Although the Labor Department is expected to post another strong jobs report on Friday, other data suggest some companies are already readying for an economic slowdown.
General Motors’s recent decision to close five plants and lay off tens of thousands of workers came in a month that saw U.S. employers slash more than 53,000 jobs — and more are likely to follow suit. The trend is an indication that an economic downturn may be in the works, according to a consultancy that tracks layoffs.
“Announcements like GM’s will not be the last, as companies adapt to shifting consumer behavior,” Andrew Challenger, vice president, Challenger Gray & Christmas, said in in a statement. “We’ve already seen major plans in the U.S. from Verizon, Wells Fargo and Toys R Us for exactly those reasons.”
By Challenger’s tally, U.S. companies this year have cut nearly 495,000 jobs — 28 percent higher than in the same period a year ago. The current 11-month tally is the highest since 2015, when Challenger counted 475,000 jobs lost through November.
Monthly job cuts averaged under 35,000 for all of last year and just below 44,000 in 2016. This year, companies are cutting about 45,000 employees a month, with that average rising above 55,000 during the last four months, the firm said.
“This upward trend is indicative of a potential economic shift and could spell a downturn,” Challenger said.
Unemployment claims edging up
Another potential cloud on the horizon can be found in weekly jobless claims.
Jim O’Sullivan, chief U.S. economist at High Frequency Economics, finds “some loss of momentum in what has been a strong labor market,” given the current four-week average of those filing for unemployment benefits stands at 228,000, up from 211,000 in the third quarter. “Claims are raising the possibility that the trend in employment growth is starting to cool a bit,” he said in a client note.
Corporations are making cuts amid headwinds that include slowing global economic growth, rising U.S. interest rates and uncertainty about trade. Economists expect the U.S. economy to expand at a rate of around 2.6 percent in the final three months of the year, down from an average of 3.8 percent between April and October.