Experts have labeled this time the ‘no-hire, no-fire’ job market. However, the recent announcements from Amazon.com Inc. and United Parcel Service Inc. about significant layoffs hint at a troubling turn for the U.S. job market.
There’s an ongoing discussion among economists regarding the implications of these layoffs, along with others recently. Despite strong profit margins for the S&P 500, these job cuts come after several months of slow hiring, as companies hesitate to make large decisions amid various uncertainties, including tariff debates, government shutdowns, rising living costs, and advances in artificial intelligence.
John Challenger, CEO of Challenger, Gray & Christmas, pointed out that the scale of job cuts at Amazon and UPS, coupled with those from companies like Paramount Skydance Corp. and Target Corp. in the past week, signifies a noteworthy reassessment among businesses about operational strategies.
“The labor market recently has been in a ‘no-hire, no-fire’ state,” he explained. “However, these layoffs imply that this stagnant approach is shifting to more decisive actions by companies, making job security less stable.”
He also highlighted that companies might launch layoffs in a ripple effect, ensuring that none appear as standalone instances of significant cutbacks, possibly prompting more corporations to take similar measures.
Meanwhile, Peter Cohan, a management practice professor at Babson College, interpreted the job cuts by Amazon and Target as indications of weaker consumer demand anticipated in the future.
“These businesses suggest they expect a drop in consumer spending for the upcoming holiday season,” he noted. “They primarily serve middle-class customers, who are financially strained with wage growth lagging behind inflation, worsened by tariffs and layoffs.”
Amazon, whose CEO had previously mentioned that artificial intelligence might lead to a smaller workforce in the future, announced plans to cut about 14,000 jobs from its corporate teams. This followed buzz that the cuts could reach 30,000. The company is offering most affected employees a 90-day period to seek roles within the organization.
Beth Galetti, Amazon’s senior vice president of people experience and technology, pointed out that these cuts are happening even as the company performs well.
“It’s essential to remember that the world is changing rapidly,” she communicated to employees. “This generation of AI represents the most significant technological transformation we’ve witnessed since the Internet, allowing businesses to innovate quicker than ever.”
A different sector, education platform Chegg Inc., indicated it would downsize its workforce by 45%, connecting the decision to “the new realities of AI.”
On the other hand, UPS recently revealed it has cut 34,000 jobs through September. Although it had previously announced intentions to lay off 20,000 employees in the spring, investors welcomed these job reductions on Tuesday, anticipating an improved financial picture after years of low shipping demand.
As of September, companies have shared plans for 946,426 job cuts this year, as reported by Challenger, Gray & Christmas—the most significant amount in a year since 2020. This figure marks a 55% increase from the same period last year and places it within the top five highest job cut totals in 36 years of tracking.
Surprisingly, 204,939 new jobs are forecasted, indicating a 58% drop compared to the same timeframe last year, largely attributed to diminished seasonal hiring.
ADP reported that private employers made job cuts in September for three of the past four months. Their preliminary forecast for employment changes in the recent four-week period suggested an average increase of 14,250 jobs.
However, Martha Gimbel, executive director at Yale’s Budget Lab, emphasized that while recent layoffs might appear alarming, the rate of job losses is, as of August, still slightly down from late 2010s levels. The rash of cuts, in her view, does not significantly affect her economic concerns.
“I was already worried about the economy yesterday, as well as how we transition through technological changes,” Gimbel remarked. “These announcements don’t change my anxiety on either front.”
She added that while alarming figures can concern the public, the U.S. labor sector routinely experiences high turnover rates. Job losses can result from unique company-specific issues, while those organizations may still be actively recruiting elsewhere.
“Without government data available, public reactions might overemphasize the implications of these private-sector announcements,” she mentioned.
In other developments, Paramount Skydance is reportedly planning to lay off around 1,000 individuals as it undergoes a rocky merger process. Other companies such as Molson Coors, General Motors Co., and Meta Platforms Inc. are also considering workforce reductions.
Additionally, recent reports indicated Target’s plans to reduce its corporate workforce by 8% amid broader strategies to boost sales growth. Jason Schloetzer, a business professor at Georgetown University, previously stated that Target appears focused on achieving “quick wins” as it seeks to gain investor confidence while working on its turnaround plans. Analysts are still anticipating greater challenges ahead for this retail giant.
As third-quarter earnings unfold, FactSet’s senior earnings analyst, John Butters, observed improved profit margins trending at 12.8% for S&P 500 firms—the sixth consecutive quarter above five-year averages.
Still, Cohan noted that since consumer spending accounts for 70% of economic growth, “we might find ourselves trapped in a cycle where companies lay off more employees to meet quarterly income objectives.”
“Newly unemployed individuals will cut back on spending, leading to reduced retail sales and potential further layoffs,” he stated.
