US Economy Flashes Warning Signs as Layoffs Top 1.17 Million
A surge in job cuts to post-pandemic highs and a doubling of student loan delinquencies among renters point to mounting stress on the American consumer.
The U.S. economy is showing significant signs of cooling as mounting layoffs and rising loan delinquencies signal that American consumers are under increasing financial pressure. Year-to-date job cuts have swelled to over 1.17 million, the highest level since the pandemic-driven turmoil of 2020, while a sharp spike in student loan defaults is raising further questions about household financial health.
U.S.-based employers have announced 1,170,821 job cuts through November 2025, a stunning 54% increase from the same period last year, according to a report from Challenger, Gray & Christmas, a global outplacement firm. This figure surpasses the full-year totals from 2021 to 2024 combined, underscoring a sharp reversal in the once-robust labor market. Sectors leading the cuts include government, technology, and warehousing, with employers frequently citing cost-cutting and the adoption of artificial intelligence as primary drivers for the workforce reductions.
Adding to the concern is a troubling trend in consumer debt. The percentage of renters who are 90 or more days delinquent on student loan payments more than doubled in the first half of the year, jumping from 15% in January to 32% in May 2025. This surge, detailed in a recent analysis by TransUnion, follows the conclusion of federal student loan forbearance programs, which has squeezed household budgets as millions of borrowers resume monthly payments.
The strain is visible across other economic indicators. The Conference Board's Consumer Confidence Index fell sharply to 88.7 in November, its lowest reading since April, reflecting a deteriorating outlook on personal finances and the broader economy. Similarly, Gallup's Economic Confidence Index dipped to -30, a low not seen since mid-2024, as consumers scale back holiday spending plans.
This confluence of a softening labor market and rising consumer distress presents a complex challenge for the Federal Reserve. After a prolonged period of interest rate hikes to combat inflation, the central bank now faces a different set of problems. Wage growth for job changers, a key inflation metric, has cooled to its lowest level since early 2021, and recent data showed an unexpected decline in private sector payrolls.
The weakening data has led investors to increase bets on a more dovish monetary policy. Market participants are now pricing in a high probability of an interest rate cut in the near future as focus shifts from fighting inflation to preventing a more pronounced economic downturn. As retailers like Kroger trim their sales guidance, citing shoppers' selective spending, the resilience of the American consumer—the primary engine of the U.S. economy—will be the critical factor to watch in the months ahead.