Experts are warning that the U.S. labor market, which has been tight for the past few years, is about to become slightly more relaxed.
In California, New York, and Washington, companies are preparing for a significant number of layoffs that will impact various industries, including tech giants, hospitality, and healthcare. Over the next few months, a total of 25,210 employees in these states will face job cuts, leading to a surge in individuals seeking new employment opportunities.
According to Ian Shepherdson, the chief economist at Pantheon Macroeconomics, this could be just the beginning.
According to Shepherdson, employers and employees are both sending a consistent message when it comes to layoffs: more are on the way. In an email to Newsweek, Shepherdson stated, “State WARN notices of imminent plant closures and mass layoffs are increasing, as is the Challenger measure of job cut announcements, and Google searches for ‘claim benefits’ have risen sharply.”
According to Warn Tracker, a website that monitors upcoming layoffs based on WARN notices, the figure of 25,210 represents the number of anticipated workforce reductions. WARN notices are legal documents that companies file when they expect to implement layoffs.
Understanding the data requires a solid understanding of WARN notices.
The Worker Adjustment and Retraining Notification (WARN) Act, which became a federal law in 1988, requires employers to provide a 60-day advance notice to both employees and government officials in the event of mass layoffs or plant closures.
The WARN Act requires employers to provide WARN notices in certain situations, depending on the number of employees and the location. These situations include plant closings, which occur when at least 50 full-time employees lose their jobs within 30 days at one site, and mass layoffs, which involve either a reduction of 500 or more full-time employees at one location or a job loss affecting at least 33 percent of the company’s full-time workforce, with at least 50 full-time employees affected at one site.
There could potentially be more than 25,210 layoffs in the three states, as not all layoffs are required to have WARN notices.
California is preparing for a significant impact as it anticipates that 13,259 workers will be facing layoffs, according to Warn Tracker. The tech industry, which houses prominent companies like Apple and Google in Silicon Valley, as well as sectors like hospitality and healthcare, will experience a period of downsizing in the upcoming months.
The laying off of 521 employees by the California Institute of Technology (Caltech) on April 7 is not just an isolated industry downturn but rather a broader tremor. This signals a diverse range of services affected by the impact.
“The labor market is expected to experience a combination of reduced hiring and an uptick in layoffs, which will likely result in a decline in job growth during the upcoming spring,” Shepherdson revealed in an interview with Newsweek. “We anticipate that job growth in the second quarter will mainly be concentrated in non-cyclical sectors, particularly healthcare and education, where demographic factors play a significant role.”
Washington is experiencing significant layoffs across various sectors, resulting in job losses for 5,994 employees. This trend is affecting both digital and tangible industries in the state, as evidenced by companies such as Expedia, Walmart, Unity Technologies, and Del Monte Foods.
RaterLabs, a search engine rating company based in Kirkland, recently made the unfortunate decision to lay off a substantial number of employees. As of April 6th, they announced a permanent layoff of 3,657 individuals. This news has undoubtedly had a significant impact on the state’s workforce.
New York is facing a situation where 5,951 layoffs are expected, resulting in widespread job cuts.
The layoffs in New York State are affecting various sectors, including banking and education. For instance, Citigroup is laying off over 310 employees, while The College of Saint Rose is also facing staff reductions. These job cuts are impacting both the financial and academic industries in the state.
The situation is further intensified by the impending job losses at UPS, with up to 100 employees at risk, and Paramount Global, with up to 500 employees facing potential layoffs. This underscores the widespread impact of the workforce reduction.
Reasons Behind Looming Layoffs
According to Shepherdson, the data from Warn Tracker is presenting a worrisome scenario. However, he also highlighted that there are several factors playing a role in this trend.
According to the expert, there is a noticeable decrease in gross hiring intentions and an increase in layoffs, indicating that businesses are adopting a more cautious approach and becoming more open to downsizing their workforce.
According to Shepherdson, companies are facing increasing pressure as borrowing costs rise due to the Federal Reserve’s rate hike campaign. In an interview with Newsweek, Shepherdson emphasized that the higher interest rates have made working capital extremely expensive, making it challenging for companies to sustain their current staffing levels.
Accessing the necessary funds for investment and growth is becoming more challenging for businesses due to stricter credit conditions, according to Shepherdson. He highlights that obtaining credit has become more difficult, as the availability of bank lending to commercial and industrial companies is actually decreasing.
Shepherdson said that companies are forced to make challenging workforce decisions due to financial difficulties.
He doesn’t think the layoffs indicate an imminent recession, but rather a decrease in job growth.
The current slowdown may have a significant impact on the Federal Reserve’s monetary policy, potentially resulting in earlier than anticipated rate cuts.
