Why this often-overlooked report on the state of the labor market contributed to Thursday's stock selloff

By Joseph Adinolfi and Joy Wiltermuth

A report from Challenger, Gray & Christmas showed layoffs in October hit the highest level since 2008, according to the firm's data

A labor-market update from Challenger, Gray & Christmas on Thursday was contributing to a gloomy mood on Wall Street.

A near-blackout of official economic data caused by the ongoing U.S. government shutdown has sent investors searching for private offerings that might provide some clues about what is happening in the labor market.

On Thursday, investors found something to latch on to - and many apparently didn't like what they saw. The latest report from Challenger, Gray & Christmas, a firm that publishes a monthly update on hiring and firing activity, showed U.S.-based employers announced 153,074 job cuts in October, up 175% from the same month a year ago, and up 183% from those announced in September. That was the highest total seen in October in 20 years, and the highest for any month since 2008.

See: No jobs report again. But these numbers show how the U.S. economy is doing.

Some on Wall Street blamed the data for contributing to a renewed stock-market selloff on Thursday, while also fueling a rally in bonds that pushed the yield on the 10-year Treasury note BX:TMUBMUSD10Y back down toward 4%. Bond yields move inversely with prices, falling as prices rise.

The selloff sent the S&P 500 SPX down by more than 1% in recent trading, according to FactSet data. This latest drop, which followed the worst session for the index in nearly a month on Tuesday, left the S&P 500 on track for its worst weekly showing since Oct. 10. The index was trading about 2.9% below its record closing high, tallied in late October.

What job numbers mean for lofty stocks

The lopsided gains of tech companies versus the rest of the stock market have been a frequent point of concern during this three-year bull market.

The thinking goes that investors chasing a small group of high-flying tech stocks could see painful losses if those concentrated bets start to falter, as they did during April's tariff chaos.

Another narrative underpinning the market has been that so long as U.S. households have jobs, the rally could easily continue.

Thursday's Challenger, Gray & Christmas data added to a recent collage of disappointing readings on the labor market, just as investors were missing out on the Labor Department's official jobs numbers for the second straight month. That seemed to compound longstanding concerns about lofty stock-market valuations, froth in speculative sectors and doubts about the durability of the artificial-intelligence trade.

"This is an upward trend," said Luke Tilley, chief economist at M&T Bank and Wilmington Trust, of the Challenger report, as well as October's ADP data released earlier week that pointed to firms with less than 50 employees shedding more than 130,000 jobs since April.

"Small firms have cut a lot of jobs since the implementation of tariffs," Tilley told MarketWatch. Yet unlike big public companies, those job cuts tend to fly under the radar, he noted, even though smaller firms account for roughly one-third of all jobs in the county.

"I think there is so much uncertainty about the path of the economy going forward that it's going to lead to wider swings in markets," Tilley said.

Hired vs. fired

On top of reporting layoffs on Thursday, the Challenger numbers included data on hiring as well. Brent Donnelly of Spectra Markets crunched the numbers and produced a chart comparing the number of new workers hired with the number losing their jobs on a 12-month rolling basis. In commentary shared with MarketWatch Thursday, he showed that the number of jobs lost has outpaced new hires by the widest margin in about 15 years.

"If job doom is your religion, this chart is a prophecy of imminent flood," Donnelly said in the report.

To be sure, the Challenger data has its flaws. It isn't seasonally adjusted, and it can be much noisier than the official nonfarm-payrolls report released by the Labor Department, Donnelly said.

"I would trust NFP much more - but we don't have NFP," he added.

Andy Challenger, chief revenue officer for Challenger, Gray & Christmas, said a few factors probably contributed to the much faster pace of layoffs seen in October. Some industries are cutting back after a pandemic hiring boom inspired many companies looking to hoard labor.

But growing AI adoption, softening consumer and corporate spending, and belt-tightening driven by higher costs likely played a role as well.

"Those laid off now are finding it harder to quickly secure new roles, which could further loosen the labor market," Challenger said in Thursday morning's press release announcing the latest numbers.

Other private-payrolls data contributed to what has become an increasingly grim picture of the labor market. Revelio Labs reported a decline of 9,000 jobs in October, according to its report on nonfarm payrolls. That decline was "predominantly driven by employment losses in the government sector," the company said.

There also was the headline number from ADP's reading on private payrolls, released on Wednesday. That data showed 42,000 jobs were created last month, more than economists had expected. But as M&T Bank's Tilley pointed out, signs of weakness could be seen under the surface.

"The key is the labor market," Tilley said. "That's where we are."

-Joseph Adinolfi -Joy Wiltermuth

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11-06-25 1331ET