Workers have been laid off at a rate not seen since the financial crisis
American factories shed workers in June at a pace not seen since the 2009 financial crisis, according to flash survey data released Tuesday by S&P Global, a finding that landed on the same morning HR professionals across the sector are fielding growing pressure to cut costs.
The S&P Global Flash US Manufacturing PMI rose to 55.7 in June, its highest reading since May 2022, and the headline number beat consensus expectations of 54.8. But the figure masks a deteriorating employment picture that analysts described as the most serious outside of pandemic conditions. Manufacturing headcounts were cut at the fastest rate since the COVID-19 lockdowns of early 2020, according to the report, and for the third time in the past four months.
"Most worrying was the further fall in employment, notably in the manufacturing sector," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in Tuesday's release. "Factory job cuts are running at the highest since 2009 if the pandemic is excluded, reflecting concerns over the sustainability of the recent upturn in demand alongside worries over the escalating cost of raw materials."
A headline that misleads
Manufacturing production grew in June at its fastest rate since July 2021, driven by the largest rise in new orders in just over four years. Yet that demand is being met partly through inventory rebuilding triggered by supply chain fears - precautionary stockpiling rather than genuine end-market strength. The distinction matters for workforce planning. When growth is structural, companies hire. When it is supply-driven and potentially short-lived, they cut headcount and wait.
"While there is better news from the manufacturing sector, we remain concerned as factory growth continues to be temporarily buoyed by inventory building amid supply fears," Williamson said. "Supply delays grew more widespread in June."
Supply chain data in the report backed that caution. Supplier delivery times lengthened in June to the greatest extent since August 2022, linked to shipping disruptions from the Middle East conflict and ongoing tariff pressures.
A year of difficult choices
The June reading sits within a broader wave of workforce reductions across the U.S. economy. AI-driven tech job cuts hit a two-year high through May, with U.S. employers across all sectors announcing 97,006 job cuts in May alone, according to outplacement firm Challenger, Gray and Christmas. The manufacturing sector's troubles compound a labor market already under significant pressure.
Lucid Motors announced a second mass layoff of 2026 on Monday, cutting approximately 1,500 workers - 18% of its workforce - as the U.S. EV market cools. That announcement arrived less than 24 hours before the S&P PMI data, adding to the sense of sector-wide strain.
The broader economy offers little comfort. The composite flash PMI, covering both manufacturing and services, rose to 52.2 in June from 51.5 in May - a five-month high - but Williamson said the reading "signals that current output levels are consistent with the economy struggling to grow much faster than a 1% annualized rate in the second quarter." That is consistent with recent GDP data: the Bureau of Economic Analysis reported in its second estimate that the economy grew at just 1.6% annualized in the first quarter of 2026 and 0.5% in the fourth quarter of 2025. (A third estimate is due June 25.)
What HR professionals are navigating
Input price inflation, while cooling slightly from May's recent peak, remained the second-highest recorded in almost four years according to the S&P report. For HR leaders in manufacturing, that combination - high input costs, uncertain demand, and stretched supply chains - produces a well-worn response from the C-suite: cut headcount as the fastest available lever for managing cost, often before workforce planning functions have had time to map alternatives.
Gartner's 2026 CHRO Leadership Perspectives Survey, which gathered input from more than 400 CHROs, found that optimising or reducing costs has overtaken increasing revenue as the top priority among people leaders this year - the two have swapped positions compared to 2025. HR functions are also squarely in the sights of that cost pressure, with 34% of CFOs citing HR as one of their top three targets for budget reductions, according to Gartner data cited in the same report.
The overall picture for manufacturing employment is not uniformly bleak. Manufacturing employment rose by 23,000 in 2026 through May, according to the Bureau of Labor Statistics, and iCIMS data showed manufacturing tech hiring up 4% since May 2025 as factories invest in automation. But the June employment sub-index represents a sharp reversal of that trend, and business confidence in the sector, while improved from February's multi-year low, remains well below long-run averages.
In the current layoff environment, workforce decisions driven by cost pressure are increasingly being made at the executive level, with HR left to manage the consequences rather than shape the strategy. Tuesday's data suggests the pressure on manufacturing workforces is not easing.
