The pace of job cuts by US employers accelerated in 2023, with the number of layoffs surging 98% compared with the previous year.

That is according to a new report published by Challenger, Gray & Christmas, which found that companies planned 721,677 job cuts last year, a substantial increase from the 363,832 layoffs reported in 2022.

The problem could get worse in 2024 as the labor market continues to soften in the face of high interest rates and stubborn inflation.

“Labor costs are high,” said Andy Challenger, senior vice president of Challenger, Gray & Christmas. “Employers are still extremely cautious and in cost-cutting mode heading into 2024, so the hiring process will likely slow for many job-seekers and cuts will continue in the first quarter.”

Technology bore the brunt of the job losses in 2023, with the industry shedding 168,032 employees – a stunning 73% increase from the previous year. The total falls slightly short of the annual record of 168,395 cuts announced for the sector in 2001.

“The tech sector will continue to be impacted by the onset of AI, mergers and acquisitions, and realigning of resources and talent,” Challenger said.

Retail companies also accounted for a large swath of the job cuts last year, slashing 78,840 positions. That marks a 274% increase from the layoffs announced in the sector during the same period one year prior. Challenger said retailers need to “be on their toes” this year, even though many companies exercised caution and flexibility in their hiring.

Health care and products manufacturers – including hospitals – also cut a significant number of jobs. They eliminated 58,560 positions in 2023, a 91% increase from the layoffs announced in 2022.

The top reason cited for job cuts last year was deteriorating market and economic conditions as the country grappled with still-high inflation, a sharp rise in interest rates and ongoing geopolitical tensions. Companies also blamed stores closing, bankruptcy and artificial intelligence for the layoffs.

The labor market has remained historically tight over the past year, defying economists’ expectations for a slowdown. Although economists say it is beginning to normalize after last year’s blistering pace, it is nowhere near breaking.  

The report comes shortly after the Labor Department reported that the economy added 216,000 jobs in December, pointing to a gradually slowing labor market.

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