The Waning Layoff Typhoon... "A Signal of Economic Reversal"

The wave of layoffs sweeping through global companies shows signs of subsiding, leading to interpretations that this signals a reversal of the economic downturn.

Bloomberg reported on the 13th (local time) that, based on a survey of layoffs at 1,300 companies worldwide, the number of layoffs at global companies in June dropped to 51,000, the lowest since December last year. The monthly layoffs, which reached 125,000 in January this year, slowed significantly to 109,000 in February, 93,000 in March, 96,000 in April, and 68,000 in May.

Following the end of the pandemic, high interest rates and unprecedented inflation deepened recession forecasts, leading to a series of layoffs at companies worldwide. Amazon, the largest e-commerce company in the U.S., conducted its largest restructuring since its founding earlier this year, cutting 1% of its total workforce. Big tech companies such as Meta, the parent company of Facebook, Twitter, and Tesla also carried out layoffs, resulting in over 700,000 job losses globally.

The company with the largest scale of layoffs was UBS, Switzerland's top bank. UBS laid off 35,000 employees, more than half of the 45,000 staff of Credit Suisse (CS), which it acquired immediately after the Silicon Valley Bank (SVB) collapse. More than 100,000 jobs have disappeared in the financial sector since October last year.

Bloomberg analyzed that the wave of layoffs centered on big tech and Wall Street, which rapidly expanded during the pandemic, is coming to an end. Layoffs in the technology sector, including big tech, decreased by as much as 70% compared to the previous month. Bloomberg evaluated this as "the boomerang effect of overemployment during the COVID-19 pandemic beginning to resolve." There is also an interpretation that the AI boom triggered by ChatGPT is contributing to the tech stock rally and leading to a turnaround in sentiment.

[Image source=Reuters Yonhap News]

Bloomberg interpreted the weakening signs of layoffs as a signal that recession forecasts are reversing. Riding on heated employment and consumption indicators, there are growing expectations that the U.S. economy can sustain high growth in the second half of the year without declining, following the first half.

S&P Global Market Intelligence projected a 1.7% growth rate for the U.S. gross domestic product (GDP) in the second quarter. This is a significant upward revision from the 0.8% forecast released earlier this month, indicating that the economy is expected to continue growing beyond market expectations.

Bank of America and Citigroup observed that "considering economic indicators, the anticipated timing of the recession expected this year is being pushed back to next year."

This content was produced with the assistance of AI translation services.