American employers are announcing layoffs at the fastest pace for the month of May since the pandemic, and retailers remain under growing pressure as consumers pull back on spending and companies rethink how many workers and stores they need.

According to data released Thursday by Challenger, Gray & Christmas, U.S. employers announced 97,006 job cuts in May, a 16% increase from April and the highest total for the month of May since 2020, when much of the economy was shut down during the COVID-19 crisis.

The increase marks the third consecutive monthly rise in announced layoffs and reflects a labor market that remains stable on the surface but is becoming increasingly cautious underneath.

The largest source of cuts this year has been technology, where companies are restructuring around artificial intelligence. Challenger reported that AI-related restructuring accounted for 38,579 announced job cuts in May, the highest monthly total ever attributed to the technology and roughly 40% of all announced layoffs during the month.

The technology sector alone announced 38,242 cuts, underscoring how rapidly companies are reorganizing operations around automation and AI-powered tools.

But retail is facing a different problem.

While technology firms are reducing staff to improve efficiency, retailers are cutting jobs because customers are becoming more selective about how they spend their money.

Major chains have announced thousands of layoffs this year as they respond to slower sales, store closures, and changing consumer behavior. Macy’s, which has been shrinking its store footprint and restructuring operations, has announced some of the largest retail workforce reductions of the year.

The challenges extend beyond traditional department stores.

Even premium brands are beginning to feel the effects of a more cautious consumer. Analysts have recently warned that several major apparel retailers could face slower growth as shoppers prioritize essentials and delay discretionary purchases.

The pressure comes at a difficult time for households.

Inflation continues to outpace wage growth, meaning many consumers have less purchasing power despite receiving raises. Rising costs for groceries, fuel, housing, insurance, and other necessities leave less room in household budgets for clothing, home goods, electronics, and other nonessential purchases.

That shift is showing up across the retail industry.

Companies report that shoppers are increasingly searching for discounts, buying fewer items, and trading down to lower-priced alternatives. Even higher-income consumers are becoming more value-conscious, a trend that retailers say has accelerated throughout the spring.

When spending slows, retailers often respond by reducing inventory, closing underperforming stores, and trimming payroll costs.

The current wave of cuts follows an already difficult period for the sector. Retailers announced nearly 93,000 job reductions during 2025, as companies struggled with changing shopping habits, e-commerce competition, inflation pressures, and uncertainty surrounding tariffs and supply chains.

This year’s reductions are building on top of those earlier efforts rather than replacing them.

There is some reason for caution before declaring a broader labor-market downturn.

Overall announced layoffs in 2026 remain below last year’s pace, although that comparison is influenced by unusually large workforce reductions in the federal government during 2025. Excluding those cuts, layoff activity today looks much closer to levels seen in 2024.

That suggests the economy is not experiencing a widespread employment crisis.

Instead, the weakness appears concentrated in sectors most dependent on consumer spending and industries undergoing rapid technological change.

For workers in retail, distribution, logistics, and related industries, however, the distinction may offer little comfort.

Their employment prospects remain closely tied to the willingness of American consumers to spend. As long as inflation continues to strain household budgets and shoppers remain cautious, retailers are likely to remain focused on cutting costs rather than expanding payrolls.

The result is a labor market that remains strong in headline numbers but increasingly fragile for workers whose jobs depend on consumer confidence.

JBizNews Desk — Economy

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