What It Measures
Layoffs and discharges measures the monthly count of involuntary separations initiated by employers across the U.S. nonfarm economy. This includes:
- Layoffs with no intent to rehire
- Layoffs expected to last more than 7 days
- Discharges from mergers, downsizing, or closings
- Firings or other discharges for cause
- Terminations of both permanent and short-term employees
Data comes from the Job Openings and Labor Turnover Survey (JOLTS), which surveys approximately 21,000 business establishments.
Why It Matters
Early Warning Signal: Rising layoffs often precede recessions and broader economic weakness.Corporate Health Indicator: Spikes in layoffs signal corporate distress, cost-cutting, or industry restructuring.Fed Watch: The Federal Reserve monitors layoffs as part of their dual mandate for maximum employment.Consumer Spending Impact: Job losses directly reduce consumer spending, the largest component of GDP.
How to Interpret
Below 1.7M: Healthy labor market with minimal involuntary separations, employers retaining workers.1.7M - 2M: Normal range for a stable economy.Above 2M: Elevated layoffs indicating potential economic stress or sector-specific troubles.Sharp Spikes: Sudden increases often signal recession onset or major economic shocks.Trend Direction: Rising trend over several months is more concerning than a single elevated reading.
Key Levels to Watch
| Level | Interpretation |
|---|---|
| Below 1.5 million | Very tight labor market, employers holding onto workers |
| 1.5-1.7 million | Healthy labor market, normal turnover |
| 1.7-2.0 million | Moderate layoffs, some economic uncertainty |
| 2.0-2.5 million | Elevated layoffs, potential weakness |
| Above 2.5 million | Significant labor market stress, recessionary signal |
Historical Context
U.S. layoffs typically range from 1.5-2.0 million per month in normal economic conditions. The all-time high of 13.0 million occurred in March 2020 during COVID-19 shutdowns. The post-pandemic low of 1.3 million was reached in October 2021 as employers struggled to retain workers during the labor shortage.
Limitations
- Layoffs data has several limitations:
- Released with a one-month lag
- Does not distinguish between temporary and permanent layoffs
- May not capture all informal separations in small businesses
- Seasonal adjustments can mask industry-specific patterns