As job growth has slowed and unemployment has crept up, some economists have pointed to a sign of confidence among employers: They are, for the most part, holding on to their existing workers.

Despite headline-grabbing job cuts at a few big companies, overall layoffs remain below their levels during the strong economy before the pandemic. Applications for unemployment benefits, which drifted up in the spring and summer, have recently been falling.

But past recessions suggest that layoff data alone should not offer much comfort about the labour market. Historically, job cuts have come only once an economic downturn was well under way.

The milder recession in 2001 offers an even clearer example. The unemployment rate rose steadily from 4.3 per cent in May to 5.7 per cent at the end of the year. But apart from a brief spike in the autumn, layoffs hardly rose.

Earlier recessions followed a similar pattern, for what economists say is a straightforward reason: Layoffs are disruptive, expensive and bad for morale. So companies try to avoid cutting jobs until they have no choice – sometimes waiting longer than financial logic would dictate.

“It’s costly to lay someone off,” said Mr Parker Ross, global chief economist at Arch Capital, an insurer. “That’s something that generally firms turn to as a last resort.”

Companies may be unusually reluctant to lay off workers now because many struggled to hire after the pandemic recession. Even if business slows, Mr Ross said, employers may prefer to retain workers rather than risk being short staffed again if the economy rebounds.

That reluctance is good news for workers in the short run. But it poses a risk: If the economy worsens more than businesses anticipate, they could be forced to shed workers in a hurry. If that happens, economic conditions could unravel quickly, as job losses cause consumers to pull back on spending, leading to more losses.

“That’s what everybody worries about, because unemployment begets unemployment begets unemployment,” said Mr Andrew Challenger, senior vice-president at Challenger, Gray & Christmas, an outplacement firm that tracks labour market data.

Unemployment can rise even without a surge in layoffs, however. What really distinguishes a recession is not job losses, but a slowdown in hiring.

That may be counterintuitive, given how synonymous “recessions” and “job losses” are in the popular imagination. Layoffs happen even in a healthy economy – but when people lose their jobs in recessions, they struggle to find new ones.

“When a hiring manager decides not to fill a position, that doesn’t tend to make headlines” the way a plant closing might, said Professor Robert Shimer, a University of Chicago economist. But those decisions – multiplied across the economy – can lead to rising joblessness, he said. In a 2012 paper, he found that roughly three-quarters of the fluctuation in the unemployment rate resulted from shifts in the hiring rate.

In other words, it is hiring, not layoffs, that tends to signal a looming recession. And hiring has already slowed.

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