Labor Market Alert: Construction Industry Layoffs Surge Most On Record

While nowhere near alarming levels, this morning's initial jobless claims confirm that the improvement in the labor market may be peaking, contrary to what ADP reported earlier, with Initial Jobless Claims jumping by 10K from 221K to 231K, the highest print since November 2018 as a trough and potential reversal appears to be forming in the series.

But while the initial claims report indicated some modest slowdown in the economy, if nothing near the recent plunge observed by both the Richmond and Dallas Feds, a far more ominous data point was revealed earlier this morning, when the latest Challenger jobs report found that seven of 28 industries tracked by Challenger had 3k or more layoffs in December, the most since April 2015, which according to Reuters' Jeoff Hall was "just the fourth time since the end of the Great Recession in which there were seven or more industries with that many layoffs each."

Also according to Challenger, the December 2018 layoff total of 43,884, was nearly 29% higher than last year and the highest total since 2015. Additionally, in 2018, 538,659 job cuts were announced, 28.6% higher than the 418,770 announced in 2017. This is the highest annual total since 598,510 cuts were recorded in 2015, and the second-highest total since 2011, when 606,082 cuts were announced.

And an even more troubling observation: the number of layoffs in the construction industry jumped by 8,822 - this was not only more than all 15 prior months combined, but was the most since at least October 2006 when Challenger started tracking the industry. Indicatively, the next closest month with such a high spike in construction job losses was February 2007, just ahead of the Great Recession.

Challenger also noted some special factors, noting that the majority of job cut announcements were due to companies restructuring, with 185,931 cuts were attributed to this reason. Another 145,298 were due to closings. Voluntary severance, such as buyouts or early retirement offers, claimed 48,745.

Challenger tracked 798 announced job cuts specifically due to enacted tariffs. Another 1,565 cuts were blamed on government regulations, either federal or local. Meanwhile, Hurricane Michael was to blame for 800 cuts in Florida. The recent earthquake in Alaska claimed 40 jobs, while 27 workers were cut due to wildfires.

“It remains to be seen, especially as new trade deals continue to be negotiated and tariffs are lifted or further enforced, what the impact on job cuts will be. The large-scale job cut announcements due to these tariffs have yet to be announced, it seems,” said Challenger.