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Friday’s jobs report came in strong: the US economy added 261,000 new jobs in October, smashing analysts’ expectations of 200,000, even as unemployment soared to 3.7%.
But don’t let the job boom lull you into a false sense of job security. Job cuts and hiring breaks are beginning to circulate in the technology sector, home to some of the most valuable companies in the world. This is bad news for the economy as a whole.
What is happening: Tech companies are announcing an alarming number of layoffs and hiring freezes.
▸ Amazon (AMZN) announced on Thursday that it was pausing corporate hiring. “We plan to maintain this pause over the coming months and will continue to monitor what we see in the economy and business to adjust as we see fit,” wrote Beth Galetti, senior vice president of the people experience and technology at Amazon (AMZN) in a memo to employees.
At the end of last month, Amazon expected its holiday quarter revenue to be weaker than analysts expected, leading to a sharp drop in its stock. Amazon shares are down more than 47% this year.
▸ Apple (AAPL) reportedly implemented its own hiring freeze in all areas except research and development. In a statement, Apple (AAPL) said it would continue to hire and was confident in its future, “but given the current economic environment, we are taking a very deliberate approach in some parts of the business. “.
Like other tech companies, Apple is worried about slowing growth over the holiday season, rising interest rates and falling consumer spending. Covid lockdowns in China are also hurting iPhone 14 production. Apple stock is down around 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 from its workforce of 87,000, and an announcement could come as early as Wednesday, the report said.
▸ Lyft (LYFT) announced last Thursday that it would lay off 13% of its employees, or nearly 700 people, as it rethinks staffing amid rising inflation and fears of a recession imminent. “We know today will be difficult,” Lyft (LYFT) founders Logan Green and John Zimmer wrote in a memo obtained by CNN. “We face a likely recession over the next year and rideshare insurance costs are rising.”
In a filing announcing the layoffs, Lyft said it would likely incur $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 staffers. Shares of the car-sharing company have fallen nearly 70% so far this year.
▸ Online payments giant Stripe will lay off around 14% of its staff, CEO Patrick Collison wrote in a memo to staff on Thursday. “We were far too optimistic about near-term growth in the internet economy in 2022 and 2023 and underestimated both the likelihood and impact of a broader downturn,” Collison wrote in the note. . Last year alone, Stripe became America’s most valuable 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 badges suspended as new CEO Elon Musk cut about half of his 7,500 employees.
The bottom line: Third-quarter headline jobs and corporate earnings data continue to reflect a strong economy overall. But other companies won’t be immune to the slowdown in consumer and business demand that tech companies have seen.
More bad news for Twitter (TWTR): Elon Musk said Friday that the company has seen a “massive drop in revenue” as a growing number of advertisers suspend spending on the platform following its controversial acquisition of $44 billion from the company.
He attributed the decline to “activist groups pressuring advertisers, although nothing changed with content moderation and we did everything we could to appease the activists”.
General Mills (GIS) and the Volkswagen Group, which owns Audi, Porsche and Bentley, confirmed to CNN that they had suspended paid activities on the platform following the takeover of Musk. Mondelez International (MDLZ) and Pfizer (PFE) have also reportedly joined this list.
On Friday, a group of watchdog organizations including the Anti-Defamation League, Free Press and GLAAD increased their pressure on brands to rethink advertising on Twitter. The groups pointed to Friday’s mass layoffs of Twitter staff as a key factor, fearing Musk’s cuts could make it difficult to enforce Twitter’s election integrity policies as well as other anti-hate speech policies. .
Take-out: It’s a key moment for Musk, who has spent much of his week in New York trying to keep advertisers on board with Twitter. it doesn’t help that The uncertainty around the platform comes at a bad time for tech companies reliant on ad revenue. Google and Meta both cited falling ad payments as a huge challenge in their most recent earnings reports.
The threat of a US railroad strike that could disrupt supply chains is still very real.
Two railway unions reached tentative agreements with the railways in September, ahead of a strike deadline, for their members to vote against ratifying them. Now, US Labor Secretary Marty Walsh has said that without a deal, he expects Congress to step in and impose contracts on disgruntled rank-and-file union members.
“My goal is to bring these two unions back to the table with business and get things done,” Walsh told CNN on Friday. He said a negotiated deal would be ‘the best thing we can do is to avoid any kind of strike or rail slowdown’.
If railroad unions were to go on strike, all railroad unions – which together represent around 110,000 members – would respect their picket lines and refuse to work.
That would be bad news for supply chains. About 30% of US freight moves by rail. Prices for goods, from gasoline to food and cars, could skyrocket if trains stop. Additionally, factories may be forced to close temporarily due to parts shortages. Goods that consumers want to buy during the holiday season could be missing from store shelves.
Walsh participated in an 20-hour bargaining session that resulted in tentative labor agreements just hours before the September 16 strike deadline. He said that unless new deals are negotiated, Congress should force a contract on the unions, in order to keep union members on the job.
If “for some reason [one of the unions] doesn’t come to an agreement with the companies then…Congress will have to take action to prevent a strike in our country,” he said.
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