What the wave of tech layoffs tells us about the economy

What the wave of tech layoffs tells us about the economy

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Friday’s jobs report was strong: US economy. added 261,000 new jobs in October, beating analysts’ expectations of 200,000, even as unemployment rose to 3.7%.

But don’t let the job boom lull you into a false sense of job security. Job cuts and pauses in hiring they are beginning to flow into the tech sector, which boasts some of the world’s most valuable companies. That’s bad news for the economy as a whole.

What’s going on: Tech companies are announcing an alarming number of layoffs and hiring freezes.

▸ Amazon

(AMZN)
announced Thursday which is putting a pause on corporate hiring. “We anticipate holding this pause for months to come, and we will continue to monitor what we are seeing in the economy and business to adjust when we think it makes sense,” wrote Beth Galetti, senior vice president of people and technology experience at Amazon.

(AMZN)
in a note to employees.

At the end of last month, Amazon Forecast its earnings for the holiday quarter would be lower than analysts expected, sending its shares down sharply. Amazon shares have fallen more than 47% this year.

▸ apple

(AAPL)
has reportedly instituted a hiring freeze own in all areas except research and development. In a statement, Apple

(AAPL)
He said he will continue to hire and is confident in his future, “but given the current economic environment, we are taking a very deliberate approach in some parts of the business.”

Like other technology companies, Apple is worried about slower growth during the holiday season, higher interest rates and a decline in consumer spending. China’s covid lockdowns are hurting too iPhone 14 production. Apple shares are down 25% so far this year.

▸ Meta plans to start mass layoffs this week, the The Wall Street Journal reported on Sunday. The parent company of Facebook

(FULL BOARD)
Instagram and WhatsApp could cut thousands of jobs from their 87,000-strong workforce, with an announcement coming as soon as Wednesday, according to the report.

▸ Lyft

(LYFT)
said last Thursday that it will be lay off 13% of their employees, or nearly 700 people, as it reconsiders staffing amid rising inflation and fears of a looming recession. “We know that today will be difficult”, Lyft

(LYFT)
founders Logan Green and John Zimmer wrote in an employee memo obtained by CNN. “We are facing a likely recession sometime next year and rideshare insurance costs are rising.”

In a filing announcing the layoffs, Lyft said it would likely incur restructuring charges of between $27 million and $32 million. “We are not immune to the realities of inflation and a slowing economy,” Lyft’s founders wrote in the memo to employees. Shares of the car-sharing company are down almost 70% so far this year.

▸ Online payment giant Stripe is laying off around 14% of its staff, CEO Patrick Collison wrote in a memo to staff on Thursday. “We were overly optimistic about the short-term growth of the Internet economy in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown,” Collison wrote in the note. Last year, Stripe became the most valuable American startup, with a valuation of $95 billion.

Chime, a private fintech firm, also announced that it will lay off 12% of its 1,300-person workforce.

▸ Twitter on Friday announced extreme layoffsand noted that offices would be closed and access to credentials suspended as new CEO Elon Musk cuts about half of his 7,500-person workforce.

The bottom line: Top Jobs and Third Quarter Numbers corporate earnings continue to reflect a strong economy overall. But other companies won’t be immune to declining consumer and business demand that tech companies have you observed.

More bad news for Twitter

(TWTR)
: Elon Musk said on friday that the company has seen a “massive drop in revenue” as a growing number of advertisers halt their spending on the platform following its controversial $44 billion acquisition of the company.

He attributed the decline to “activist groups putting pressure on advertisers, although nothing has changed with content moderation and we did our best to appease activists.”

general mills

(NEXT)
and Volkswagen Group, which owns Audi, Porsche and Bentley, confirmed to CNN that they stopped their paid activities on the platform in the wake of the Musk acquisition. Mondelez International

(MDLZ)
and Pfizer

(PFE)
have too supposedly joined that list

On Friday, a group of watchdog organizations including the Anti-Defamation League, Free Press and GLAAD increased pressure on brands to reconsider advertising on Twitter. The groups pointed to Friday’s mass layoffs of Twitter staff as a key factor, citing fears that Musk’s cuts will make it harder to enforce Twitter’s election integrity policies alongside other anti-hate speech policies.

Food to go: This is a key moment for Musk, who spent much of his week in New York trying to keep advertisers on board with Twitter. that doesn’t help The uncertainty around the platform comes at a bad time for tech companies that rely on ad revenue. Google and Meta mentioned lower ad payouts as a big challenge on your most recent earnings reports.

The threat of a US rail strike that could disrupt supply chains remains very real.

Two rail unions reached tentative agreements with the railroads in September, ahead of the strike deadline, only to have their members vote against ratifying them. Now, US Secretary of Labor Marty Walsh says that without an agreement he expects Congress to intervene and impose contracts on disgruntled rank-and-file unionists.

“My goal is to get those two unions back to the table with the companies and do this,” Walsh told CNN on Friday. He said a negotiated settlement would be “the best thing we can do is avoid any kind of strike or rail slowdown.”

If any rail union were to strike, all rail unions, collectively representing some 110,000 members, would honor their pickets and refuse to work.

That would be bad news for supply chains. About 30% of US freight moves by rail. The prices of goods, from gasoline to food to cars, could skyrocket if the trains stop. Additionally, factories could be forced to temporarily close due to parts shortages. Products that consumers want to buy during the holiday season could be missing from store shelves.

Walsh participated in a 20-hour bargaining session that reached tentative labor agreements just hours before a September 16 strike deadline. He said that barring new negotiated agreements, Congress would have to impose a contract on unions, as a way to keep union members on the job.

If “for some reason [one of the unions] does not reach an agreement with the companies then… Congress will have to take measures to avoid a strike in our country”, he said.

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