Layoffs among employers based in the United States increased nearly 400% between the first three months of last year and this year.
Economic turmoil and a desire for increased cost efficiency are primary causes for employers dismissing large shares of their employees, according to a Thursday report from executive outplacement firm Challenger, Gray & Christmas. Layoffs have accordingly risen 396% between the first quarter of 2022 and the first quarter of 2023.
“We know companies are approaching 2023 with caution, though the economy is still creating jobs,” Challenger, Gray & Christmas Senior Vice President Andrew Challenger said in a statement. “With rate hikes continuing and companies’ reigning in costs, the large-scale layoffs we are seeing will likely continue.”
Technology companies are responsible for 102,000 of the 270,000 positions nixed by employers, marking the most severe layoffs in the sector since 168,000 workers were dismissed in the 2001 dot-com bubble. Overall layoffs in 2023 are therefore on pace to exceed the total layoffs for the American technology sector at the most tumultuous time in its history.
Companies in the financial sector have dismissed nearly 31,000 employees in the first quarter of this year, while hospitals and manufacturers announced a combined 23,000 position cuts. Media companies have likewise eliminated more than 10,000 positions.
Firms such as Meta, Google, and Amazon started to reduce headcount as the elevated consumer demand which followed the lockdown-induced recession began to slow. Another estimate from Crunchbase says that 130,000 workers have been dismissed from technology firms thus far in 2023 even after companies nixed about 93,000 positions last year.
The layoffs were also prompted by entreaties from investors who have noted that inflated payrolls and diminished consumer demand are preeminent factors behind lackluster profits.
Amazon CEO Andy Jassy, for instance, cited the “uncertain economy” as a motivating factor behind his company’s newly downsized payrolls. “The overriding tenet of our annual planning this year,” he wrote in a recent memo, “was to be leaner while doing so in a way that enables us to still invest robustly in the key long-term customer experiences that we believe can meaningfully improve customers’ lives and Amazon as a whole.”
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The headcount reductions in certain industries come as the overall American labor market remains robust: unemployment was 3.6% as of February, marking an increase from the 3.4% unemployment charted in January but remaining well below typical levels. Real wages, which consider the effect of inflation on nominal pay increases, meanwhile fell 1.3% year-over-year as of February, according to data from the Bureau of Labor Statistics, indicating that rising price levels continue to erode household purchasing power.
There exist roughly 9.9 million job openings and 5.9 million unemployed individuals across the economy, according to a report from the Bureau of Labor Statistics, a slight reprieve from a labor market in which there were two open positions for each individual seeking work.
The Federal Reserve has closely monitored employment data over the past year as officials reverse the near-zero target interest rates that stimulated the economy amid the lockdown-induced recession. Policymakers announced a quarter-point rate hike last month, continuing a slowdown from previous rate hikes meant to combat inflation but marking caution given recent tumult in the banking sector.