Why companies do layoffs around christmas


As job cuts ripple through industries such as tech and media, it is hard not to notice how the holiday season is a really unfortunate time for workers to be getting pink slips.

There is arguably no good time for companies to lay off employees, of course, but as farewell-to-my-job posts continue to populate LinkedIn, many are wondering, why did they have to do this the week before Thanksgiving or right before Christmas?

Despite the job market’s overall strength, big names in tech including Meta Platforms Inc., Salesforce Inc. and Amazon.com Inc. have all laid off workers or announced plans to do so in recent months. In finance, Goldman Sachs Group Inc. is planning to lay off several thousand employees, according to people familiar with the matter.

Thousands of job cuts have also hit other industries, with Ford Motor Co., Walmart Inc. and PepsiCo Inc. all reducing their head counts, leaving many employees to wonder: Could I be next?

Historical data shows December often ranks as the second-highest month for layoffs and discharges, going back to 2000, according to the Bureau of Labor Statistics. But the month when companies consistently cut the most workers is coming soon—January. (The pandemic made 2020 an outlier year when massive layoffs were recorded in March and April as Covid-19 spread and lockdowns went into effect.)

Layoffs around the holidays are a relatively recent phenomenon. In the 1970s and 1980s, companies were more cognizant of the optics of putting people out of work during the most wonderful time of the year, says Andy Challenger, a senior vice president with Challenger, Gray & Christmas, a career services and executive-coaching firm.

That sentiment has passed, he says. “Today we tend to see companies making the cuts when they feel like they need to.”

Jonathan Reynolds, chief executive of Titus Talent Strategies, a recruiting agency, says he advises firms to wait until after the holidays if they need to terminate a large group of employees, especially if they made a poor business decision by over-hiring in the first place. They might end up having a hard time hiring talent back.

“This is where companies really need to think about their talent reputation,” he says. “Some people who are a little bit more risk-averse would rather go to an organization that cares for its people first.”

The timing of some job cuts can be explained, in part, by the seasonality of the labor market, says Nick Bunker, economic research director for North America at Indeed Hiring Lab. Different industries have different times of year when they are busier and need more help. Retail is a prime example.

“There is lots of seasonal hiring in October and November to ramp up for the holidays when there’s a boom in demand and then people are let go in January because Christmas happened,” Mr. Bunker says.

But federal data also shows industries that are less known for holiday hiring sprees, such as professional and business services, finance, insurance and real estate, have consistently had above-average layoffs in January for the past decade. One reason is, for many companies, December marks the end of the fiscal year, analysts say. After closing the books, many firms want to make adjustments for the year ahead based on organizational performance and expectations about the future economy.

At the start of the new year, leadership can say, “We now know that we missed targets or that our forecasts were off and we need to adjust accordingly,” says George Penn, managing vice president of research and advisory for research firm Gartner Inc.

December’s above-average layoff numbers often stem from companies trying to adjust costs and reboot in the new year with a new balance sheet. This year, some company leaders are worried about rising interest rates and the war in Ukraine, in addition to supply-chain issues and softer global demand for goods and services, says J.P. Gownder, vice president and principal analyst with advisory firm Forrester Research Inc.

“They want to set up finances for success in 2023,” he says. “It’s a good bet that tech companies that haven’t yet laid off employees are carefully considering whether or not to do so. It wouldn’t be surprising to see more layoffs in the next few weeks.”

Still, December jobless-claims data so far show the labor market remains robust. And a number of recently laid-off professionals who posted about losing their jobs on LinkedIn and other networking sites have reported quickly finding leads and, ultimately, new positions.

Initial jobless claims, a proxy for layoffs, fell by 20,000 to a seasonally adjusted 211,000 last week, their lowest level since late September, the Labor Department said this week. Claims are up from lows this spring, but remain at levels that suggest many employers are holding tight to workers.

(Write to Katherine Bindley at [email protected])


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