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Layoff Watch — Unemployment Rate Could Get Ugly Soon

A spate of layoff news has made headlines lately, including blue-chip stocks in a variety of sectors:

Those are just the big ones. In August, AOL (AOL) started laying off about 500 of the remaining 1,100 employees in its local news arm, Patch. About 150 out of 900 sites will close. Also, early retirement has been offered to about 3,000 employees at the Cleveland Clinic, and if the cost savings aren’t enough to close a $300 million budget gap, layoffs may follow.

The list goes on.

Healthcare, tech, media, manufacturing, energy … no sector seems to be spared the job cuts lately as corporations look to streamline operations amid tepid growth.

The news shouldn’t be a surprise; in August, staffing firm Challenger Gray & Christmas reported planned layoffs were surging 34% on the month. A combination of tough economic conditions, uncertainty in Washington thanks to the debt ceiling and Obamacare fireworks and specific struggles at companies trying to adapt to the “new normal” in their industry has resulted in a brutal job market.

So where do we go from here?

Well, theoretically we will only see accelerating layoffs over the next few months. Historically, December and January tend to be the months where the harshest job cuts come down, according to Forbes. That might seem counterintuitive since it’s not “nice” to fire someone around the holidays; however, companies are often racing to make their budget in Q4 or trying to position to growth in a new year … and job cuts are a sad reality of those dynamics.

The headline unemployment rate continues to drift lower, now at 7.3%, but a growing layoff trend could reverse that.

And considering investors already have enough uncertainty, if the monthly jobs numbers for September are ugly… it could have serious impact on the markets.

Related Reading on Layoffs:

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

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