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Friday’s jobs report came in strong: The 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. Reduction of jobs and interruptions in recruitment they are beginning to spread in the technology sector, which is home to 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 pausing in corporate hiring. “We expect this suspension to remain in place for the next few months, and we will continue to monitor what we are seeing in the economy and business to adjust as we feel makes sense,” wrote Beth Galetti, Senior Vice President and People Experience. In a memo to Amazon technology (AMZN) employees.
At the end of last month, Amazon forecast that its revenue for the holiday quarter would be weaker than analysts expected, sending its stock down sharply. Amazon shares are down more than 47% this year.
▸ Apple (AAPL) has reportedly instituted a hiring freeze in all areas except research and development. In a statement, Apple ( AAPL ) said it will continue to hire and is 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 concerned about slower growth, higher interest rates and lower consumer spending during the holiday season. The Covid lockdowns in China are also affecting iPhone 14 production. Apple shares are down about 25% 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 87,000 workforce, and an announcement could come as soon as Wednesday, according to the report.
▸ Lyft ( LYFT ) said last Thursday that it will lay off 13% of its workforce, or nearly 700 people, as it restructures its workforce amid rising inflation and recession fears. “We know today is going to be tough,” Lyft ( LYFT ) founders Logan Green and John Zimmer wrote in an employee memo obtained by CNN. “We are facing a possible recession next year and travel insurance costs are rising.”
In a filing announcing the layoffs, Lyft said it would likely pay $27 million to $32 million in restructuring costs. “We are not immune to the reality of inflation and a slowing economy,” Lyft’s founders wrote in a memo to employees. Shares of the car-sharing company are down nearly 70% this year.
▸ Online payments giant Stripe will lay off about 14 percent of its workforce, CEO Patrick Collison wrote in a memo to employees Thursday. “We were far too optimistic about near-term growth in the Internet economy in 2022 and 2023 and underestimated the likelihood and impact of a broader slowdown,” Collison wrote in the note. Last year, Stripe became the most valuable startup in the US, with a valuation of $95 billion.
Chim, a private fintech company, also announced that it will lay off 12% of its 1,300-strong workforce.
▸ Twitter on Friday announced drastic layoffs, saying offices would be locked down and access to badges suspended as new CEO Elon Musk cuts half of its 7,500-strong workforce.
Bottom line: The headline jobs numbers and third-quarter corporate earnings reflect a still-strong economy. But other companies are not immune to softening consumer and business demand that tech companies have pointed out.
More bad news for Twitter ( TWTR ): Elon Musk said Friday the company has seen a “dramatic decline in revenue” as a growing number of advertisers pause spending on the platform following the company’s controversial $44 billion acquisition.
The downgrade “activist groups put pressure on advertisers, although nothing has changed with content moderation and we did everything we could to appease the activists.”
General Mills (GIS) and Volkswagen Group, which owns Audi, Porsche and Bentley, confirmed to CNN that they have suspended paid activities on the platform as a result of Musk’s takeover. Mondelez International (MDLZ) and Pfizer (PFE) are also said to have joined that list.
On Friday, a group of watchdog organizations including the Anti-Defamation League, Free Press and GLAAD stepped up pressure on brands to rethink their advertising on Twitter. The groups cited Twitter’s mass layoffs as a key factor on Friday, citing fears that Musk’s cuts will make it harder to enforce Twitter’s election integrity policies along with other anti-hate policies.
Takeaway: It’s a key moment for Musk, who spent much of the week in New York trying to keep advertisers on Twitter. It doesn’t help with that The uncertainty surrounding the platform comes at a bad time for tech companies that depend on ad revenue. Google and Meta both cited lower ad payouts as a major challenge in recent earnings reports.
The threat of a US rail strike that could disrupt supply chains is still very real.
The two rail unions reached tentative agreements with the railroads in September, before the strike deadline, but members voted against ratifying them. Now, US Labor Secretary Marty Walsh says without a deal he hopes Congress will step in and impose contracts on unhappy union members.
“My goal is to get those two unions back to the table with the companies and get this thing done,” Walsh told CNN Friday. He said a negotiated agreement “is the best thing we can do to avoid any kind of train strike or slowdown.”
If any railroad union went on strike, all railroad unions—representing about 110,000 members—would honor their pickets and walk off the job.
This would spell bad news for supply chains. About 30% of US goods are moved by rail. Prices of goods ranging from gasoline to food and cars can rise if trains stop. In addition, factories could be forced to close temporarily due to parts shortages. Goods that consumers want to buy during the holiday season may be missing from store shelves.
Walsh participated in a 20-hour bargaining session that reached tentative labor agreements hours before the Sept. 16 strike deadline. Barring a newly negotiated agreement, Congress will have to impose a contract on unions as a way to keep union members on the job, he said.
There is “for some reason [one of the unions] then he doesn’t get an agreement with the companies… Congress will have to take measures to prevent a strike in our country”, he said.