I'd call it a "layoff" if it is expected that business conditions will improve and employees will be given the option to continue their employment at that time.
If it's a permanent situation then I'd call it something else like "dismissal for business reasons" or "downsizing due to market conditions."
Personally what I'd love to see companies do is:
- executive staff and management taking pay cuts (ideally zero pay for C-level execs and directors) first
- offering an option of reduced hours and/or pay
- offering an option to return to work if business conditions are expected to improve
- offering ownership or open source agreements for canceled projects if possible
- providing at least six months of severance pay for anyone who is dismissed, paid immediately along with full vacation and sick day allowances
- immediately vesting any pending equity and options for anyone who is dismissed
- providing office space and placement services which people can use while looking for a new job
- working with other companies to provide jobs, even temporary or contract jobs
- eliminating noncompete restrictions if any
- telling everyone at the same time, as soon as possible
- honestly explaining the situation and how and why people were selected
- honestly explaining the company's financial situation
- being open to creative suggestions from employees for alternative options
- giving two weeks' notice, much as employees would be expected to do
- sponsor a company alumni organization (startupalumni.org) with social events, seminars, and other events, to enable people to keep in touch
- provide alumni email addresses (@startupalumni.org)