BCA Research released a report stating that tariffs are becoming less of a threat to corporate profits, but signs of labor market weakness are now a more worrying factor for investors. Most companies have managed to reduce the impact of tariffs on margins, making the issue less important to earnings prospects.
However, layoffs have increased sharply. October recorded 153,000 layoff announcements, the highest number for October in more than two decades, bringing the cumulative total this year to 1.1 million. However, BCA Research stressed that there is no single systemic factor driving this wave of layoffs.
The technology and warehouse industries accounted for the largest share of layoffs, but BCA Research noted that the cuts in the technology sector are not related to profitability problems. Instead, companies are shifting resources towards developing GenAI infrastructure, with about 20% of layoffs directly related to AI restructuring.
Other factors include cost-cutting measures that accounted for a third of the layoffs, as well as signs of a slowdown in consumer and corporate spending. Analysts said the growing use of AI, rising costs and a sluggish economic environment are also driving more hiring freezes.
BCA Research closed the report by warning that a continued slowdown in the labor market could weigh on the resilience of companies’ earnings and investor sentiment, but the strategic outlook for equities remains positive for now.
