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Friday’s jobs report was strong: The US economy added 261k jobs in October, beating analysts’ expectations of 200k, even as unemployment rose to 3.7%.
But don’t let the job boom lull you into a false sense of job security. downsizing and hiring pauses are beginning to flow through the technology sector, which boasts some of the most valuable companies in the world. This is bad news for the economy as a whole.
What’s happening: Tech companies are announcing an alarming number of layoffs and hiring freezes.
▸ Amazon (AMZN) announced on Thursday that it is pushing for a pause in hiring businesses. “We expect to maintain this pause over the next several months and will continue to monitor what we see in the economy and business to adjust when we think it makes sense,” wrote Beth Galetti, senior vice President of People Experience and Technology at Amazon (AMZN) in a note to employees.
Late last month, Amazon forecast that its holiday quarter earnings would be lower than analysts were expecting, causing the stock to fall sharply. Amazon’s shares are down more than 47% this year.
▸ Apple (AAPL) has reportedly imposed its own hiring freeze in all areas except R&D. In a statement, Apple (AAPL) said it would continue hiring and was confident about its future, “but given the current economic environment, we’re taking a very deliberate approach in some parts of the business.”
Like other tech companies, Apple is concerned about slower growth during the holiday season, higher interest rates, and falling consumer spending. Covid lockdowns in China are also affecting production of the iPhone 14. Apple stock is down about 25% so far this year.
▸ Meta plans to begin large-scale layoffs this week, The Wall Street Journal reported Sunday. The parent company of Facebook (FB), Instagram and WhatsApp could cut thousands of jobs among its 87,000 employees and an announcement could come as early as Wednesday, according to the report.
▸ Lyft (LYFT) announced last Thursday that it will lay off 13% of its employees, or nearly 700 employees, as it reconsiders staffing amid rising inflation and fears of a looming recession. “We know today is going to be tough,” Lyft (LYFT) founders Logan Green and John Zimmer wrote in an employee memo obtained by CNN. “Sometime next year we’re likely to face a recession and rideshare insurance costs are going up.”
In a filing announcing the layoffs, Lyft said there would likely be $27 million to $32 million in restructuring costs. “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 nearly 70% so far this year.
▸ Online payments giant Stripe will lay off about 14% of its workforce, CEO Patrick Collison wrote in a memo to employees on Thursday. “We have been far too optimistic about the near-term growth of the internet economy in 2022 and 2023, and have underestimated both the likelihood and impact of a broader slowdown,” Collison wrote in the note. Just last year, Stripe became the most valuable US startup with a valuation of $95 billion.
Chime, a private fintech company, also announced that it would lay off 12% of its 1,300 employees.
▸ Twitter announced extreme layoffs on Friday, noting that offices would be locked down and access to ID cards suspended as new CEO Elon Musk cut about half of his 7,500 staff.
The bottom line: Third quarter employment and corporate earnings headlines still reflect an overall strong economy. But other companies won’t be immune to the slacking demand from consumers and businesses that tech companies have noticed.
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 spending on the platform following his controversial $44 billion acquisition of the company .
He attributed the drop to “activist groups pressuring advertisers, although moderation of content has not changed and we have done everything we can to mollify activists.”
General Mills (GIS) and the Volkswagen Group, which owns Audi, Porsche and Bentley, have confirmed to CNN that they have ceased their paid activities on the platform following Musk’s acquisition. Mondelez International (MDLZ) and Pfizer (PFE) have also reportedly joined this list.
On Friday, a group of watchdogs 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 firings of Twitter employees as a key factor, citing fears that Musk’s cuts would make it difficult to enforce Twitter’s election integrity policies, along with other anti-hate speech policies.
Take away: This is a key moment for Musk, who has spent much of his week in New York keeping advertisers on board with Twitter. That does not help The uncertainty surrounding the platform comes at a bad time for tech companies dependent on advertising revenue. Google and Meta both cited lower ad payouts as a massive challenge in their latest earnings reports.
The threat of a US rail strike disrupting supply chains is still 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 ratification. Now US Secretary of Labor Marty Walsh says he expects Congress to step in without a deal and force contracts on disaffected rank and file union members.
“My goal is to get these two unions back together with the companies and get this thing done,” Walsh told CNN on Friday. He said a negotiated agreement was “the best we can do is avoid any kind of rail strike or slowdown”.
If one rail union went on strike, all rail unions – representing some 110,000 members collectively – would picket and refuse to work.
That would be bad news for supply chains. About 30% of US freight is transported by rail. The prices of goods from gasoline to groceries to cars could skyrocket when trains stop. In addition, factories could be temporarily closed due to parts shortages. Goods that consumers want to buy during the holiday season could be missing from store shelves.
Walsh was involved in a 20-hour negotiating session that reached tentative labor agreements just hours before a Sept. 16 strike deadline. He said that unless new negotiated agreements were reached, Congress would have to force the unions into a contract to keep union members in the workplace.
If “for any reason [one of the unions] then no agreement reached with the companies… Congress must take action to avert a strike in our country,” he said.