Layoffs are out. Labor hoarding is in

Why some companies are doing the exact opposite of laying off employees.

When the economy gets shaky, corporations usually take the shortsighted way out, cutting employees to save money.

Layoffs are out. Labor hoarding is in

Except, not right now. Despite recession warnings, economists say many businesses are focused on the opposite of layoffs: labor hoarding.

Labor hoarding…

… is when companies hang on to employees during a tough economic period because they believe they’ll save money in the long run, according to Inc.

  • To corporations, layoffs provide a quick high, inflating quarterly profits. But the hangover can be worse. When the economy recovers, companies must spend hefty amounts on recruitment, rehiring, and training.

Labor hoarding helps them avoid those costs. After a quick rebound from the March 2020 recession left companies shorthanded, many are likely reluctant to risk a repeat.

But is this just a long tail effect of the ongoing labor shortage?

Maybe. That’s the case against labor hoarding.

Some economists believe companies still don’t have enough employees, which is why they’re not cutting many jobs.

Either way, there’s good news we can all celebrate: Layoffs have been minimal this summer, hovering at a rate of 0.9% of total employment.

That’s roughly the same rate as this time last year and lower than every month of 2019.

Topics: Labor

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