What is the layoffs and discharges rate?

The layoffs and discharges rate, part of the monthly JOLTS report from the Bureau of Labor Statistics, measures the number of involuntary separations (firings, layoffs, and discharges) as a percentage of total employment. Unlike the quits rate, which captures voluntary departures, this indicator specifically tracks unwanted job losses and directly reflects business decisions about workforce reductions.

In a healthy economy, the layoffs rate tends to be remarkably stable, typically hovering around 0.9-1.1% per month. This stability reflects the fact that some baseline level of firings always occurs due to performance issues, seasonal adjustments, and normal business closures. What matters for the economic outlook is when the rate moves meaningfully above this range. During the Great Recession, the layoffs rate spiked above 2%, and during the pandemic it briefly exceeded 7%. These spikes coincide precisely with NBER-dated recession periods.

The layoffs rate is analytically distinct from initial jobless claims, though both measure involuntary separations. Initial claims are filed by workers seeking unemployment insurance, which means they miss workers who are ineligible for benefits or choose not to file. The JOLTS layoffs rate is derived from employer surveys and captures all involuntary separations regardless of benefit eligibility. Comparing the two measures can reveal whether initial claims are understating or overstating actual firing activity.

One of the notable features of the 2022-2024 period was that despite widespread fears of recession, the layoffs rate remained near historic lows around 1%. While hiring slowed and job openings declined, businesses were reluctant to actually fire workers, likely reflecting lingering memories of how difficult rehiring was during the pandemic recovery. This pattern of cooling through reduced hiring rather than increased firing is sometimes called a "slow-motion normalization" and helps explain why the unemployment rate remained low even as other indicators softened. The layoffs rate staying below 1.2% is generally a signal that recession risk remains contained.