A new analysis from BCA Research suggests that while tariffs are no longer viewed as the biggest threat to corporate margins, early signs of a weakening labour market are becoming a growing concern for investors.
In the report, chief strategist Irene Tunkel wrote that tariffs “are fading in importance as companies successfully mitigate cost pressures and preserve profitability,” but warned that the recent acceleration in job-cut announcements points to a more complicated—and potentially riskier—economic environment.
According to BCA Research, tariffs “remain a drag on select sectors,” yet most major corporations have “successfully mitigated their impact, limiting margin erosion.”
Because of this, the firm argues tariffs are “unlikely to hinder earnings growth or pose meaningful risks to the labor market” in the near term.
Layoffs, however, are proving harder to overlook. Drawing on figures from Challenger, Gray & Christmas, the report noted that October saw “153,000 announced layoffs… the highest non-recession October in 22 years,” bringing the total number of cuts this year to 1.1 million.
Still, BCA emphasized that there is “no single systemic driver behind the recent wave of layoff announcements.”
The bulk of the October reductions came from the tech and warehousing sectors, though the latter was inflated by double-counting associated with UPS.
Tech-related job cuts, BCA found, are “little to do with profitability,” pointing out that S&P 500 tech firms posted 27% earnings growth in the third quarter.
Instead, companies appear to be “trimming headcounts to redirect resources toward GenAI infrastructure,” with AI-related restructuring now representing about 20% of all layoffs.
Traditional cost-cutting measures accounted for roughly one-third of job reductions, while a notable share was tied to “market and economic conditions.”
As Andy Challenger of Challenger, Gray & Christmas cautioned, “AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes.”
BCA Research concluded that any further weakening in the labour market “could challenge earnings resilience and sentiment,” although it said its overall strategic view on equities “remains constructive for now.”