The 'vibecession' driving holiday mass layoffs

On 13 December, US marketplace-platform Etsy announced it would be laying off 11% of its staff, cutting more than 200 jobs.

Two days earlier, US financial firm State Street announced they'd lay off 1,500 workers; the same day, toy-maker Hasbro reported cuts of more than 1,000 jobs. This news came just days after Swedish streaming service Spotify laid off 1,500 employees, and global publisher Condé Nast cut 5% of its workforce. In the UK, pharmaceutical companies, banks, automakers and consulting firms also announced sweeping layoffs, shuffling off workers in the last few months of the year.

With the holidays in full swing, the months of November and December feel like a particularly cruel time to let people go. Why does it happen? 

This year, at least, rocky economic headwinds may play a role, says Nicholas Bloom, an economics professor at Stanford University. He believes most companies that conducted these end-of-year mass layoffs did so under the assumption that an economic downturn is imminent. He calls this response a "vibecession", where perceptions drive action – even if the data doesn't tell a story to back up the widespread scepticism.

And 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 mostly strong. This misalignment, says Bloom, feeds into companies scrambling to boost end-of-year-profits in anticipation of a sharp economic downturn, despite the data to the contrary. Hence, layoffs based on "vibes".

"Companies try hard to avoid layoffs over the holiday season, so those making cuts now must be under some pressure," says Bloom. "This is in response to something they did not see two months ago, but is now so pressing it can't wait another two months."

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 particularly be high in sectors including tech and media right now, she says end-of-year job cuts are a common business practice across industries.

"Companies typically track their financials to the calendar year when reporting quarterly results," she says. "A company's annual reports to shareholders, which are also important to attract new investors, include last-quarter financial results." Holiday-season layoffs then are often the result of last-minute cost cutting intended to boost a company's balance sheet for the benefit of shareholders.

In addition to saving on paying employee wages, says Lin, cuts also enable employers to avoid paying out bonuses, many of which land at the end of the year.

Yet while the timing of these layoffs is not a new business practice, Lin believes the current, highly active state of labour has raised the profile of these holiday-season job cuts.

"We're seeing a historic surge of public support for workers' rights," she says. "In recent years, there's been growing interest in companies and shareholders taking workers' wellbeing and contributions to the company's success back into account, along with the equitable workplace policies."

So, although cutting workers in Q4 is a straightforward way to shore up a company's end-of-year financials, Lin says the approach is ultimately harmful to a company's stakeholders, employees and business partners.

"Layoffs just before the holidays can damage company morale and its public image," she says. "The timing of these layoffs can seem particularly cruel, since worker productivity in the US has soared, but historically without similar levels of wage growth."

No matter the reasons for these layoffs – be it real circumstance, perceived financial vibes or long-standing financial calculus – the newfound scrutiny might have some employers thinking twice about axeing jobs at the holidays.

On 13 December, US marketplace-platform Etsy announced it would be laying off 11% of its staff, cutting more than 200 jobs.

Two days earlier, US financial firm State Street announced they'd lay off 1,500 workers; the same day, toy-maker Hasbro reported cuts of more than 1,000 jobs. This news came just days after Swedish streaming service Spotify laid off 1,500 employees, and global publisher Condé Nast cut 5% of its workforce. In the UK, pharmaceutical companies, banks, automakers and consulting firms also announced sweeping layoffs, shuffling off workers in the last few months of the year.

With the holidays in full swing, the months of November and December feel like a particularly cruel time to let people go. Why does it happen? 

This year, at least, rocky economic headwinds may play a role, says Nicholas Bloom, an economics professor at Stanford University. He believes most companies that conducted these end-of-year mass layoffs did so under the assumption that an economic downturn is imminent. He calls this response a "vibecession", where perceptions drive action – even if the data doesn't tell a story to back up the widespread scepticism.

And 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 mostly strong. This misalignment, says Bloom, feeds into companies scrambling to boost end-of-year-profits in anticipation of a sharp economic downturn, despite the data to the contrary. Hence, layoffs based on "vibes".

"Companies try hard to avoid layoffs over the holiday season, so those making cuts now must be under some pressure," says Bloom. "This is in response to something they did not see two months ago, but is now so pressing it can't wait another two months."

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 particularly be high in sectors including tech and media right now, she says end-of-year job cuts are a common business practice across industries.

"Companies typically track their financials to the calendar year when reporting quarterly results," she says. "A company's annual reports to shareholders, which are also important to attract new investors, include last-quarter financial results." Holiday-season layoffs then are often the result of last-minute cost cutting intended to boost a company's balance sheet for the benefit of shareholders.

In addition to saving on paying employee wages, says Lin, cuts also enable employers to avoid paying out bonuses, many of which land at the end of the year.

Yet while the timing of these layoffs is not a new business practice, Lin believes the current, highly active state of labour has raised the profile of these holiday-season job cuts.

"We're seeing a historic surge of public support for workers' rights," she says. "In recent years, there's been growing interest in companies and shareholders taking workers' wellbeing and contributions to the company's success back into account, along with the equitable workplace policies."

So, although cutting workers in Q4 is a straightforward way to shore up a company's end-of-year financials, Lin says the approach is ultimately harmful to a company's stakeholders, employees and business partners.

"Layoffs just before the holidays can damage company morale and its public image," she says. "The timing of these layoffs can seem particularly cruel, since worker productivity in the US has soared, but historically without similar levels of wage growth."

No matter the reasons for these layoffs – be it real circumstance, perceived financial vibes or long-standing financial calculus – the newfound scrutiny might have some employers thinking twice about axeing jobs at the holidays.

-bbc