Why are job cuts rising, and what does that mean for you? Uptick shows 'cracks' in labor market

A recent report found job cuts are on the rise among U.S. companies, the latest indicator that the country's strong labor market is cooling.

Overall, U.S.-based employers announced nearly 30,000 job cuts last month, a 68% increase from a year earlier and a 46% increase from the previous month, according to a report Thursday from outplacement firm Challenger, Gray & Christmas.

Employers announced plans to hire 380,014 workers, the lowest September total since 2011. And though total job cuts in the third quarter were down 1.6% from the second quarter, September was the fifth month this year when reductions surpassed the corresponding month in 2021.  ​​​

"It’s first couple little cracks in what has been a really resilient labor market in the face of a lot of headwinds," Andrew Challenger, senior vice president of Challenger, Gray & Christmas, told USA TODAY.

Challenger added that September was not "a huge month" for job cuts, but it's a surprising uptick at a time when companies tend to staff up for the holidays.

The report found year-to-date hiring plans in the retail sector were down 37% compared with the year prior.  

"What that basically tells you, very clearly, is that the sellers are not expecting a very bountiful Christmas season," said Joelle Saad-Lessler,associate industry professor at Stevens Institute of Technology's school of business.

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Which sectors are cutting jobs?

The top five industries in job cuts are:

• Automotive: 28,922 job cuts this year, up 194% from the year before.

• Health care/products: 23,850, up 26%.

• Technology: 18,620, up 86%.

• Retail: 18,213, up 11%.

• Services: 15,999, down 29%.

Why are jobs being eliminated?

According to the Challenger report, "closing" was listed as the No. 1 reason for job cuts in September, followed by "cost-cutting," "market conditions" and "demand downturn," as well as "no reason provided."

Challenger said the cooling housing market and the Federal Reserve's interest rate increases have led to job reductions among mortgage staff at banks and lenders, and recession concerns have companies across sectors reassessing their staffing.

The overall labor market is still solid

Despite the job cuts, the overall labor market remains strong, according to Wells Fargo senior economist Sarah House.

"You still have historically high demand for workers," she said. "But I think when we look at the direction of the market, it has softened a little bit in recent months. So still strong in an absolute sense but cooling since the spring, and we think will cool further in the months ahead."

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While news of layoffs at companies like Peloton is making headlines, House said workers should "not be terribly concerned" about losing their jobs.

"Sure, we're seeing some layoffs in certain sectors," she said. But when "we look at the composition of the companies announcing job layoffs right now, they're not fully indicative of widespread job cuts across industries."

Unemployment benefits applications are up

Also Thursday, the Department of Labor released a report showing more people are applying for unemployment benefits.

The number of people who applied for benefits last week jumped 15% to a five-week highof 219,000, which could be a sign of more layoffs.

Meanwhile, the number of open jobs is decreasing. Job openings fell from 11.2 million in July to 10.1 million at the end of August.

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Challenger said there are still enough openings to give workers the upper hand, but "that period might be finally starting to come to an end."

"It's not going to get better than it is today," he said. "Time to take advantage of a lot of opportunities and some real negotiating power. But I wouldn't wait too long."

The Bureau of Labor Statistics is set to release the jobs report for September on Friday. Economists expect to see 250,000 jobs added, the lowest monthly gain since December 2020.

The unemployment rate is expected to remain steady, according to estimates from Refinitiv, a global provider of financial market data and infrastructure.

You can follow USA TODAY reporter Bailey Schulz on Twitter @bailey_schulz and subscribe to our free Daily Money newsletter here for personal finance tips and business news every Monday through Friday.

This article originally appeared on USA TODAY: Job cuts in 2022 are rising. Here's why and what it means for you.