There's a lot going on in the labor market these days, and it has recently been difficult to sift through the mixed signals to get a clearer picture of where things stand. Although some information suggests that the market is fairly stable all things considered, there are also frequent headlines regarding both layoffs and challenges for job seekers. The US Bureau of Labor Statistics (BLS) tracks Business Employment Dynamics which provides some insights into the underlying patterns.

In addition to looking at net employment changes by firm size, the data also reveals the "churn" in the labor market, that is, the simultaneous processes of job creation (gross gains) and job destruction (gross losses). While most employment data is expressed on a net basis (gains minus losses), a small net number could look like stability but conceal substantial volatility.

A key finding in the most recent data release (4Q 2024) indicates that small firms with fewer than 50 employees are disproportionately responsible for the numbers of job gains and losses. The net change for small firms was a modest increase of 115,000, but there were almost 3.2 million jobs gained and more than 3.0 million lost.

Mid-size companies with between 50 and 249 employees had a net similar overall increase of 116,000 jobs, but only 1.1 million gains and 1.0 million losses. Large firms (250+) contribute a larger absolute number of jobs to the economy due to their sheer size, but they actually logged a small net decrease over the quarter, with both gains and losses of about 1.8 million. Overall, the private sector added 6.0 million jobs but lost 5.8 million, resulting in a net employment change of 227,000.

It is noteworthy that small firms exhibited by far the highest volume of both gains and losses, illustrating their enormous degree of dynamism. Mid-size firms are generally a relatively consistent and somewhat more stable source of net employment growth. Large firms generated millions of jobs but lost slightly more.

Part of the picture is that many large firms are in a restructuring cycle. Several have announced layoffs related to deployment of AI-driven automation. There have also been industry-specific shifts, such as downsizing in the technology sector and movements toward pre-pandemic labor market patterns.

Relatively small shifts in overall net employment during the fourth quarter camouflaged the fact that millions of people lost private-sector jobs during just a few months (though somewhat more were added). The widely publicized net job gains are just the tip of the proverbial iceberg in the labor market. As the data for 2025 becomes available, we will be able to assess the patterns stemming from new tariff and immigration policies more clearly. Stay tuned and safe!