The pace of job cuts by U.S. employers accelerated at the start of 2024, a sign the labor market is starting to deteriorate in the face of ongoing inflation and high interest rates.
That is according to a new report published by Challenger, Gray & Christmas, which found that companies planned 82,307 job cuts in January, a substantial 136% increase from the previous month. However, that is down about 20% from the same time one year ago. It marked the second-highest layoff total for the month of January in data going back to 2009.
"Waves of layoff announcements hit U.S.-based companies in January after a quiet fourth quarter," said Andy Challenger, senior vice president of Challenger, Gray & Christmas. The cuts were "driven by broader economic trends and a strategic shift towards increased automation and AI adoption in various sectors, though in most cases, companies point to cost-cutting as the main driver for layoffs."
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Financial companies bore the brunt of the job losses in January, with the industry shedding 23,238 employees. That is the highest monthly layoff total for the financial sector since September 2018, when it announced 27,343 job cuts.
The technology sector followed with 15,806 layoffs, the most since May 2023 and a stunning 254% increase from just one month prior.
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"The impact of rapidly advancing artificial intelligence adoption is beginning to be felt from a jobs perspective, particularly in media and tech, but truly across sectors," Challenger said. "That said, companies are not outright blaming AI for many layoff decisions."
Food production companies also accounted for a large swath of the job cuts in January, slashing 6,656 positions – the highest monthly total for the sector since November 2012. Challenger said that "high costs and advancing automation" are reshaping how the industry operates.
The sector is battling headwinds like climate change and immigration policies that affect labor dynamics, according to the report.
Another source of layoffs in January was retail stores, which trimmed 5,364 positions in January, a significant increase from the 110 layoffs announced in December.
The top reason cited for job cuts last month was restructuring; companies blamed stores closing and artificial intelligence for the layoffs, as well.
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The labor market has remained historically tight over the past year, defying economists' expectations for a slowdown. Although economists say it is beginning to normalize after last year's blistering pace, it is nowhere near breaking.
The findings precede the release of the more closely watched January jobs report from the Labor Department on Friday morning, which is expected to show that employers hired 180,000 workers, following a gain of 216,000 in December.
The unemployment rate is expected to inch higher to 3.8%.
