American employers announced fewer layoffs in July than the year before, marking the first year-over-year decrease in more than a year and bolstering prospects that a resilient labor market will help the economy avoid a recession.
U.S.-based employers announced 23,697 job cuts in July, a 42% drop from the number of layoffs announced in June and an 8% decrease from July 2022, according to a report released on Thursday by employment firm Challenger, Gray & Christmas. It was the first year-over-year decrease since May 2022, and July also had the fewest announced layoffs since August of last year.
The Fed’s aggressive interest-rate hiking campaign that kicked off in March 2022 led many economists to forecast that it would eventually trigger a recession - and accompanying large-scale job losses - a conviction that picked up momentum as 2023 began.
Indeed, the year began with a flurry of layoffs announced through the first quarter. So far this year there have been more than three times as many announced job cuts compared with last year: 481,906 job cuts announced in the first seven months of 2023 compared with 159,021 through the same period in 2022.
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But that trend appears to be nearing an end. On the whole, employers have continued to add jobs throughout the year and the labor market has consistently outperformed economists’ expectations that the Fed’s 525 basis points of interest rate hikes would drive the unemployment rate up.
“Companies, weary of letting go of needed workers, are finding other ways to cut costs. Many have slowed hiring, but wages continue to rise, particularly for the lowest-wage earners, for the moment,” said Andy Challenger, senior vice president of Challenger, Gray & Christmas.
The technology sector continued to lead all industries in cuts, accounting for nearly a third of the announced layoffs in 2023. Of the employers who provided a reason for layoffs in July, most cited business closing, closely followed by market economic conditions.
The drop in layoffs last month dovetails with other signs of continued labor market strength. On Wednesday, payrolls processor ADP estimated 324,000 private-sector jobs were added in July, well above the median forecast of 189,000 in a Reuters poll.
On Friday, the Department of Labor is set to release its widely watched monthly unemployment figures and payroll changes. Economists polled by Reuters forecast 200,000 jobs added in July, somewhat fewer than the 209,000 added in June, and an unchanged unemployment rate at 3.6%.