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

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

• The information services sector is estimated to have the highest risk of job losses amid the projected upcoming recession, according to The Conference Board Job Loss Risk Index. Employment in the industry grew rapidly during the pandemic as the adoption of technologies including telework, e-commerce, and distance learning fueled growth expectations and stock prices for tech companies, which encompass a large share of the information industry. Valuations of high-growth companies are more sensitive to interest rate hikes as these firms are often highly leveraged. As such, rising interest rates increase the cost of borrowing and servicing debt. With the Federal Reserve swiftly raising interest rates to control inflation, valuations are down, and companies have already started layoffs. Layoffs and hiring freezes are expected to continue in the industry during a possible recession.
• Workers in transportation & warehousing; construction; and repair, personal & other services are also at higher risk of job loss. Expansion of e-commerce increased hiring in transportation & warehousing as consumers’ preferences for online shopping were catalyzed during pandemic-era lockdowns. With lockdowns over, consumers’ general tendency to reduce their discretionary spending during recessions, along with the recent shift of consumption from goods toward services, means demand for labor is expected to decline. Job losses in construction, repair, and maintenance are expected as the housing market is weakening, meaning there will be less demand for new construction projects or for in-home repair and maintenance.
• While the accommodation & food services industry bore the brunt of pandemic job losses, layoffs could be more limited during the projected recession. The pandemic caused major shutdowns, which disproportionally affected in-person services. Employment is still significantly below prepandemic levels (employment in February 2023 was still 2.4 percent (or about 350,000 jobs) below the February 2020 level). As the industry is still recovering, there will be less need for layoffs in the upcoming recession. In addition, the current severe labor shortage further lowers the risk of job losses.
• Government, private education, and health and social assistance are also not expected to face significant job losses. These industries appear less sensitive to interest rate changes than other sectors. In addition, these industries do not seem to have overhired, and labor shortages have troubled employers in government and health care. Hence, the need for layoffs may be lower across these sectors.
• There may be some temporary easing of labor shortages in 2023 as demand for workers diminishes. However, recruitment and retention difficulties will not disappear, with the unemployment rate projected to remain relatively low. Once the US economy starts growing again, severe labor shortages could quickly reappear.

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: Industry job loss risk % professional workers Prepandemic employment % workers 16-24 Wage growth Interest rate sensitivity Quits Layoffs % workers without BA Current staffing Pandemic recovery employment

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.

• The information services sector is in the very high-risk category of job losses. Employment in the industry increased significantly during the pandemic due to a surge in consumer and business demand for computers, high-tech gadgets, innovation, digital transformation, and automation. As lockdowns have ended and more consumers are returning to work, the demand for technology is fading. Presently, declining job openings and quits, as well as increasing layoff rates, suggest labor shortages are less of an issue for the industry. Wage growth was relatively modest compared to other industries in the last year, and the sector created 5.7 percent more jobs than prepandemic. Spending is discretionary for consumers and the sector carries a lot of debt, making it sensitive to interest rate increases. Moreover, valuation of tech companies—which constitute the bulk of information services—are often determined by future profit expectations. As these firms are often highly leveraged—with growth being more dependent on borrowing—rising interest rates increase the cost of borrowing and servicing debt. Amid rising interest rates, to keep higher valuations, companies often feel pressured to reduce spending, which includes hiring freezes and layoffs.
• Transportation & warehousing is in the very high-risk category. Employment in the industry grew the fastest during the pandemic, adding 15.8 percent more jobs compared to the prepandemic level (February 2023 compared to February 2020). Recently, job openings have cooled and wage growth was modest over the past year, suggesting demand for labor is slowing significantly. Industry demand is highly driven by e-commerce, which grew rapidly during the pandemic. With a potential recession, consumer spending is expected to decline, dampening earnings and the need for workers. The industry as a whole has a high share of younger workers and workers without a college degree as well as a low share of management and professional workers, all increasing the risk of job losses.
• Construction is estimated to be at very high risk of job losses amid the upcoming recession. Construction is sensitive to interest rate hikes, which raise the cost of borrowing for home purchases. In recent months, quits rates have fallen rapidly, suggesting labor demand is cooling and workers are finding it more difficult to change jobs. While the industry added many jobs during the pandemic, new housing starts are now on a sharp decline and, as a result, demand for construction workers is expected to fall, putting the industry at high risk of job losses in the projected recession.
• Repair, personal & other services is in the high-risk category. As with information services, a relatively lower level of job openings and quits and moderate wage growth suggest that the industry is less affected by labor shortages. Consumer demand typically declines faster during downturns as the output of these sectors is often discretionary. Compared to other industries, the workforce in this industry is relatively younger and less educated and has a lower share of management and professional workers—characteristics associated with lower productivity and job mobility—and hence is more prone to job losses during downturns.
• Manufacturing is also at high risk of job losses. This is another industry that will be sensitive to reduced consumer spending during a downturn. However, the demand for labor in the industry was already relatively low before the pandemic, with the industry increasing employment by a mere 4.1 percent in a five-year span between the start of 2015 and 2020 as automation made the industry less reliant on labor. The industry has already recovered the jobs that were lost at the beginning of the pandemic as demand for goods was especially strong during 2020 and 2021. Goods demand is now slowing. A recent decline in quits shows that labor shortages in the industry are easing.
• Wholesale trade is at high risk of job losses. This is another industry where employment growth prior to the pandemic was already slow. The layoff rate is presently increasing, wage growth and the quits rate have moderated, and the industry is less interest rate sensitive compared to other industries.
• Real estate, rental & leasing is at high risk of job losses. The industry is directly dependent on what happens to housing markets and hence is very sensitive to interest rate increases. However, wage growth has been very robust in the last year, and the gap between job openings and hires has been high recently compared to 2019 levels. Labor shortages have started to ease, placing the industry at high risk of job losses in a downturn. Ongoing strength in the rental market may be supporting job gains. However, the risk of job loss in the sector may rise over the coming months as weakness in the new and existing housing market spreads to the labor market.
• Finance & insurance services is at medium risk of job losses. The industry added 3 percent more jobs than prepandemic, and recent levels of layoffs and moderate wage growth suggest the industry is not facing significant labor shortages and hence is expected to be prone to job losses. However, the workforce has a higher share of highly educated workers as well as professionals and a lower share of younger workers, making it more productive and mobile compared to workers in other industries. Rising interest rates affect the sector differently depending on the specific business. On the one hand, financial firms lose customers as they must issue higher interest on loans and must pay higher interest on deposits. On the other hand, insurance companies benefit from rising rates on their safer assets.
• Utilities is at medium risk of job losses. Employment in the industry shrank in the five-year period prior to the pandemic, suggesting that labor demand was already in decline. Wage growth in the industry was very slow in 2022 as well. However, the industry appears less sensitive to business cycles and interest rate increases, with employment in the industry barely changing year to year since the mid-2000s. The layoff rate is relatively low and the quits rate relatively high, suggesting labor demand is not dramatically declining and putting the industry at medium risk of further job losses.
• Mining & logging is at medium risk of job losses. The workforce in the industry was already shrinking prepandemic, shedding 22 percent of its jobs between 2015 and 2020 and another 8 percent in the last three years. These losses were partly related to the transition to renewable energy. Wage growth has been on the lower end among industries, suggesting labor demand is relatively low. However, the job openings-to-hires ratio and the layoff rate suggest labor demand has been relatively stable more recently, putting the industry at medium risk of further job losses during a recession.
• Professional & business services is at medium risk of job losses. The industry is made up of services like accounting, legal, architecture, consulting, and advertising. The workforce is well educated with a high share of managerial and professional workers and a low share of young workers, making it less prone to significant layoffs in a recession. The employment growth was high prior to the pandemic, suggesting that labor demand is robust in the industry during normal times. A recent decline in the quits rate and a slight increase in layoffs suggest that labor shortages may be easing, and companies are being more careful with hiring new employees.
• Arts, entertainment & recreation services is at low risk of job losses. The industry is very sensitive to interest rates as, in a recession, spending on recreation and entertainment is one of the first items that consumers tend to reduce. Additionally, according to the S&P 500 Consumer Discretionary index (which includes companies in arts, entertainment, and recreation services), employers in this sector appear to have relatively high debt-to-equity ratios. With rising interest rates, servicing this debt becomes more expensive and may ultimately lead to job losses. Further, the workforce is relatively young and has a lower share of college graduates than other industries do, making it vulnerable to job losses in a recession. However, employment in the industry has not yet recovered from prepandemic levels, and recent trends in layoffs and quits in the industry suggest labor shortages are a challenge for employers. Ultimately, this puts arts, entertainment & recreation currently at lower risk of job loss.
• Retail trade is at low risk of job losses. Employment in the industry—which is mostly brick and mortar—grew by only 0.4 percent from 2015 to 2019. This was mostly driven by consumers changing their shopping habits away from brick-and-mortar retail, which grew by only 0.1 percent but represents 96 percent of retail, to e-commerce, which grew by 10.7 percent but only represents 4 percent of retail. The labor force is relatively young with a lower share of college educated people and professionals compared to other industries. However, a low layoff rate, high wage growth, and a high quits rate all suggest that hiring is continuing and companies operating in the industry are facing labor shortages.
• State and local government is at low risk of job losses. State and local government employment was growing very slowly prior to the pandemic and declined in the aftermath of the pandemic. Wage growth is slow—not because labor demand is low but because governments have limited budgets and cannot adjust salaries as freely as the private sector can. The quits rate is low, and the workforce is relatively mature and highly educated. Unless the recession ends up being deep and very negatively affects local and state budgets, severe job cuts are unlikely given that state and local governments still face some challenges with recruitment and hiring.
• Accommodation & food services is at low risk of job losses. The combined industries remain at about 350,000 workers below prepandemic level. Labor shortages are severe in the industry as workers prefer to work in other industries such as transportation & warehousing, where wages are relatively higher, or where there is greater job stability and/or flexibility (e.g., remote or hybrid work).
• Health care & social assistance is at very low risk of job losses. Severe labor shortages in the industry will likely make employers more reluctant to lay off workers as rehiring is difficult and expensive. Employment in the industry keeps growing, even during downturns, as demand for health services is nondiscretionary and driven by changing demographics—specifically the aging population. This phenomenon is intensifying presently.
• Federal government is at very low risk of job losses. Layoffs are rare and wage growth relatively strong. Labor demand is even less sensitive to interest rates as the federal government is not obliged to balance its budget and sometimes may even expand hiring during downturns.
• Private education services is at very low risk of job losses. Labor demand is very stable in the industry as it is not cyclical. Interest rate changes have very little impact. The workforce is highly educated with a large share of management and professional workers, putting the industry at low risk of job losses in a downturn.

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.