Laying Off on Layoffs

Why firms are being more cautious with letting people go now than they have in other uncertain economic times.

When it comes to layoff trends, numbers matters—as does culture and reputation.

Despite repeated headlines announcing them earlier this year, layoffs are actually not as widespread as most people think. The reality is they’re trending lower during this economic downturn than they did during the pandemic, the financial crisis, and other times this century. In fact, two reports out this week show that layoffs, while up from last year, were down in June compared to May.

Experts say firms have been more cautious about layoffs because such decisions are no longer based on pure financial considerations. Laying off people too quickly in today’s business world could have more damaging repercussions among various stakeholders, including workers, says David Vied, global sector leader in Korn Ferry's Medical Devices and Diagnostics practice. “Employees are watching the degree to which firms talk about values and purpose versus how much they practice it,” he says.

In all, employers have announced about 450,000 job cuts so far this year. That’s triple the amount from a year ago, but only one third of the 1.5 million cuts recorded in the first half of 2020 at the pandemic’s start. Experts say this year’s layoffs have been magnified because they are occurring at large, recognizable brands. Only 7% of small-business owners in a recent survey say they are planning layoffs this year, and small business employee half of the US workforce.  

Bigger companies that hired vigorously during the pandemic are now shedding workers. “Some bigger companies hired for a future that did not anticipate consumers returning to pre-COVID behaviors so quickly,” says Michelle Seidel, a senior client partner in Korn Ferry's Global Technology practice. That’s certainly true for the technology industry, which not only leads all industries in layoffs this year, but also is on pace to post its worst year ever for job losses. Other sectors hit by extensive layoffs include finance, retail, media, and professional services.

For most industries, however, instead of layoffs as a first resort, firms are turning to other measures such as delaying or reducing capital expenditures, slowing hiring, and cutting budgets. Focusing on that underscores the ongoing battle for top talent with in-demand skills. Unemployment remains at historically low levels, and there are nearly 9.6 million vacant jobs in the US. Experts say leaders are getting wise to the fact that mass layoffs often end up scaring off top talent that they don't want to lose. That’s why training and development budgets have held up relatively well so far this year, says Andrés Tapia, Korn Ferry's diversity, equity, and inclusion global strategist. “Firms are sticking with retraining and reskilling as a way to foster a loyalty mindset for everyone,” says Tapia.

Of course, some economists are still warning about a recession, and that could hasten the pace of layoffs dramatically. The growing introduction of artificial intelligence into the workplace creates some questions marks on future staffing as well. Still, “firms are erring on the side on holding onto people longer instead of laying them off too soon,” says Korn Ferry’s professional services sector leader Juan Pablo Gonzalez.


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