The 'vibecession' driving holiday mass layoffs

The holiday season is a time of celebration for many, but for others, it signifies a period of job loss. This phenomenon seems particularly pronounced at present. On 13 December, the US-based marketplace platform 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 more than 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 like a particularly harsh time to terminate employment. Why does this occur? This year, at least, economic turbulence 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 dismissing workers due to a 'vibe' concerning 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 the current economic climate. While layoffs may be particularly high in sectors including tech and media at present, she asserts that end-of-year job cuts are a standard 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 for attracting new investors, include last-quarter financial results. ' Holiday-season layoffs, therefore, are often the result of last-minute cost-cutting measures 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.