These job cuts and slower hiring are hurting the economy and slowing growth.d
U.S. companies announced 153,074 job cuts in October, the highest number for any October since 2003, as the adoption of artificial intelligence (AI) and cost-cutting pressures reshape the workforce.
Challenger, Gray & Christmas Inc. (an outplacement firm) says companies’ job cuts are almost three times more than a year ago.
Industries are increasing layoffs because of AI
Most of these job cuts come from the tech, warehousing, and shipping industries because they are now automating their processes to complete work faster.
These companies hired many workers during the pandemic, when demand was high, as almost everyone was shopping online and spending more time at home. However, now that demand has dropped, companies realize that AI tools are cheaper, so they no longer need as many staff.
A similar situation occurred in 2003, when companies had to reorganize their teams due to the emergence of mobile phones and new digital tools. It’s the same change, but this time, AI is growing and spreading faster than mobile phones did, and can impact many different jobs simultaneously.
Andy Challenger of Challenger, Gray & Christmas, said companies are also laying off workers because the global economy is falling. People and businesses are spending way less than they used to, and the costs of running a business have become so expensive that companies are doing whatever it takes to save costs.
According to Andy, these layoffs create a cycle that makes it difficult for the global economy to recover quickly. People who lose their jobs struggle to find new ones, so they must compete for the limited job openings. In return, companies take too long to hire new workers because there are too many applicants, so they want to be extra careful.
When job seekers spend too much time unemployed, they reduce their spending, which in turn affects the wider economy by slowing down growth. Experts say workers must learn new skills to transition into careers that require human judgment, as AI can’t fully replace these roles.
The labor market is straining as seasonal hiring slows down
As job cuts have reached record-breaking highs this year, the hiring rates for companies are at their lowest since 2011. The holiday shopping season, which typically runs from October to December, usually has higher employment rates due to strong demand; however, companies expect people to spend less this year.
Some businesses say they might hire seasonal workers if demand increases, but experts believe the rates will be too low this year or early next year. People who lost their jobs this year will remain unemployed or be forced to accept jobs that offer less pay and fewer hours.
Big tech companies aren’t left behind by this trend, as layoffs at Amazon, Meta, Target, and Paramount Skydance are also at an all-time high. Retail companies expect less shopping, while tech companies continue to add more AI systems. Entertainment firms are also in the mix because advertising and production spending remain uncertain.
Federal Reserve Chair Jerome Powell once said the job market is cooling only “very gradually,” but the actual situation proves something entirely different. The national statistics appear steady on paper, but it’s the workers experiencing these effects firsthand who feel the slowdown is anything but gentle.
Hiring is still occurring, as evidenced by the latest payroll report, which shows that the economy added 42,000 jobs in October; however, the rate of employment is slower than before. Families have less money to spend, and businesses lose confidence in the economy; as a result, the cycle continues to affect the labor market until the situation changes.
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