1) You're always looking over your shoulder, and can't think about long term projects or work.
2) The first people out (frequently the weakest performers) are able to find jobs the easiest, but by the time the better employees are also let go, the market demand has been filled.
3) It encourages and environment of non-cooperation. Employees cooperate more when they think they'll see each other again. If it's "there's 3 of us here today, and probably only 2 in a few months" then there are multiple incentives to not compete.
Better to get it over with all at once wherever possible. Companies that need multiple rounds are usually either mis-run or in markets deteriorating extremely rapidly.