Cost Increases and AI Contribute to ‘Stagnating Labor Market’

As of the end of September, this year has seen the highest number of job cuts since 2020 and the lowest amount of planned hiring since 2009, Challenger, Gray & Christmas said Thursday (Oct. 2).

The year-to-date total of job cuts is 946,426, which is 55% higher than the 609,242 announced during the same period last year and the highest since the 2,082,262 announced during the same period in 2020, the outplacement firm said in a Thursday press release.

When it comes to hiring, year to date, employers announced plans to add 204,939 jobs, a total that is 58% lower than the 483,590 announced through September 2024 and the lowest since the 169,385 announced during the same period in 2009.

“Right now, we’re dealing with a stagnating labor market, cost increases and a transformative new technology,” Andy Challenger, senior vice president and labor expert for Challenger, Gray & Christmas, said in the release. “With rate cuts on the way, we may see some stabilizing in the job market in the fourth quarter, but other factors could keep employers planning layoffs or holding off hiring.”

Among the job cuts announced year to date, from January through September, most have been in the government and technology sectors. The government sector announced 299,755 job cuts, while the technology sector announced 107,878.

Most of the cuts in the government sector resulted from the efforts of the Department of Government Efficiency (DOGE), while many of those in the technology sector were due to technological updates, including artificial intelligence, according to the release.

“Tech firms are undergoing incredible disruption with AI that is not only costing jobs, but also making it difficult to land positions, particularly for entry-level engineers,” Challenger said in the release. “Tech leaders have stressed that AI is changing the nature of work, and more companies are requiring their teams be trained on it.”

Looking at the month of September alone, there was a slowdown in job cuts. September saw 54,064 job cuts, down from the 72,821 announced during the same month last year.

There was also less hiring in September. The month saw 117,313 announced hiring plans, down from 403,893 in September 2024, according to a Challenger, Gray & Christmas report released Thursday.

Most of the reduction in hiring plans is due to a drop in seasonal hiring announcements, the company said in its press release.

“Now is when we typically see retailers bulk up for the holidays, but so far, plans have been slow to come, reflecting caution,” Challenger said in the release. “With lower consumer confidence and tariff pressures ahead, we predict the hiring season will be muted.”

Human resources and payroll solutions provider ADP said Wednesday (Oct. 1) that the private sector employed 32,000 fewer people in September than it did the month before and that job creation continued to slow across most sectors.

“Despite the strong economic growth we saw in the second quarter, this month’s release further validates what we’ve been seeing in the labor market, that U.S. employers have been cautious with hiring,” ADP Chief Economist Nela Richardson said in a press release.

The Conference Board said Tuesday (Sept. 30) that consumers are growing more cautious about jobs and the economy, leading to a drop in consumer confidence.

The post Cost Increases and AI Contribute to ‘Stagnating Labor Market’ appeared first on PYMNTS.com.