Another day, another set of disappointing data. Data this week from Challenger, Gray & Christmas indicate that the US labor market is no longer merely cooling. According to the latest report, US employers announced 108,435 job cuts in January, the highest January total since 2009, and more than double January 2025 figures. Hiring plans collapsed to just 5,306 announced jobs — the lowest January level on record since the firm began tracking hiring in 2009.
For years after the pandemic, employment was the one strong headline in an otherwise weakening economy. Even as real growth slowed and debt expanded, companies continued to hire, and workers found jobs. That narrative of a resilient labor market propping up economic optimism is now unravelling. Fewer new hires, skyrocketing job cuts, and employers setting reduction plans before the year even began shouldn’t be dismissed as routine seasonal shifts; they point to a downturn in employer expectations and consumer demand.
While headlines often attribute layoffs to artificial intelligence, the Challenger data shows AI accounted for a relatively small share of the cuts. The dominant forces are market conditions, contract losses, and cost pressures.
The labor market is the backbone of consumer demand. Companies expand payrolls when they believe future sales justify investment. Workers thrive when they believe they will be fairly compensated and not penalized by the government through excessive taxation.
Employers set layoff plans late in 2025, anticipating weaker conditions in 2026. Hiring plans are a clear sign of confidence, or in this case, the erosion of confidence. This is not a temporary cooling but a downward trend.
Since the government is unable to operate, data sources like Challenger and ADP have become more dependable. Still, the data from BLS is the preferred gauge, but there is no need to wait for that data to publish to see that the labor market is weakening.
Confidence always precedes activity. When confidence fades, activity follows.