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Layoffs surge in US white collar jobs as rates, AI alter office work

One in every four American workers that have lost their jobs this year worked in professional and business services, a sign that the white-collar labor market may be straining under the weight of high interest rates and that technological advances may already be making some workers obsolete.

In September, employers shed 497,000 professional and business services jobs — which includes accountants, consultants and legal workers — the highest for the group in nearly two years and more than any other sector during the month, according to Bureau of Labor Statistics data released Oct. 29. Through the first nine months of 2024, professional and business service sector jobs accounted for more than 3.7 million of the nearly 14.9 million layoffs and discharges in the US.

While the exact causes of these job cuts remain unclear, it could reflect a cyclical weakness sparked by higher interest rates and overall restrictive monetary policy hindering investment and employment. It may also reflect more structural changes, with the rising number of layoffs and stalling growth in the sector potentially connected to new technologies, such as generative artificial intelligence, replacing white-collar workers and improving productivity with a smaller number of employees, said Julia Pollak, chief economist at ZipRecruiter.

"If those trends stick in the coming months, even as interest rates fall and activity in various markets revives, that could be evidence in support of the theory that the economy is fundamentally changing due to new technologies," Pollak said.

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The overall number of Americans employed in the professional and business services sector ballooned by nearly 3.8 million from April 2020 to over 22.9 million in April 2024, but growth has largely stagnated since, peaking just below 23 million in May 2024, where it has essentially stalled.

"While it is still well above the pre-COVID level, it is now clearly below the pre-COVID trend," Pollak said.

As growth has stalled, hiring in the sector has flattened, and layoffs and discharges have begun to climb. The 497,000 layoffs and discharges in September were the most for the sector since January 2023.

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The professional and business services sector includes temporary help services and staffing firms that have seen a pullback in recent months and often see dynamic labor turnover, said Cory Stahle, an economist with Indeed Hiring Lab.

Overall, the jobs data shows a clear trend of cooling and rebalancing as job openings have fallen steeply from their peak in late 2021, Stahle said.

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"That large peak gave the Federal Reserve a cushion to work with, but that is nearly spent," Stahle said. "The labor market is still relatively solid, but we are at a point where further cooling could become more worrisome and start impacting unemployment."

There were 7.4 million job openings in the US in September, the lowest number of openings since January 2021, the new data shows.

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"There is a question mark over whether they are being actively filled or whether the employer is just keeping the head count open," said James Knightley, chief international economist with ING. "It is less painful to simply pull a vacancy rather than fire someone if you need to cut future budgets."

At the same time, the quits rate, a measure of workers voluntarily leaving their jobs, dropped to 1.9%, its lowest level since June 2020 and a sign that Americans are increasingly holding on to their jobs as options appear to be more limited.