'Anxiety-inducing' layoffs are scaring many U.S. workers. How worried should they be?

By Aarthi Swaminathan

Employee confidence has dropped to an 8-year-low amid high-profile layoffs, even as the labor market remains strong.

Layoff fears are taking hold of workers across America, with many worried about whether they're next.

One expert says layoffs may be less widespread than they appear to be, but workers are still grappling with uncertainty.

Employee confidence has taken a nosedive. The share of workers reporting a positive six-month business outlook for their employer fell to 45.6% in January, according to job-search portal Glassdoor. That's the lowest level on record since Glassdoor began tracking the sentiment in 2016.

"Everybody's trying to prove their value at work," said one North Carolina-based designer in the tech industry whose company has said it plans to reduce headcount. It's been an "anxiety-inducing" experience, she said, because no one knows which teams will be affected.

"It made things kind of tense, and put people on edge for a while," said the employee, who spoke anonymously because she is worried about job security.

Headlines don't match official metrics

In the last week alone, PayPal (PYPL), Block (SQ), iRobot (IRBT), as well as the Los Angeles Times and Sports Illustrated, have all laid off workers as they've tried to make their businesses leaner. UPS (UPS), Wayfair (W) and Microsoft (MSFT) were all hit by layoffs.

Yet the U.S. economy seems to be humming along just fine. In January, 353,000 new jobs were added, a surprisingly large gain that beat forecasts of an increase of 185,000. Unemployment is near the lowest level since the 1960s.

"Bang! What a way to start the new year as today's January jobs report," Ali Jaffery at CIBC Economics wrote in a note. The data shows that the "U.S. labor market [is] much stronger ... than we believed."

Yet given the onslaught of layoff news, especially in tech and media, "job security remains top of mind for employees," Glassdoor noted. The share of reviews of companies on Glassdoor that mention layoffs was up in January by 27%, as compared with last year.

The tech designer whose company is planning layoffs said the fear has ignited a fire under her to work even harder and to be "as sharp as possible," she said. She has survived two other rounds of layoffs - one in 2016 and one in 2022.

Another worried employee, who works at a San Diego-based biotech startup, said his company grew rapidly during the pandemic, but is now in the midst of "huge cuts." His department shrunk from five employees to just him. "I'm the entire department," he said.

"It's been really challenging and stressful to be honest," the worker said. He's talked to recruiters, and has begun applying for jobs, but senses competition.

Even though recruiters have reached out, he hasn't applied to as many positions as he would like, sending out only 20 applications over the last month, including some for jobs in other industries.

"I think there's a lot of people out there aggressively looking for a new role" either because they're laid off or are worried about being retrenched, he noted.

One career expert told MarketWatch that layoffs were top of mind for many business leaders as they headed into 2024. "Almost every CEO that I know is planning layoffs right now," Tessa White, a career-navigation adviser and founder of the Job Doctor, said. "I think things are going to slow down much more than we expect."

Yet much of workers' anxiety seems disconnected from official measures of unemployment and job cuts, Daniel Zhao, lead economist at Glassdoor, told MarketWatch. Some of workers' unease may be related to the fact that people are comparing the current moment with the hot job market of 2021 and 2022, when employees were job-hopping and getting big raises.

It's a confusing time for employees. Troubling layoff news is mixed in with rosier reports about the overall economy, which seems to have avoided a recession so far as inflation finally cools off.

Is workers' layoff fear justified?

Although thousands of workers are losing their jobs in tech, media and other industries, there is little evidence so far that layoffs are spreading across the economy, Zhao said.

Reports of companies laying off thousands of workers, such as Wayfair losing 1,650 employees or Google shedding over 12,000 jobs - and counting - are cases that aren't necessarily representative of the entire economy.

About 1.6 million people were laid off in December 2023, according to data from the U.S. Bureau of Labor Statistics, which is still below the pre-pandemic normal of 1.8 million, Zhao said.

"So a company that lays off 1,000, that sounds like a huge number, but it's not even 1% of the monthly amount of people who are laid off," he added.

When mom-and-pop restaurants that can't operate shut down and lay off their staff, and local businesses go bust, that's more of a reflection of widespread layoffs.

What is the biggest sign of impending layoffs?

Employees searching for signs of layoffs at their company may find the biggest indicator to be the pace of hiring.

Outside of the pandemic, hiring has hit its slowest pace since 2014, Zhao noted, based on BLS data, which is worrying people. If workers are looking for jobs, they may find fewer opportunities. They may also find that some companies are putting hiring freezes in place.

"A company that is worried about the future will stop hiring pretty quickly because that's an instantaneous action that a company can take to stop their costs from increasing," Zhao said. "It's a very slow process to actually undergo those layoffs or to cut annual budgets, but taking down a job posting or not extending an offer, that's something that you can do today."

Hiring freezes or seeing job openings come down will be the "best early indicators" about a company's sentiment towards the future, he said, "which is itself an indicator of potential layoffs."

The North Carolina tech worker who feared losing her job also noted that at her old companies, one key sign of impending layoffs was a reorganization.

"You can kind of read the signs that something is coming when they start moving people around, especially when it doesn't make sense," she explained. "That's the biggest red flag."

Who's most worried about layoffs, and who is most likely to be laid off?

The biggest declines in employee confidence were among those in the utilities industry, transportation and warehousing, and the information industry, which spans technology and media.

Employees in the information sector have tended to be the most worried about layoffs, Zhao said. That's because the sector spent much of last year dominating the headlines with tech-company layoffs.

Among employees, mid-level workers were the most spooked, with their confidence falling the most in January, Glassdoor said. Entry-level employees were second place in terms of shaken confidence.

"This is not just frontline employees who are concerned," Zhao said. "Even for those folks who have more information about the business, their confidence is declining too."

While some data suggest that remote employees were more likely to be laid off in 2023, Zhao said that the link between not being in the office and being at a higher risk of being let go was not fully clear.

"We know that many employers are pushing return-to-office plans and if those companies are doing layoffs at the same time, they might choose to target people who are either not complying with return-to-office mandates, or are unlikely to, because they live too far away from the office to come in," he explained.

Not being in the office could also mean missing out on gossip or casual conversations about the state of the business and whether there was tension or stress, he added.

Moves to make if you think you're going to be laid off

For those who are worried about losing their job, there are a couple of steps to consider taking. First, check if you will get a severance package if you're laid off, which could help you juggle finances while you are on the hunt for a new job.

Find spots to trim. Cut off any memberships or subscriptions that aren't necessities, which could help save some money.

Start networking with people from your past, as well as find new connections. It's less nerve-wracking to put yourself out there when you're still employed, and for some, it can be exhausting to juggle. Still, it could pay off: One expert advised that searching for a job while holding on to one "gives you leverage when it comes to negotiating terms for the new gig."

Finally, step back and reset, Zhao said. Get into the right state of mind and address your emotional and mental health before starting your job search. See if you can find opportunities in other less recession-sensitive industries, like healthcare.

The San Diego biotech worker, who has been laid off three times over nearly two decades in the industry due to companies winding down, knows the drill.

"So it's not my first rodeo, as they say. It's still nerve-wracking when you're the primary person in the family as far as wage-earning goes," he said.

If he were to be laid off, he would expect a severance package.

Meanwhile, the North Carolina tech worker who is anticipating layoffs said if she gets laid off again, she may just quit the industry.

"I might transition to finance-based roles, because it feels a bit more secure, or something related to healthcare," she said.

But for now, she isn't about to jump into job search mode just yet. "At this point, I'd rather be laid off than to quit and start searching for a job and have interviews. At least if I get laid off, I know I'm going to get a severance package."

-Aarthi Swaminathan

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

02-03-24 1258ET

Copyright (c) 2024 Dow Jones & Company, Inc.