Worried about layoffs? Economists say the job market is cooling but 'not falling off a cliff'

Despite a significant increase in layoff announcements, totaling 1.1 million this year and marking the worst period since 2009, job experts indicate the overall labor market is cooling rather than collapsing, with private data not fully corroborating a widespread downturn. However, worker confidence, particularly among senior leadership, is declining, and job postings are at 2021 lows, signaling a tightening market. A notable divergence exists, with robust job growth in healthcare and private education sectors largely offsetting losses elsewhere, while broader economic uncertainty dampens employer willingness to hire and reduces employee leverage.

Analysis

Despite 1.1 million layoff announcements year-to-date, marking the worst period since 2009, job experts indicate the overall labor market is cooling rather than collapsing. Private data on job openings and payrolls suggest hiring is moderating, not "falling off a cliff," with Challenger's monthly layoff data noted for its volatility and not yet reflected in state-level unemployment filings.

Worker confidence is notably declining, particularly among senior-level employees, whose confidence dropped 4.6 percentage points since October 2024, potentially impacting future hiring and investment plans. Job postings on Indeed are at their lowest level since 2021, signaling a tightening market and reduced leverage for job seekers, with fewer declining job offers.

A significant "tale of two economies" is evident, with robust job growth in health-care and private education sectors, which accounted for 56% of job growth between July 2023 and July 2025, largely offsetting losses elsewhere. However, broader economic uncertainty and the government shutdown are dampening employer willingness to hire, contributing to a "funk" in the job market, despite some top-line indicators not being historically bad.

Key Decisions for Investors

• Monitor official labor market data, particularly unemployment claims and BLS reports once available, to distinguish between headline layoff announcements and broader employment trends.
• Evaluate portfolio exposure to sectors exhibiting resilience, such as healthcare and private education, versus those more susceptible to economic uncertainty and declining job postings.
• Factor in the implications of declining worker and senior leadership confidence, as this could signal slower corporate investment, hiring, and consumer spending, impacting future earnings outlooks.