Why Mounting Layoffs Don’t Spell Doom

Is the US labor market showing cracks? With official data sidelined for the moment due to the government shutdown, private-sector announcements and layoff figures fed that narrative late last week. Many argue they are an early warning sign of trouble. But let us put the figures in broader perspective and show you why we don’t think this is cause for concern now, especially for markets.

Grabbing headlines last week: UPS, Amazon, Target and American Airlines announced notable workforce reductions, suggesting layoffs are hitting across a wide swath of Corporate America. Capping it off, outplacement firm Challenger, Gray & Christmas, Inc. reported Thursday that US companies announced layoffs affecting 153,074 workers in October, triple 2024’s reading for that month and the highest amount of October layoffs in 22 years.

Exhibit 1: 2025 Layoffs Have Been Elevated

Source: FactSet, as of 11/7/2025. Challenger, Gray & Christmas Announced Layoffs, January 1993 – October 2025.

As Exhibit 1 shows, though, layoffs were even higher in February (172,017) and March (275,240), and there wasn’t too much concern at the time. Perhaps that is because US Bureau of Labor Statistics’ (BLS) data showed the government’s official nonfarm payrolls still adding more than 100,000 workers per month overall—hiring more than offset job cuts on net. But without BLS employment reports during the government shutdown, there are no official hiring figures to contrast against announced layoffs.

Current elevated layoff announcements—running over one million year-to-date—are consistent with past recessionary episodes, although the figure is skewed upward by over 300,000 government job cuts (mostly last spring).^[i] Whatever you think of the Department of Government Efficiency, it is hard to see those curtailments as hints at the economic cycle. Meanwhile, Challenger, Gray & Christmas reported less than half a million planned hires through October, which is -35% below last year’s cumulative level through October and the fewest in 14 years.

Also stoking alarm: University of Michigan’s consumer sentiment reading hit near-record lows on Friday, dropping to 50.3 in November from October’s 53.6 and just off June 2022’s 50.0 all-time trough.^[ii] Partially driving the drop: job worries. Some 71% of households expect unemployment to rise over the next 12 months, up from 65% last month—and 32% a year ago. This is against 9% of folks who currently think unemployment will fall—the smallest share since March 2009. (You may recall March 2009 was the end of the financial crisis bear market, although joblessness kept rising thereafter—normal, considering jobs lag the economy.) Hence, a net 62% now expect worsening job conditions over the next year.

So people feel glum about the job market entering November, and we doubt the latest layoff news makes them feel much better. But step back. As Exhibit 2 shows, jobless claims remain historically low according to state-level data (in the absence of the Department of Labor’s weekly reports during the shutdown).^[iii] While backward looking, if the economy were in recession, this would be one of the first labor-market indicators to spike. Announced layoffs are up this year, but those cut don’t seem to be filing for claims to any great degree so far.

Exhibit 2: Yet Jobless Claims Remain Historically Low

Source: Federal Reserve Bank of St. Louis and Department of Labor (DoL), as of 11/7/2025. Weekly initial jobless claims, 1/6/1968 – 9/20/2025, and Bloomberg estimates based on downloadable DoL state-level claims, 9/20/2025 – 11/1/2025. Y-axis truncated at 1,000; claims peaked at 6.137 million on 4/4/2020—for comparison, the previous peak on 3/28/2009 topped out at 665,000.

In any event, absent the last two BLS job reports, how do we know whether overall employment is rising or falling? At least on a private-sector basis, the latest October data from payroll processing firm ADP showed US companies added 42,000 workers in October. (Exhibit 3) That is no gangbusters rate, but net job growth suggests many of those laid off earlier this year may have found new positions.

Exhibit 3: US Private-Sector Logging Job Gains, Too

Source: FactSet, as of 11/7/2025.

Another way to see this? Look north. Since comparable Canadian employment data start in 1976, the monthly correlation between changes in US and Canadian employment is 0.82.^[iv] Since -1.00 means they move exactly opposite and 1.00 lockstep synchronization, a reading above 0.80 indicates they are closely correlated to a statistically significant degree. Exhibit 4 illustrates this tight relationship.

Exhibit 4: Rising Canadian Employment Suggests Similar for America

Source: FactSet, as of 11/7/2025.

Canada’s 60,400 and 66,600 jobs added in September and October, respectively, strongly indicate ongoing US job growth. While the figures have diverged some this year, the overall direction remains upward. Generally speaking, if Canadian employment is trending higher, America’s likely is, too.

Now, we are about the last people to argue there is forward-looking importance in these data, as jobs figures routinely lag the economy, which in turn lags stocks (our primary interest). But even here, you must scrutinize a litany of available evidence before concluding one datapoint and a few layoff announcements prove the job market is looking bleak. When we do so today, we see little clear and compelling evidence the backdrop is as dire as some headlines cast it last week.