Job Loss Risk Index: Which Industries Will Suffer the Greatest Layoffs?
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Navigating the Economic Storm

Job Loss Risk Index: Which Industries Will Suffer the Greatest Layoffs?

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Amid the anticipated US recession, job losses are expected to vary widely by industry. The Conference Board Job Loss Risk Index—which uses multiple indicators that influence job losses and drive differences across industries—estimates that information services; transportation & warehousing; construction; and repair, personal & other services may be at the greatest risk of job losses. Government; private education services; health care & social assistance; and accommodation & food services may be the least at risk.

Members of The Conference Board can access all underlying data of the Job Loss Risk Index by Industry in the Excel workbook here.

Amid the anticipated US recession, job losses are expected to vary widely by industry. The Conference Board Job Loss Risk Index—which uses multiple indicators that influence job losses and drive differences across industries—estimates that information services; transportation & warehousing; construction; and repair, personal & other services may be at the greatest risk of job losses. Government; private education services; health care & social assistance; and accommodation & food services may be the least at risk.

Members of The Conference Board can access all underlying data of the Job Loss Risk Index by Industry in the Excel workbook here.

Insights for What’s Ahead

Looming Recession May Lead to Greater Job Losses in Information and Manual Labor Industries

The US economy may fall into recession in 2023. While the recession is projected to be shallow and brief, the unemployment rate is expected to rise to about 4.4 percent in early 2024, corresponding with approximately 1 million job losses in the second half of the year and Q1 2024. Although these figures are modest compared to prior recessions, the pain of layoffs will not be distributed equally across industries: some will fare better than others.

The figure below shows the ranking and score of industries according to the Job Loss Risk Index (the interactive chart can also be used to review the index components). A higher index score means the risk of job losses is greater, with 10 denoting the highest risk and 1 the lowest. The score provides a relative rank of an industry’s risk of layoffs. According to the index, the information services; transportation & warehousing; construction; and repair, personal & other services sectors have the highest risk, while government; private education services; health care & social assistance; and the accommodation & food services industry have the lowest risk of job losses. Note that while the index projects the risk of job losses, it does not estimate how large each industry’s job losses will be.

Projected recession may lead to larger job losses in information services, construction, and transportation & warehousing

Select category to review each index component: 

Risk of Job Loss Is Driven by Six Factors

Several indicators contribute to the risk of job losses, which varies across industries. These indicators capture the industry’s exposure to labor shortages, sensitivity to monetary policy, productivity and job function, age composition and experience of its workers, recovery from pandemic-era job losses, and longer-term changes in labor demand. More detailed description on each is provided below:

  1. Exposure to labor shortages. Industries that currently have labor shortages may be more careful about laying off workers during downturns. At the other end of the spectrum, rising layoff rates may foreshadow even more job losses to come and a shift in focus from labor shortages to downsizing. To capture this, four index components are included. To capture current staffing, the gauge includes the job openings-to-hires rate, the layoffs rate, and the quits rate in the last three months compared to 2019. The fourth indicator is wage growth in the last year. Together, these components make up exposure to labor shortages, which weighs most in the index.
  2. Sensitivity to monetary policy. Industries more sensitive to increasing interest rates may be forced to lay off workers sooner, with the Federal Reserve rapidly increasing interest rates to help fight inflation. Highly leveraged industries—where growth is more dependent on borrowing—will be especially affected as servicing debt and acquiring new loans has become more expensive.
  3. Job function and education. Firms tend to hold onto workers in a professional or managerial function. These workers drive the day-to-day and longer-term decision-making in companies. Their experience and institutional knowledge are vital to a company’s profitability, making it difficult to replace these workers. In the index, a large share of management and professional workers reduces the risk of job loss. In addition, industries with higher educational attainment of workersare also expected to be at lower risk of job loss. Education is correlated with job security across multiple dimensions. Higher-educated workers tend to have more firm-specific skills. Firms may want to keep these employees, perhaps with pay freezes, rather than dismiss them during downturns, making the college educated less prone to layoffs. Employees with lower educational attainment tend to work in industries where demand for goods and services is more discretionary, putting them at a larger risk of job loss during recessions. However, some of the dynamics may be presently shifting as industries coping with serious labor shortages are reducing educational requirements to attract new workers. Additionally, some of the industries that thrived during the pandemic (e.g., information, financial services) are now having to rightsize their labor forces, which tend to skew toward employing more educated workers.
  4. Pandemic recovery. Industries that have not fully recovered from pandemic employment losses are still understaffed and thus may be less likely to lay off workers. Conversely, industries that overstaffed may be at a larger risk of job loss.
  5. Labor demand gauge. Industries that expanded or reduced employment prior to the pandemic due to changing consumer demand may continue those trends. For example, brick-and-mortar retail trade employment grew by only 0.1 percent between 2015 and 2020, whereas transportation and warehousing grew by 21.8 percent in the same time period due to the seismic shift toward online shopping over the years.
  6. Age composition and experience. Younger workers (aged 16 to 24) are often the first cohort to lose their jobs during recessions and stay unemployed longer. This is because they have less on-the-job experience and often work in jobs with high turnover. For example, during the Great Recession, whereas the overall unemployment rate rose from 5 percent in December 2007 to 10 percent in October 2009, the unemployment rate rose from 11.7 to 19.1 percent for workers aged 16 to 24.

Components Have Varying Impacts on Job Loss Risk in Different Industries

The figure below depicts the six factors (embodied in the 10 index components) and their contributions to the Job Loss Risk Index. The arrows show each factor’s contribution to the index. The double red upward-pointing arrows (↑↑) indicate that the component adds significant risk of job losses in the industry. One red upward-pointing arrow () implies that the component adds marginal risk, one green downward-pointing arrow () indicates that the component marginally decreases the risk of job loss, and two green downward-pointing arrows (↓↓) mean the component significantly reduces the risk of job losses in the industry.

Fewer Layoffs Are Expected due to Labor Shortages

Each factor driving the index makes its own unique contribution to the risk of job loss. However, what stands out in the projected recession is the impact labor shortages are expected to have. Employers experienced extreme difficulty recruiting and retaining workers over the past two years due to strong labor demand but constrained labor supply. Hiring was expensive as larger compensation packages (wages, benefits, bonuses) were necessary to both attract and retain workers. Additionally, an aging population, tighter immigration laws, fewer multiple jobholders, and residual effects from the pandemic (e.g., long COVID, childcare, and adult care challenges) are also severely constraining labor supply.

Leading up to previous US recessions, labor markets were often tight but not to the same degree as today. Therefore, employers are expected to be more cautious in laying off workers if they believe the anticipated recession will be short and shallow (see The Conference Board Measure of CEO Confidence™), and rehiring may be difficult and expensive.

The Index and Its Components

The table below shows the components of the index, including a description of how they affect job losses. Members of The Conference Board can access all underlying data of the Job Loss Risk Index by Industry in an Excel workbook, which also includes a more detailed description of the index.

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