I don't see much reason to think mass layoffs are typically the result of over-hiring rather than a reaction to changing circumstances that are different than when the hiring originally happened. The article opens with a perfect example, the constriction of the US air travel market following 9/11. The people most airlines fired as a result weren't "over-hired". Their hiring made sense at the time and they were fired when circumstances changed. I'd argue this is likely more often be the case than actual over-hiring, since it's easier for a company to see if they can actually utilize new employees now than it is for them to predict the future.

In cases like that, the layoffs really do seem likely to be damaging to the companies. If circumstances change for a company and they can no longer effectively use all their employees, the most obvious solution is to get rid of employees, but it then makes it far more difficult to recover when positive opportunities present themselves. I think companies trick themselves into believing that since hiring and firing employees is relatively quick, it's a good tool to adapt to changing circumstances in either direction. But that ignores the time it takes for a new employee to become fully productive and the increased difficulty/cost in hiring new employees if your company has a reputation as an unreliable employer. It also ignores the potential boost to productivity that can come from employee loyalty and job satisfaction and security.