The 'vibecession' driving holiday mass layoffs

The holiday season is a time of celebration for many, but for others, it signifies job loss. This phenomenon seems particularly pronounced at present, prompting questions about its cause. On 13 December, US-based online marketplace Etsy announced it would be laying off 11% of its staff, equating to over 200 jobs. Two days prior, US financial firm State Street declared they'd lay off 1,500 workers; the same day, toy manufacturer Hasbro reported cuts of over 1,000 jobs. This news followed shortly after Swedish streaming service Spotify laid off 1,500 employees, and global publisher Condé Nast reduced its workforce by 5%. In the UK, pharmaceutical companies, banks, automakers and consulting firms also announced extensive layoffs, dismissing workers in the final months of the year.

With the holiday season in full effect, the months of November and December seem a particularly harsh time to terminate employment. Why does this occur? This year, at least, turbulent economic conditions may be a contributing factor, suggests Nicholas Bloom, an economics professor at Stanford University. He posits that most companies that conducted these end-of-year mass layoffs did so under the assumption that an economic downturn is on the horizon. He refers to this reaction as a 'vibecession', where perceptions dictate action – even if the data doesn't corroborate the widespread scepticism. Indeed, the numbers largely don't. Although consumer confidence is down, and many people perceive a weak economy amid inflation and a tightening jobs market, indicators show the economy is predominantly strong. This discrepancy, Bloom argues, leads to companies scrambling to bolster end-of-year profits in anticipation of a sharp economic downturn, despite the data suggesting otherwise. Hence, layoffs based on 'vibes'.

'Companies strive to avoid layoffs over the holiday season, so those implementing cuts now must be under significant pressure,' Bloom asserts. 'This is in response to something they did not foresee two months ago, but is now so urgent it can't be postponed another two months. ' Some companies are laying off workers due to a 'vibe' regarding the state of the economy. Shirley Lin, a professor at Brooklyn Law School in New York, is more sceptical that these cuts are unique to current economic conditions. While layoffs may be particularly high in sectors including tech and media at present, she asserts that end-of-year job cuts are a common business practice across industries. 'Companies typically align their financials with the calendar year when reporting quarterly results,' she explains. 'A company's annual reports to shareholders, which are also crucial to attract new investors, include last-quarter financial results. ' Holiday-season layoffs, therefore, are often the result of last-minute cost cutting intended to enhance a company's balance sheet for the benefit of shareholders. In addition to saving on employee wages, Lin notes, cuts also enable employers to evade paying out bonuses, many of which are distributed at the end of the year. Yet while the timing of these layoffs is not a novel business practice, Lin believes the current, highly active state of labour has heightened the visibility of these holiday-season job cuts. 'We're witnessing a historic surge of public support for workers' rights,' she states. 'In recent years, there's been growing interest in companies and shareholders considering workers' wellbeing and contributions to the company's success, along with equitable workplace policies. ' Therefore, although dismissing workers in Q4 is a straightforward method to strengthen a company's end-of-year financials, Lin argues the approach is ultimately detrimental to a company's stakeholders, employees and business partners. 'Layoffs just prior to the holidays can harm company morale and its public image,' she warns. 'The timing of these layoffs can appear particularly cruel, given that worker productivity in the US has skyrocketed, but historically without commensurate levels of wage growth. ' Regardless of the reasons for these layoffs – whether actual circumstances, perceived financial vibes or long-standing financial strategies – the increased scrutiny may cause some employers to reconsider terminating jobs during the holiday season.