“For me, this is a real alarm signal”

Employers cut 35,000 temporary workers last month, marking the largest monthly drop since the start of 2021, according to data from the St. Louis Federal Reserve. The cuts bring the total number of cuts from August to December to more than 110,000, raising fears among many economists that the labor market could worsen.

“To me, this is a real wake-up call,” said James Knightley, chief economist at ING. the wall street journal Tuesday. “The labor market may not be invulnerable to the recession story.”

As the US economy added 223,000 jobs and the unemployment rate fell to just 3.5% in December, history shows that fewer temporary workers are often a sign of labor market weakness . When the U.S. economy experienced a recession in 1990-91, 2001, and 2007-09, declines in temporary employment “preceded those in the overall labor market by 6 to 12 months,” according to data from researchers at the Federal Reserve.

“When the economy contracts, the flexible work arrangements provided by temp agencies allow companies to scale back operations easily and without the added expense of severance packages or having to lay off their best workers,” they said. they explained.

Rising layoffs of temporary workers is another worrying sign for economists given recent weakness in once booming industries like technology. Big Tech’s Amazon, Google, Meta and Microsoft have laid off more than 50,000 workers combined since November. And Gene Munster, managing partner of technology-focused investment and venture capital firm Deepwater Asset Management (formerly Loup Ventures), said on Monday that tech companies could cut another 15-20% of their workforces.

Layoffs will be a “major theme” this earnings season, Wedbush technology analyst Dan Ives said in a research note Friday, saying tech companies are entering “cost-cutting mode” to help cope with higher interest rates and a slowing economy.

Huw Roberts, head of analytics at market research firm Quant Insight, said in a Monday note that there could be “a spike in layoffs” outside of tech in the coming months as well. due to declining corporate profits. According to him, some 61% of executives said they planned to lay off employees in 2023 in a December survey from Resume-builder.com, and about one in three U.S. companies plan to cut their workforce by at least 30% This year.

The layoffs have already started spreading outside of Big Tech this week as well, with Ford saying Monday it plans to cut more than 3,000 jobs and the Washington Post adding to a wave of media layoffs on Tuesday by cutting 20 more employees.

This story was originally featured on Fortune.com

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