Goldman Sachs: "Signs of Weakening in U.S. Labor Market... Layoff Signals Worst in a Decade"

Layoff Indicators Rising Fastest Since COVID-19
Federal Data May Reflect This Trend in the Coming Winter

Goldman Sachs has analyzed that the U.S. labor market is beginning to show signs of weakening, with layoffs increasing particularly in the private sector. While the firm noted that the recent trend of layoffs has become more pronounced, it also assessed that there is still no clear evidence that artificial intelligence (AI) is the main driver behind these job cuts.

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On November 27 (local time), Business Insider introduced a Goldman Sachs report containing these findings. Goldman Sachs analyzed that, excluding the temporary surge during the COVID-19 period, the number of planned mass layoffs reported to state governments has soared to its highest level since 2016. The firm noted that this indicator is rising at the fastest pace in the past decade, indicating that layoff signals have increased more sharply than at any time in the last ten years.

According to data from Challenger, Gray & Christmas (CG&C), as of October this year, the number of layoff announcements has jumped to levels not seen outside of recession periods. Business Insider reported that increased layoffs in sectors such as technology, industrials, and food and beverage have been identified as the main causes.

Goldman Sachs pointed out that all layoff-related indicators are rising simultaneously, which it interpreted as a sign that the labor market is visibly weakening. This means that as it becomes increasingly difficult to find new employment in the U.S., it is now harder for jobless workers to regain stable income and employment status after losing their jobs.

Major U.S. corporations are no exception. Amazon, for example, announced plans this fall to cut about 14,000 white-collar jobs, citing the adoption of AI and organizational restructuring as reasons.

Goldman Sachs also analyzed that, along with an increase in Worker Adjustment and Retraining Notification (WARN) notices, there has been a rise in cases where executives of publicly listed companies openly mention the possibility of layoffs during recent earnings announcements. WARN notices, which companies are required to issue when laying off more than 100 employees, serve as a key indicator of corporate actions and are interpreted as a sign that layoffs are imminent.

However, weekly jobless claims remain at low levels, suggesting that the deterioration of the labor market has not yet been fully reflected in government statistics. The September employment report released by the Department of Labor also exceeded market expectations.

Goldman Sachs noted that jobless claims tend to lag private layoff indicators by about two months. Considering this time lag, the firm analyzed that signals of increasing layoffs may appear in federal statistics as winter approaches.

For now, Goldman Sachs does not see evidence that AI is driving the recent wave of layoffs. The firm's researchers explained, "While it is true that AI is increasingly being considered in workforce-related decision-making, clear evidence that AI has directly caused layoffs remains limited."

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