Editor's note: Jessica Durdu, a special commentator on current affairs for CGTN, is a foreign affairs specialist and PhD candidate in international relations at China Foreign Affairs University. The article reflects the author's opinions and not necessarily the views of CGTN.

The latest data from the U.S. labor market presents a paradox that warrants careful examination. While headline indicators such as GDP growth and equity market performance continue to suggest economic resilience, corporate behavior tells a more cautious story. According to the January report by Challenger, Gray & Christmas, U.S. employers announced 108,435 layoffs, marking the highest January figure in 17 years. More striking than the scale of layoffs is the accompanying collapse in hiring plans, which has fallen to the lowest level since the firm began tracking such data. Together, these trends point to a defensive posture by U.S. companies: They are shedding labor while refraining from future workforce expansion.

This "laying off without hiring" strategy signals that firms are not merely adjusting to short-term fluctuations but may be recalibrating their expectations for the medium- and long-term economic outlook. During cyclical slowdowns, layoffs are often paired with selective hiring or reskilling as companies reposition themselves for recovery. The current pattern, however, suggests a deeper uncertainty about future demand, financing conditions, and policy stability, both domestic and global.

One immediate interpretation is that firms are bracing for tighter financial conditions to persist longer than previously anticipated. Although inflation has moderated from its post-pandemic peak, interest rates remain elevated by historical standards. Higher borrowing costs continue to shape investment decisions, particularly in interest-sensitive sectors such as technology, real estate, logistics, and manufacturing. Large technology firms, for example, have announced repeated rounds of layoffs since 2023, citing efficiency drives and the need to prioritize capital allocation amid uncertain returns on growth-oriented projects such as artificial intelligence infrastructure and global expansion.

Beyond firm-level balance sheets, corporate caution also reflects broader geopolitical and structural uncertainties. Heightened U.S.-China economic competition, ongoing conflicts in Ukraine and the Middle East, and the fragmentation of global supply chains have collectively reduced predictability in international markets. For export-oriented U.S. firms or those deeply embedded in global production networks, workforce expansion becomes a risk rather than an opportunity under such conditions. The preference for flexibility over commitment is thus reflected in their labor decisions.

The implications of large-scale layoffs extend well beyond immediate employment figures. One key channel is consumer confidence. The U.S. economy remains heavily consumption-driven, with household spending accounting for roughly two-thirds of GDP. When job security weakens, even among those who remain employed, households tend to postpone discretionary spending and increase precautionary savings. This behavioral shift can dampen demand across sectors, creating a self-reinforcing slowdown that validates firms' initial pessimism.

A second, more structural concern relates to workers' bargaining power. The tight labor market of 2021-2022 strengthened employees' leverage, driving wage growth and improving working conditions across several sectors. The current wave of layoffs, combined with reduced hiring, risks reversing these gains. As job openings decline and competition for positions intensifies, workers may accept lower wage growth, reduced benefits, or more precarious forms of employment. Over time, this could exacerbate income inequality and weaken the link between productivity gains and wage increases – an issue that has long challenged the U.S. economic model.

Workplace uncertainty constitutes a third channel of longer-term impact. Repeated layoffs, even when firms remain profitable, can erode trust between employers and employees. This dynamic is particularly visible in industries undergoing technological transformation, such as media, finance, and information technology. When employees perceive their positions as inherently unstable, their incentives to invest in firm-specific skills diminish, potentially undermining innovation and productivity growth. From a macroeconomic perspective, this weakens one of the United States' traditional strengths: Its dynamic, adaptable workforce.

By comparison, international experience suggests that prolonged labor market insecurity can constrain economic resilience. In parts of Europe after the 2008 financial crisis, persistent employment uncertainty contributed to subdued domestic demand and political polarization, even as headline growth returned. While the institutional contexts differ, the U.S. is not immune to similar feedback loops, particularly in an era marked by political polarization and an upcoming electoral cycle.

Nonetheless, the current labor market signals suggest that the next phase of U.S. economic growth may be slower and more uneven than recent headline indicators imply. Corporate retrenchment reflects not only cyclical caution but also deeper questions about global economic governance, technological disruption, and domestic policy coherence. How U.S. policymakers respond – through targeted labor market support, investment incentives, and efforts to stabilize expectations – will be critical in determining whether today's defensive stance becomes a temporary adjustment or a drag on long-term growth momentum.

(If you want to contribute and have specific expertise, please contact us at opinions@cgtn.com. Follow @thouse_opinions on X, formerly Twitter, to discover the latest commentaries in the CGTN Opinion Section.)