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posted on 07 July 2016

June 2016 Job Cuts Up 28% From May But Down 26% Year-over-Year

from Challenger Gray and Christmas

Employers announced plans to cut payrolls by 38,536 jobs in June, an increase from May, but still well below the 12-month average and indicative of a positive employment environment.

The June job-cut total is 28 percent higher than May, when planned layoffs fell to a five-month low of 30,157. Said John A. Challenger, chief executive officer of Challenger, Gray & Christmas:

Job cut announcements were up last month, but they increased from the lowest total of the year to the second lowest of the year. The June total is 26 percent lower than the 53,049 monthly job cuts averaged over the past year.

June job cuts were down 14 percent from the 44,842 planned job cuts reported by employers in June 2015.

Through the first half of the year, employers announced 313,754 planned job cuts, which is up 9 percent from the 287,672 job cuts announced in the first six months of 2015.

However, pace of job cutting has slowed significantly since the beginning of the year. Job cuts in the second quarter totaled 132,834, down 27 percent from the 180,920 first-quarter cuts and 10 percent lower than the 147,458 job cuts announced in the second quarter of 2015. Challenger added:

It is not unusual to see a slowdown in job cuts during the summer months. Other factors are definitely contributing to the decline, the biggest one being the precipitous drop off in job cuts attributed to low oil prices.

In the first quarter, firms in the energy and industrial goods sectors blamed oil prices for 50,053 announced job cuts. In the second quarter, oil-related job cuts declined 48 percent to 26,022.

In the energy sector alone, job cuts declined 42 percent from 48,901 in the first quarter to 28,310 in the second quarter.

Sectors linked to oil were not the only ones to see a drop in job cuts. After announcing 31,832 job cuts in the first three months of 2016, retailers announced 48 percent fewer layoffs in the second quarter (10,263). Job cuts in the health care fell by 65 percent from 7,935 in Q1 to 2,798 in Q2. Challenger concluded:

We may continue to see low job cut totals throughout the remainder of 2016, as employers take a wait-and-see stance on workforce levels. Several uncertainties, including national elections, the recent Brexit, and global security and economic issues are giving employers pause when it comes to workforce decisions. We are seeing it in layoff numbers, as well as the job creation numbers, which have been lackluster in recent months.

Last year, the second half of the year kicked off with more than 100,000 job cuts announced in July. The surge was due primarily to massive cuts in troop and civilian jobs in the US military. We are unlikely to see similar government cuts in an election year. Even with the 105,000 July job cuts, monthly job cuts averaged just under 52,000 in the last half of 2015, well below a level that would indicate widespread contraction in employment.

Not every sector is holding off on job cuts. Layoffs in the computer industry increased in the second quarter and total 39,589 through the first half of 2016, which is more than triple the 11,618 announced by these firms in the first six months of 2015.

We have seen large scale job cuts from Intel and Dell this year, as well as, numerous smaller cuts from tech firms, including Seagate Technology, which announced 1,600 job cuts in June. The very nature of the technology sector means that these firms must remain agile and able to shift directions on a dime to meet constantly changing advances and changing consumer demands.

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