Corporate layoffs surge

Bottom line

The federal government shutdown is now the longest in US history, with the Senate failing to pass legislation to reopen at least 14 times. With Tuesday’s important off-year elections now behind us, in which Democrats ran the table by huge margins in key races, we expect that cooler heads in Washington to prevail to end the stalemate before Thanksgiving.

But that doesn’t help us today. The shutdown continues to deprive investors of economic data, including the critically important nonfarm payroll report. The Labor Department failed to produce it for September and did not deliver the October reading that was scheduled for today. As a result, financial markets and the Federal Reserve are forced to cobble together data from disparate sources, creating a decidedly incomplete picture of the labor market.

Layoffs hit a 22-year high According to Challenger, Gray & Christmas, companies announced job cuts of more than 153,000 in October 2025, a 183% month-over-month (m/m) increase from September 2025, and a 175% year-over-year (y/y) increase from October 2024. That’s the highest level for any October since the technology bubble burst in 2003. And, it takes the total layoffs this year to 1.1 million, the most since the Global Financial Crisis. Warehousing (31%) and technology (21%) account for about half the total layoffs.

Companies are motivated to reduce their staffing levels after their post-pandemic hiring boom, due to cost cutting, the impact from anticipated adoption of AI, and the expected economic slowdown from the federal government shutdown. Seasonal hiring plans through October are the lowest since Challenger started tracking them in 2012. 

Negative GDP impact from shutdown After posting a decline of 0.6% in this year’s first quarter, GDP soared 3.8% in the second quarter. We should have a preliminary figure for the third quarter, but the shutdown prevented the Commerce Department from releasing it. The Atlanta Fed’s GDPNow real-time calculation can add color to the bigger picture but is not, on its own, meaningful data. For the record, its current estimates of third quarter GDP is 4.0%. In any case, the Congressional Budget Office, which is working for some reason, estimates that the shutdown could reduce GDP by perhaps 0.1-0.2% per week. Of course, we expect GDP to rebound after the government shutdown ends.

Corporate roll call Many prominent S&P 500 companies have announced layoffs recently: UPS, 48,000 layoffs; Amazon, 30,000; Intel, 24,000; Accenture, 11,000; Microsoft, 9,000; Meta, 8,000; Ford, 8,000; Salesforce; 4,000; ConocoPhillips, 3,000; IBM, 2,700; Target, 1,800; General Motors, 1,700; Starbucks, 1,100; Paramount Skydance, 1,000; and Kroger, 1,000.

Blame game More than 25,000 federal government workers who accepted buyouts earlier this year dropped off the payroll totals in October. Last week, the American Federation of Government Employees, the union that represents 820,000 federal and Washington, DC, government workers, implored Congress to pass the House Republicans’ continuing resolution to reopen. According to a survey from Evercore ISI, as the government shutdown has dragged on, 40% of Americans believe that both parties share equal blame, 35% believe that Democrats are chiefly responsible and 25% fault the Republicans. 

The Transportation Department has reduced capacity at the nation’s 40 largest airports by 10% due to reduced staffing levels among air traffic controllers and TSA officers. If travel conditions worsen going into the Thanksgiving holidays, the mood among average Americans could get ugly in a hurry, ramping up pressure on Congress to open the government. 

ADP private payrolls rebound...sort of October posted a better-than-expected gain of 42,000 jobs (consensus gain of 30,000 expected), up from losses of 29,000 jobs in September and 3,000 in August. But the October number is still far below the gains ADP had been posting earlier in the year. For instance, it reported a gain of 104,000 private jobs in July. Also worrisome, hiring at small businesses declined for the fifth time in the last six months. Wage gains seemed strong, as workers who changed jobs last month saw their pay rise 6.7% y/y. But that’s less than half the cycle peak of 16.1% in April 2022. Job stayers earned a more modest pay boost of 4.5% y/y, well below the peak of 7.8% in September 2022. 

Initial weekly jobless claims rose slightly This high-frequency leading employment indicator declined from a four-year high of 264,000 claims for the week ended September 5 to 219,000 for the week ended September 19, the last week for which we have government data. Wall Street economists estimate that claims rose to 228,000 for the week ended November 1, by combining the release of individual state-level claims with the Labor Department’s pre-released seasonal adjustment factors. That compares with claims of 219,000 for the week ended October 25. Continuing claims among federal workers climbed to 30,000 for the week ended October 25, the most since January 2019, which just so happens to be the last time the government shutdown.

How will the Fed respond? The Federal Reserve cut interest rates by a quarter point on September 17 and October 29, referencing the recent weakness in the labor market. But Chair Jerome Powell cautioned investors during his presser last week that another cut on December 10 was not a foregone conclusion. That spooked investors, and immediately reduced the odds of a December cut from roughly 95% to 65%, where it sits now. 

The S&P 500 hit a new intraday record at 6,920 when the Fed cut rates last Wednesday, but stocks have declined by 4% over the past seven trading days. While this is in part due to the government shutdown, we think Powell’s intransigence on the prospect of rate cut in December is also to blame. We disagree with Powell’s hawkish assessment and believe that the Fed should, and likely will, lower the fed funds target range by another quarter point. We anticipate three more cuts of the same magnitude to come in 2026, taking the fed funds rate down to 3% before year-end.