Layoffs Ease, But Labor Market Stays Uneven — Evening Brief – 03.05.26

After a rough start to the year, planned layoffs eased noticeably in February even as pockets of the labor market remain under pressure. U.S.-based employers announced 48,307 job cuts last month, down 55% from January and 72% below February 2025 levels, according to Challenger, Gray & Christmas.  

Through the first two months of 2026, companies have disclosed 156,742 cuts, the lowest January–February tally since 2022, but still the fifth‑highest start to a year since 2009. “February’s dip is a nice reprieve from the elevated job cut plans to start the year,” said Andy Challenger, the firm’s CRO, while warning that U.S. involvement in a growing war in Iran could prompt more belt‑tightening later in Q1 as uncertainty and costs rise. 

Hiring plans improved month over month, climbing to 12,755 in February, up 140% from January, but remain 63% below the same month a year earlier; year‑to‑date, employers have announced plans to hire 18,061 workers, down 56% from early 2025.  

Sector data underscore how uneven conditions remain: technology led February cuts with 11,039 layoffs and 33,330 year‑to‑date, up 51% from a year ago, while education, industrials/manufacturing, healthcare and transportation all posted sharp year‑on‑year increases in announced reductions. Transportation cuts, at 31,702 year‑to‑date, are more than nine times the level in the same 2025 period, with Challenger pointing to the conflict in Iran, higher oil prices and supply chain disruptions as likely headwinds.  

Meanwhile, official claims and productivity data still paint a picture of a labor market that’s loosening gradually rather than breaking. Initial jobless claims held around 213,000 in late February, near consensus forecasts and consistent with historically low layoff rates.  

Nonfarm business labor productivity rose at a 2.8% annualized pace in Q4 2025, down from a revised 5.2% gain in Q3 but ahead of the 1.9% consensus. Output increased 2.6% while hours worked fell 0.2%, leaving productivity up 2.8% over the past four quarters and 2.2% on average for 2025.  

Unit labor costs also increased 2.8% in Q4, versus an estimated 2.1%, reflecting a 5.7% rise in hourly compensation; manufacturing productivity, by contrast, fell 1.9% as unit labor costs in that sector jumped 8.3%, underscoring margin pressure in goods‑producing industries.