2024: The Year of Extreme Cost Cutting and Layoffs

Major companies are already anticipating 2024 to be a year marked by stringent cost-cutting measures. While the Biden administration and the Bureau of Labor Statistics (BLS) seemingly overlook extensive layoffs in the corporate sphere, those in the real world are already positioning themselves for significant job losses and other cost cutting moves this year as a result of the impending economic climate.

The trajectory for 2024 looks to be a continuation of corporate strategies geared towards reducing costs, invariably translating into reduced head-counts and compensation for employees. Executives across diverse sectors, spanning toys, cosmetics, and technology, are implementing cost-cutting initiatives, even within profitable enterprises like Mattel, PayPal, Cisco, Nike, Estée Lauder, and Levi Strauss, according to recent reports from CNBC.

For instance, Macy's intends to shutter five stores and lay off more than 2,300 employees, while airlines such as JetBlue and Spirit are offering buyouts, and United is scaling back in-flight services. This trend is propelled by consumer apprehension and investor demands for companies to adapt to evolving market dynamics and increased operational expenses.

“You’re seeing a rebalancing happening in the labour markets, in the capital markets. And that rebalancing is still going to play out and gradually lead to a more sustainable environment of lower inflation and lower interest rates, and perhaps a little bit slower growth, said Gregory Daco, chief economist for EY.

He continued, telling CNBC: “You are in an environment where cost fatigue is very much part of the equation for consumers and business leaders. The cost of most everything is much higher than it was before the pandemic, whether it’s goods, inputs, equipment, labour, or even interest rates.”

Moreover, significant labour contracts, notably within airlines and UPS, have resulted in heightened costs, challenging businesses accustomed to passing these expenses on to consumers. Despite previous fanfare surrounding UPS drivers' contract victories, the company is already initiating layoffs as a repercussion.

Major banks have also proactively downsized their workforce in anticipation of economic shifts, with Wells Fargo and Goldman Sachs eliminating more than 20,000 jobs last year.

Tech conglomerates such as Amazon, Alphabet, Microsoft, and Cisco, following Meta's restructuring in 2023, are following suit in trimming their workforce. However, the trend transcends the tech sector, with UPS alone slashing 12,000 jobs, while retail and entertainment sectors also announce layoffs.

Several other major corporations, including Warner Bros. Discovery and Disney, have unveiled substantial cost-saving measures, with Disney targeting $7.5 billion in savings. Paramount Global and NBCUniversal have similarly reduced their staff.

The evidence clearly suggests large companies are planning to downsize their workforce and cut costs in 2024, with many already beginning to do so. Yet, as we have discussed previously, the Biden administration and Bureau of Labor Statistics continue to ignore the inevitable and paint an overly rosy picture of the current economic landscape.

The uninformed (or heavily manipulated) optimism cannot last long before reality kicks in, and when it does, it appears it will be a rather significant change in unemployment, worker compensation, and the broader labour market as a whole.