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Bankruptcies Are Driving Up Job Cuts

There is no doubt that in the current robust economy unemployment has reached its lowest levels in over 50 years. However, according to theJuly 2019 Analysis of Job Cuts Announcements from global outplacement and executive coaching firm Challenger, Gray and Christmas, Inc, through July, 42,937 jobs cuts have been announced due to bankruptcy. This is a 40% increase over job cuts announced through July 2018 and a 19% increase over all of 2018. In fact, it is the highest level of job cuts since 2009 when 50,911 were announced over the course of the entire year.

Moreover, the data shows that 11.6% of all of the job cuts announced so far this year are due to bankruptcy, up from 11.3% from the same period in 2018. From 2007 through 2018, job cuts due to bankruptcy accounted for less than 6% of the annualized total job cuts.

Perhaps it comes as no surprise that retail is leading the charge.

According to Andrew Challenger, "We have seen a number of retailers filing for bankruptcy, closing locations, and cutting workers, and indeed, the majority of bankruptcy cuts occurred in that industry. In recent months, however, we've seen bankruptcy filings that led to cuts in manufacturing, transportation, and automotive." 

Employment is considered a lagging indicator of a recession as companies typically keep hiring right up until the edge. In spite of slowing GDP growth, the impact of the trade war, and cuts in business investment, the labor market is still robust. Regarding the impact from retail challenges, however, estimates show that retail is now on track to close roughly 12,000 retail stores by the end of the year, beating the record set in 2017 of 8,139. While retail may not be the sector that tips the scales towards a correction, its impact on job cuts will nevertheless continue to be felt. 

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