economists forecasting the addition of 200,000 jobs in July and an unchanged unemployment rate of 3.6%.
Overall, the decline in layoffs and the resilience of the labor market offer optimism for the US economy’s ability to avoid a recession.
