With the slew of recent gloomy economic data, many see an economic recession on the horizon. And if history is any indication, the media sector could see a big surge in layoffs as a result.
Looking back at recent recessions, the biggest spike in layoffs occurred in those years. After the dot-com bubble, there were a whopping 43,420 media job cuts in the recession that followed in 2001, according to global outplacement firm Challenger, Gray & Christmas. Then during the Great Recession, which ran from the end of 2007 until 2009, there were a combined 51,149 job cuts from 2008 to 2009. The COVID recession in 2020 resulted in 30,711 layoffs that year.
Recessions are brutal on the job market, and, to be fair, the media sector won't be the only one to see major cuts. Recessions typically trigger layoffs across all the major industries, and the recovery in the job market thereafter is never swift.
During economic downturns, corporations are quick to trim costs to beef up their balance sheets. Some recessions last years, and some could be as quick as a couple of months, such as the COVID-19 recession. However, there is no telling how long downturns will last, thus companies must prepare for prolonged periods of compressed profits and stalled earnings growth. Historically, companies have resorted to trimming headcount to cut costs.
Nevertheless, the current economic downturn isn’t the only factor to blame for the recent flurry of layoffs in the media industry. Just a week ago, streaming giant Netflix laid off 3% of its workforce, or about 300 employees, in its second round of layoffs following its disastrous first-quarter results. But Netflix’s woes have little to do with the broader macroeconomic picture and more to do with the streaming landscape and management’s shortcomings.
Big media mergers and acquisitions have also resulted in layoffs associated with restructuring and rebalancing. Earlier this week, it was reported that CAA and ICM’s merger would result in roughly 105 layoffs. And around 1,000 employees at Warner Bros. Discovery are also getting axed, according to reports. At the time of the merger between WarnerMedia and Discovery, management said it would be looking to create $3 billion in cost savings. Though layoffs are always difficult, post-M&A layoffs are often par for the course.
Even as a recession is widely expected, no one knows for certain, and for now the job market is still relatively hot. The U.S. economy added 390,000 jobs in May, and the unemployment rate was at 3.6%, according to the Bureau of Labor Statistics.
And companies are still hiring. According to Challenger, Gray & Christmas, U.S. companies made more than 600,000 hiring announcements as of the end of May, which was up 39% from the same period last year. It was the second-highest January-to-May hiring total since the firm began tracking the data in 2006.
As we enter the second half of the year, executives aren’t exactly sounding the alarm just yet. However, if conditions continue to deteriorate at the current pace, the economy could very well be in for dark times, and workers will be left to deal with the repercussions as the job market cools off.