We're afraid we have to start this edition of the "less than useful data" series with a dire announcement. Job cut announcements jumped in August 2023 and are up 210% year to date. Let's turn now to Challenger Gray & Christmas for the Challenger Report August 2023 with the details:
U.S.-based employers announced 75,151 cuts in August, a 217% increase from the 23,697 cuts announced one month prior. It is 267% higher than the 20,485 cuts announced in the same month in 2022, according to a report released Thursday from global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc.
So far this year, companies have announced plans to cut 557,057 jobs, a 210% increase from the 179,506 cuts announced in the same period last year. It is the highest January-August total since 2020, when 1,963,458 cuts were recorded. It is the third-highest year-to-date total since 2009.
“Job openings are falling, and American workers are more reluctant to leave their positions right now. The job market is resetting after the pandemic and post-pandemic hiring frenzy,” said Andrew Challenger, labor expert and Senior Vice President of Challenger, Gray & Christmas, Inc.
That sounds pretty bad. But we'll need more context to tell if it's really as dire as it sounds. The following chart from Trading Economics shows the last 25 years of Challenger's periodic layoff reports:
source: tradingeconomics.com
We can quickly see the current level of layoffs is being compared with a period in which the the announced layoffs were abnormally low following the Coronavirus Pandemic Recession, which inflates the reported percentages. We also see the level of layoffs in 2023 is the highest since 2009, so that observation is correct. However, we also see they're at about the same level that held through much of the decade of the 2000s, so what exactly is that telling us anything about the state of today's economy? Is this a cause for great concern going forward? Is the job market going back be more like it was in the early part of the 21st century with respect to the pace of announced layoffs? Can any of these questions be answered with the layoff report's data?
That's the rub. Moody's economist Mark Zandi included the Challenger layoff report in a short list of economic indicators he pays less attention to because they can be either misleading or hard to interpret given their signal-to-noise ratio.
Unlike other entries in this series, we think the Challenger layoff data has a lot of value as a lagging economic indicator that confirms whether the economy experienced a period of contraction after the fact. But its value as a forward-looking economic indicator is limited because it often raises more questions than it can answer, which is almost certainly why market forecasters like Zandi don't give Challenger layoff announcements more attention.
So if you're a economic historian, it's useful, but if you're a forward-looking analyst, Challenger layoff announcments are much less so. It all comes down to where your time arrow is pointing.
Previously on Political Calculations
- Less Than Useful Data in the World of Big Data
- Less Than Useful Data: Consumer Confidence
- Less Than Useful Data: FHFA House Price Index
- Less Than Useful Data: Index of Leading Economic Indicators
- Less Than Useful Data: Weekly Chain Store Sales
- Less Than Useful Data: Challenger Layoff Announcements
Image credit: Layoffs image by Gerd Altmann from Pixabay.
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