It's a rolling layoff world: Companies are making cuts year-round in small batches

Companies are increasingly implementing a strategy of continuous, smaller-scale job reductions, dubbed "forever layoffs," rather than large, infrequent cuts, a trend that now sees layoffs of fewer than 50 employees comprising 51% of all reductions, up from 38% in 2015, according to Glassdoor. While this approach allows companies to make strategic adjustments with less public scrutiny, it is fostering persistent worker anxiety, negatively impacting employee morale and productivity, and is becoming normalized within a slowing labor market, with projections indicating long-term damage to workplace culture.

Analysis

The financial landscape is increasingly characterized by "forever layoffs," a strategy where companies implement continuous, small-batch job reductions rather than large, infrequent events. This approach, which now sees layoffs of fewer than 50 employees constituting 51% of all reductions (up from 38% in 2015), allows businesses to adjust strategies with reduced public scrutiny and normalizes workforce reductions.

This trend contributes to a slowing labor market, declining hiring, and heightened worker anxiety, exacerbated by concerns over AI's impact on jobs. Glassdoor data indicates a significant rise in "layoff" and "job insecurity" mentions in employee reviews, surpassing March 2020 levels, while a Johns Hopkins study confirms employee well-being reached a new low last year.

The normalization of these "silent layoffs" is projected to persistently damage worker morale and workplace culture through 2026 and beyond. While small cuts are prevalent, a deteriorating economy could trigger larger-scale reductions, as exemplified by Verizon's recent 15,000-job cut, indicating that even small-scale reductions do not make companies immune to significant workforce adjustments under adverse conditions.

Key Decisions for Investors

• Investors should assess companies' human capital management strategies, particularly how they mitigate the long-term damage to morale and culture from persistent small-scale layoffs, as this impacts productivity and retention.
• Monitor macroeconomic indicators for signs of further deterioration, as this could trigger a shift from "forever layoffs" to larger, more impactful workforce reductions, affecting corporate earnings and market sentiment.
• Evaluate sectors with high AI adoption or those already experiencing slowing hiring for increased exposure to both "forever layoffs" and potential larger cuts, adjusting portfolio allocations accordingly.