Latest private-sector data indicates the U.S. labor market is undergoing a sharp and profound cooling, with deterioration potentially outpacing official statistics. From soaring corporate layoff announcements to multiple alternative employment growth metrics turning negative, leading indicators are flashing warning signals of a potential job recession looming.
The most striking red flag comes from the surge in corporate layoffs. According to Challenger, Gray & Christmas, October layoffs spiked to 153,000, marking the highest level for the month in over two decades. Concurrently, Goldman Sachs’ tracking of Worker Adjustment and Retraining Notification (WARN) Act filings—mandatory for large-scale layoffs—hit a post-2016 high (excluding pandemic anomalies).
These trends are reshaping economic outlooks. The once-resilient job market, a pillar of the "soft landing" narrative, is now faltering, significantly raising recession risks. Investors and analysts are increasingly scrutinizing high-frequency alternative data to gauge the economy’s true health, pressuring the Federal Reserve as markets question whether it’s "far behind the curve" on rate cuts.
With potential lags in government data, attention has shifted to private-sector reports from ADP, Revelio Labs, and Goldman Sachs, collectively painting a picture of rapidly fading job momentum—a stark contrast to official August figures and setting a grim tone for upcoming employment reports.
**Layoff Wave Triggers Multiple Red Flags** Weakness is first evident in corporate actions. Challenger’s report shows October layoffs far exceeded historical averages. Andy Challenger, the firm’s COO, noted: "Some industries are correcting pandemic-era hiring surges, while AI adoption, weak consumer and business spending, and rising costs are driving cost-cutting and hiring freezes." He added that laid-off workers now face tougher re-employment prospects.
Other high-frequency data corroborates this. ADP’s weekly report revealed private employers cut 11,250 jobs weekly in the four weeks to October 25, implying ~45,000 job losses in late October alone—the steepest monthly decline since March 2023. Revelio Labs reported a loss of 9,100 jobs in October, the second-worst monthly performance in 2025, driven by government sector declines but also affecting manufacturing and trade.
**Goldman’s Multi-Dimensional Tracking Confirms Labor Weakness** Goldman Sachs’ alternative data models conclude the job market is softening further, projecting a 50,000 drop in October nonfarm payrolls after adjusting for deferred government resignations. Key findings include:
- *Deteriorating Leading Indicators*: New layoff-tracking models show layoffs exceeding pre-pandemic levels, with WARN notices surging. Historically, WARN filings and Challenger reports lead initial jobless claims by ~2 months, suggesting claims—still low—may soon rise. - *Loosening Labor Market*: Job openings and labor tightness metrics continue declining, indicating weaker conditions than August’s official data. - *Corporate Sentiment Shift*: Analysis of Russell 3000 earnings calls shows rising mentions of "layoffs," especially in Q3 2025, reflecting pessimistic hiring outlooks.
**AI Fuels Layoffs, Recession Risks Spike** A notable feature of this layoff wave is AI’s role. Goldman notes AI has become central to workforce discussions since ChatGPT’s 2022 debut, with adoption accelerating in 2025 across tech, finance, and real estate—sectors now frequently citing AI in layoff decisions.
This tech-driven shift, combined with cyclical downturns, heightens unemployment risks. Goldman’s models project median/mean unemployment could reach 4.5% in six months, up 0.2pp from August. Tail risks have also surged: the probability of a 0.5pp+ unemployment rise now stands at 20-25%, versus 10% six months ago.
Recent mass layoffs by
- **Oct 29**: CarMax cut 350 customer service jobs; Paramount laid off 2,000 post-Skydance merger;
As AI-driven restructuring accelerates alongside economic pressures, the labor market’s downturn appears increasingly entrenched.